The Public Accounts Committee (PAC) is scheduled to question 1Malaysia Development Bhd (1MDB) personnel, beginning today. Hopefully, this will shed light on the 1MDB business decisions that are the subject of damaging exposés of late.

However, this is not the first time that PAC will be doing so. Back in November 2011, it resolved to investigate 1MDB following complaints from then opposition leader Anwar Ibrahim on the company’s “suspicious” deal with PetroSaudi International.

Although 1MDB is struggling to pay off creditors now, Prime Minister Najib Abdul Razak, who chairs the company’s advisory board, boasted that the state investment fund posted RM425 million in profit for the year 2010 - two years after it was founded.

Apart from Anwar’s complaint, the PAC hearing, which was held on June 27, 2012, also decided to investigate 1MDB on Putrajaya’s decision to allocate RM1.11 billion for the company under Budget 2012.

Thus, before the PAC hearing proceeds today, it would be useful to examine what it has uncovered three years ago, through the proceeding report, which was obtained by Malaysiakini.

The missing documents

Four individuals directly involved in 1MDB attended the meeting as witnesses - Nurzahid Taib, Maisara Ismail, M Yunus Mamat and Shahriza Embi. Also present was Economic Planning Unit director-general Rahamat Bivi Yusoff.

Seven documents were sought from 1MDB, of which only one - the audited account for 2011, which was already a public document at the time - was made available to PAC.

Nurzahid, then listed as the 1MDB senior vice-president, explained to PAC that the other documents could not be furnished because of a non-disclosure agreement with joint-venture partner PetroSaudi International (PSI).

Apart from establishing the fact that the auditor-general has the right to “sight” the six other documents, PAC didn’t pursue the matter much further, although DAP’s panel member, Petaling Jaya Utara MP Tony Pua ( right ), did put on record that 1MDB’s decision not to furnish the documents was tantamount to contempt towards the PAC.

A lengthy exchange ensued between some PAC members, primarily Pua, and Nurzahid and Rahamat Bivi on whether the shareholders - the Finance Ministry, which owns 100 percent of 1MDB - has a decision making role.

Rahamat revealed that although the ministry has to approve any investment valued at RM300 million and above, 1MDB’s board of directors are the ones who are really calling the shots.

“The government isn’t actually involved in the micro situation of the company. It’s all within the management and the Board the Directors. So, in actual fact it is the Board of Directors that oversees details of all these investments,” Rahamat said then.

Cheap land re-valued

Rahamat also explained that 1MDB had raised RM5 billion, when it was known as Terengganu Investment Authority (TIA), and the cabinet made a decision to guarantee the bonds.

Of this amount, RM3.5 billion was invested in the joint-venture with PSI, a point which a number of PAC members remarked was akin to putting all the eggs in one basket.

On the RM1.11 billion allocation for 1MDB through Budget 2012, Rahamat said it was meant to pay 1MDB in order to develop land where the old Sungai Besi airport once stood, and that the funds had nothing to do with PSI.

To a  question from Kamaruddin Jaffar (PAS - Tumpat, left ), he said the established part of the income reported in 1MDB’s 2011 accounts was from gain from “revaluation of investment properties” - namely, plots of land along Jalan Imbi.

In other words, said Kamaruddin, this amounted to a paper gain recorded as income.

Pua then suggested that had there been no revaluation, then 1MDB would have posted a loss of about RM300 million that year, which Nurzahid refused to confirm and instead pointed out that companies are legally obliged to revalue assets every year.

Pua: This piece of land was acquired for RM494 million, same year and was revalued by RM826 million the same year to generate the additional profit. Fantastic investments.

Abdul Rahman Dahlan (BN - Kota Belud): Of course.

Pua: How did you get this piece of land?

Nurzahid: The land was transferred to 1MDB (from the federal government).

Nurzahid said there was nothing illegal about the the revaluation exercise and that 1MDB’s auditor expected this to be done and reflected on the account.

It was clear that throughout the proceeding, the 1MDB and EPU officers were keen on absolving the company of any wrongdoing, noting that the auditor had not raised any red flag, and neither did the advisory board, which at that time included former Qatar prime minister Sheikh Hamad Jassim Jabr Al-Thani, CITIC Group chairperson Chang Zhenming and Louis Vitton’s CEO Bernard Arnault. Arnault is no longer listed on the board.

“The only comment we got was, for example, Sheikh Hamad asked, when they can invest in Malaysia with 1MDB for the Sungai Besi land.

“That was one of the concerns. Other than that, that was no concern of whether there are any difficulties for us, financially of whatsoever,” Nurzahid said.

Stumbling block

Then PAC chairperson Azmi Khalid appeared convinced by the explanations provided, telling the press later that 1MDB’s financial situation appeared to be financially sound, while noting that some PAC members disagreed.

The most obvious dissenter was Pua, who appeared to be the only one to have thoroughly studied 1MDB’s 2011 accounts before the meeting and pressed the company’s officers on how the numbers were arrived at.

However, at almost every stage of the hearing, Pua was faced with an obstacle in form of Rahman Dahlan, who appeared to be keen on defending 1MDB’s business decisions and steering discussions away from contentious matters.

For starters, Rahman did not appear at all perturbed that 1MDB did not furnish the required documents, citing the example of Yayasan Sabah Shipping Sdn Bhd, which he chairs, which does not reveal its rates because it is a trade secret.

Rahman also advised chairperson Azmi ( right ) that the PAC must be clear about its mandate and that it should not function as an “investment committee” to evaluate investments in all companies made by the Finance Ministry and its companies.

Rahman: Right now, as far as I am concerned, looking at the figures, there is no trigger point yet. Belum ada lagi (none yet). So…

Pua: You want to wait for us to lose the money, then trigger point?

Rahman: No. I’m not saying that. Don’t put words in my mouth. I’m just saying, do not turn PAC into an investment committee.

At one point, Rahman even made note that this was the first time PAC was investigating a company that had actually made a profit, pointing out that 1MDB made a profit of RM615 million in five months.

Kamaruddin: If it is that good, we should learn (from 1MDB).

Rahman: Not a problem. I just want to make a point.

Kamaruddin: PKFZ untung (PKFZ made money), NFC untung (NFC made money)...

On the transfer of the Jalan Imbi property from the federal government to 1MDB, Rahman said he saw nothing wrong with it because 1MDB is 100 percent owned by the federal government and described it as a “right pocket to left pocket” deal.

“I think, to me, that is a brilliant move, to unlock the value of that land. Nothing wrong with it,” he said.

On 1MDB’s ability to pay its creditors, Rahman noted that at this point of time, the company has not defaulted on payment.

Moving forward

However, Rahman did ask for Nurzahid to describe 1MDB’s five-year plan to the PAC, in order to evaluate the company’s cash-flow situation. Nurzahid said this would be provided at a later date. It is understood that PAC never got the five-year plan.

Fast forward to March 2015, taxpayers had to cough up RM950 million in “standby credit” for 1MDB and the company is also bogged down by cash-flow problems after failing to list its energy unit on the stock exchange.

In recent months, Malaysians have been fed with dozens of articles outlining 1MDB’s alleged business irregularities and warning them of the RM42 billion debt the company they own, through the Finance Ministry, is struggling to repay.

This begs the question: Had PAC used those two hours to thoroughly probe 1MDB and compelled it to reveal all the necessary documents back in 2011, could the company’s problems today have been averted?

Thus the present PAC, chaired by Nur Jazlan Mohamed (BN - Pulai), will have a tremendous task ahead in order to ask the necessary questions on whether 1MDB is serving Malaysia’s best interest and whether its debts, a portion of it which is guaranteed by the government, can be managed.

And lastly, for the sake of public interest, the hearing proceedings report - which should contain transcripts of the proceedings - should be made available for download as soon as possible.

ANDREW ONG is a member of Team Malaysiakini.