Doubts hit $1 billion IPIC settlement in 1MDB dispute
By Nick Kochan
Malaysia was widely expected to announce a settlement close to $1 billion of the long-running dispute with the United Arab Emirates government over the role of IPIC, the Gulf state’s sovereign wealth fund, in the 1MDB scandal, sources said.
At the time of writing, the settlement has not been announced. This suggests that the Malaysian authorities have had doubts about the quick deal that would top up the country’s national coffers, depleted by Covid spending.
Controversy around the legal handling of the settlement programme may have sent this settlement into retreat. This include growing evidence that the directors of Ambank which announced a $700m payment to the government of Malaysia for its role in the 1MDB scandal were strongarmed into agreement.
The IPIC deal would settle the dispute over guarantees given jointly by Malaysia and International Petroleum Investment Company for $6.5 billion bonds issued by Goldman Sachs. The money was subsequently looted. IPIC dropped a lawsuit in October against Goldman to recover losses suffered from the U.S. investment bank’s 1MDB dealings.
“We are in negotiations with the UAE and they are very close to conclusion. The final amount will be not far off a $1 billion,” Rosli Dahlan, a lawyer in Kuala Lumpur, who is advising the Malaysian government.
Malaysian prime minister Muhyiddin Yassin was expected to announce the settlement during a visit to Saudi Arabia and the UAE.
Other recent settlements have included an $80 million settlement with Deloitte. The accountancy firm audited 1MDB between 2011 and 2014 when the funds were lost. A $700 million settlement between Ambank, a subsidiary of ANZ Bank and Malaysia was announced last week. The IPIC settlement would be the last piece in this jigsaw.
The IPIC agreement has stoked controversy in Malaysia.
“The agreement to pay Abu Dhabi a billion dollars will be trumpeted as a great victory by the government. In fact, the country should not be paying Abu Dhabi anything as part of the money was stolen by IPIC officials,” said Wong Chen, chairman of the Malaysian parliament’s select committee for international relations and trade.
Khadem al Qubaisi and Mohamed Badawy al Husseini, two former IPIC executives, were sentenced in Abu Dhabi in June 2019 to jail terms for frauds related to the scandal.
The payment of $1 billion would provide a conclusion to a much-disputed agreement made in 2017 by Razak Najib, the former Malaysian prime minister. This required the country to pay Abu Dhabi $5.8 billion following the theft of $4.5 billion of bonds from 1MDB, the sovereign wealth fund, and guaranteed by Malaysia.
Malaysia has made $1.2 billion of interest payments to Abu Dhabi since the agreement, Chen said.
“This agreement was illogical and was made by the prime minister to cover up his own complicity,” he said.
This settlement was subsequently the subject of an arbitration hearing in London between Malaysia and Abu Dhabi. A High Court decision to take this out of the arbitration process and have it heard in the commercial court was stalled after the parties decided to settle the contentious issue through private negotiations rather in public.
Najib was convicted of an offence related to 1MDB in July 2020 and given a 12-year prison sentence. His appeal hearing is underway in Kuala Lumpur. The former prime minister is the subject of four other cases related to 1MDB.
The recent settlements of 1MDB-related cases have followed a change of Malaysian government in March 2020.
Malaysia’s Ministry of Finance did not return calls for comment.
Razak’s then government set up the 1MDB fund in 2009. The U.S. Department of Justice has estimated $4.5 billion was misappropriated by high-level fund officials and their associates masterminded by Jho Low, a banker, between 2009 and 2014.
On the run
Low, a fugitive from justice who is believed to be in China, is being sought by the Malaysian, U.S. and Swiss governments.
Last September, Malaysia dropped criminal charges against three Goldman units after the bank agreed to pay $3.9 billion to settle the probe.