Malaysian parliamentary report blames former management for huge loss of state investment fund

A Malaysian parliamentary report on Thursday blamed the former management for the huge loss suffered by state investment fund 1MDB, in an incident that has shaken Malaysian politics in the past year.

In the report submitted to the parliament, the Public Accounts Committee said the former management team of 1Malaysia Development Bhd (1MDB), led by former chief executive officer Shahrol Azral Ibrahim Halmi, should be held responsibility of the company's weaknesses and shortcomings.

Comprising lawmakers from both sides of the aisle, the committee urged authorities to carry out further investigations and take action against any wrongdoing.

The report also recommended for the abolishment of 1MDB's advisory board, chaired by Prime Minister Najib Razak.

Setting up after Najib took over as prime minister in 2009, 1MDB was aimed at investing in strategic areas to boost economic growth in the country. However, it was revealed that the company has accumulated huge amount of debt that it was unable to repay in just a few years of operations.

The company had few cash equity, which necessitated a heavy dependence on borrowing to fund the investment.

The Public Accounts Committee said in the report that 1MDB had on certain occasions failed to abide by the decisions and directives of its Board of Directors or acted without getting prior approval from the board, and a number of investments and sizeable loans were made without in-depth study.

The excessive debts in capital structure should never be allowed, the report added.

Prime Minister Najib was under massive pressure after Wall Street Journal alleged last year that hundreds of millions of U.S. dollars were transferred into his personal account, possibly via 1MDB. Among the most vocal critics against Najib was Mahathir Mohamed, Malaysia's longest serving prime minister.

Najib has denied any wrongdoing. Malaysia's attorney general said earlier this year that the funds were legal donations from the Middle East, and no offences were found committed by the Prime Minister.

In a statement, Najib said the report had proven that Mahathir's allegations against 1MDB have been false, and that the former prime minister "was motivated by personal interest, not the national interest, and a desire to unseat the government."

Following the submission of the report, 1MDB said its board of directors had decided to offer its resignation to the ministry of finance, the 100 percent shareholder of the investment fund.

"The Board views the PAC Report as a comprehensive and conclusive document, which has clearly established various facts and has dispelled numerous allegations about the company," it said in a statement. Enditem