Malaysian state investment fund 1MDB this year will pay out U.S. $1.2 billion (5.2 billion ringgit) to an Abu Dhabi-based firm as part of arbitration to settle a loan it defaulted on last year, the London Stock Exchange said Monday.
1Malaysia Development Berhad (1MDB) will pay International Petroleum Investment Co. (IPIC) two installments of $600 million (2.6 billion ringgit) on July 31 and Dec. 31, respectively, under terms of a deal which began last year at the London Court of International Arbitration.
The cash-strapped and state-run Malaysian fund is the target of money-laundering probes in at least a half-dozen countries, and has been tied to corruption allegations surrounding Prime Minister Najib Razak, who has denied any wrong doing.
In a statement released Monday, 1MDB said it would cash out investment funds to make the payments and already had $50 million (219 million ringgit) available. Additionally, 1MDB said it would assume responsibility for a pair of $1.75 billion (7.7 billion ringgit) bonds due in 2022.
But according to a former member of Najib’s ruling United Malay National Organization (UMNO) party, who traveled to Switzerland, Britain, France and Hong Kong to draw attention to alleged corruption and financial mismanagement at 1MDB, the settlement shows that taxpayers will be footing the bill to repay the loan to the firm in the United Arab Emirates.
“Najib Razak had said it would not involve the government and Malaysians, but it seems the people are ones who will be paying up the debts of 1MDB,” Khairuddin Abu Hassan told BenarNews.
1MDB defaulted on $1.75 billion in bonds after missing an interest payment of $50 million in April 2016, Agence France-Presse reported. Two months later, Abu Dhabi announced it was seeking $6.5 billion through international arbitration.
Prime Minister Najib Razak accepted the settlement.
“The government is pleased that IPIC and 1MDB have resolved their differences in an amicable manner,” press secretary Tengku Sarifudin said Monday in a statement.
1MDB called the settlement and efforts to cash out investment funds major parts of a so-called rationalization program now in its final stages. Last year, CNBC reported the rationalization program of selling off assets was launched in May 2015 to reduce 1MDB’s debt burden, which had grown to $11 billion (42 billion ringgit).
The arbitration deal agreed to between 1MDB and the Emirati firm does not appear to be related to a lawsuit filed by the U.S. Department of Justice (DOJ) seeking restitution of more than $1 billion in assets purchased with money stolen from 1MDB, or reports that Najib received nearly $700 million in personal accounts from 1MDB funds prior to 2013 elections. Najib has been identified as Malaysian Official 1 who was named dozens of times in the DOJ lawsuit.
Malaysian lawyer Mohamad Haniff Khatri Abdulla, who has been speaking out against 1MDB, told BenarNews that “all foreign agencies should increase their efforts” to bring 1MDB money laundering investigations to their respective courts.
Last year, Malaysia Attorney General Apandi Ali cleared the prime minister of any wrongdoing and Najib has denied taking any 1MDB-linked money for personal gain. Apandi could not be reached for comment on Monday’s settlement.
No one has been charged in a Malaysian court over the 1MDB scandals, but at least five people have been charged and two banks have been closed in neighboring Singapore.
Meanwhile, a lawmaker from Malaysia’s political opposition issued a statement late Monday saying that the settlement would “only benefit the infamous Malaysian Official 1, Prime Minister Najib Razak and his friends.”
“The settlement essentially allows Najib Razak to avoid a trial which would have opened a gigantic can of worms,” said Wong Chen, a member of parliament representing Kelana Jaya. “Instead of justice and closure, this settlement today further ingrains the culture of corruption and impunity in Malaysia at the expense of the people.”
Hata Wahari in Kuala Lumpur contributed to this report.