KUALA LUMPUR, Malaysia (AP) — Heavily indebted Malaysian state investment fund 1MDB said Thursday its entire board of directors has offered to resign after a parliamentary inquiry found extensive mismanagement and called for a police probe of the fund's former head.
In a report submitted in Parliament on Thursday, the Public Accounts Committee said it found 1MDB's financial performance "unsatisfactory," with debts ballooning from 5 billion ringgit ($1.3 billion) in 2009 to 50 billion ringgit ($12.8 billion) this January.
It said 1MDB's business model depended heavily on debt, mainly bank loans and bonds, part of which are guaranteed by the government. Such heavy reliance on debts for working capital should never have been allowed, the report said.
The report, however, did not mention Prime Minister Najib Razak, who was behind the creation of 1MBD in 2009 and has been battling allegations that hundreds of millions of dollars was channeled from the fund into his personal bank accounts.
Malaysia's attorney general cleared Najib of wrongdoing in January, saying $681 million deposited in the prime minister's accounts was a donation from Saudi Arabia's royal family, an explanation that was met with widespread skepticism. He said most of the money had been returned by Najib.
The report warned that the government could face losses of around 20.3 billion ringgit ($5.2 billion) if 1MDB fails to pay off its debts. The fund's only shareholder is the Ministry of Finance.
It said the board of directors failed in its responsibility to keep tight control over the fund's finances. It said there were "restrictions and weaknesses" by the fund's management and board of directors.
The report said the fund's former CEO and current board member, Shahrol Azral Ibrahim Halmi, should be held accountable and urged law enforcement agencies to further investigate Shahrol and other managers.
Shahrol is also an official in the prime minister's department.
Opposition lawmaker Tony Pua said the 106-page report "confirms gross mismanagement and wanton neglect of all principles of good governance and accountability."
In a statement, 1MDB said its debts will be resolved by an ongoing rationalization plan that includes asset sales. It said the board believes the mass resignation was the right thing to do to facilitate any follow-up investigations.