PETALING JAYA - The management of 1Malaysia Development Bhd acted without the approval of the board of directors on the joint venture with PetroSaudi International Ltd, the Public Accounts Committee said.
According to the PAC report tabled in the Dewan Rakyat on Thursday, the National Audit Department found that 1MDB's management obtained only general approval and not specific approval required from the board of directors.
The report concluded that the 1MDB management did not inform the directors about the joint venture proposal letter dated Aug 28, 2009, or the proposed terms of the joint venture project that were agreed with PetroSaudi.
"The 1MDB board of directors were not briefed clearly regarding the project partner and its relation between three companies - PetroSaudi International Ltd (Saudi), PetroSaudi Holdings (Cayman) Ltd dan PetroSaudi International (Cayman)," it said.
The report also said that PetroSaudi Holdings (Cayman) Ltd was a new company established by PetroSaudi International Ltd specifically for the joint venture.
Among the proposed terms were the principle ratio setting, the channelling of US$1bil in cash, asset values, goodwill and the joint venture company's profit expectations.
"The board of directors had given conditional approval to the management of 1MDB to carry out the effort with PetroSaudi International Ltd, but the actual deal was signed with PetroSaudi Holdings (Cayman) Ltd without the informing the 1MDB board regarding the change of the project partner," it said.
1MDB PetroSaudi Ltd, which was later made into a joint venture company, was registered much earlier by PetroSaudi Holdings (Cayman) Ltd on Sept 18, 2009, eight days before the approval of the board of directors on Sept 26.
The board were also not informed that 1MDB PetroSaudi Ltd had been established on the day that the first proposal was brought to the board.
"This shows that the management of 1MDB had decided to work with PetroSaudi International Ltd earlier without informing the board of directors," the report said.
It said that the board was also not informed that there was a clause in the joint venture agreement stating that 1MDB PetroSaudi Ltd had to pay a US$700mil (S$940mil) loan from its parent company PetroSaudi Holdings (Cayman) Ltd on or before Sept 30, two days before the agreement was signed.
Approval was also not given by the board to pay the US$700mil loan from the US$1bil in investments that had been channelled into accounts owned by other companies.