China Communications Construction Company, the new owner of Australian engineering group John Holland, has denied involvement in an alleged plot to cover up a multi-billion-dollar corruption scandal at Malaysian sovereign wealth fund 1MDB by inflating a railway contract.
The allegations were published last week by London-based Sarawak Report, which was subsequently repeated by Asian media outlets.
Then-treasurer Joe Hockey allowed CCCC to buy John Holland from Leighton Holdings for $853m in April last year, even though the World Bank has banned the Chinese giant from work on its projects until next year due to “fraudulent practices”.
At the time, Mr Hockey said that “appropriate arrangements have been put in place to mitigate any concerns in relation to this issue and I am satisfied that this investment is not contrary to our national interest”.
Sarawak Report’s allegations against John Holland’s parent bring to three the number of big Australian companies drawn into the 1MDB debacle, in which US authorities allege at least $US3.5 billion ($4.6bn) has been stolen from the fund.
The other two are ANZ, which owns a quarter of Malaysia’s AmBank, where corrupt payments allegedly ended up in Malaysian Prime Minister Najib Razak’s bank account, and LendLease, a key developer at 1MDB’s flagship Tun Razak Exchange project, the financing of which is now unclear following the alleged looting of the sovereign fund.
ANZ and LendLease have not been accused of doing anything wrong and Mr Najib has repeatedly denied any wrongdoing.
Citing a leaked term sheet and other documents, Sarawak Report alleges the Malaysian government planned to double the cost of the East Coast Rail Project from 30 billion ringgit to 60 billion ringgit, a difference of about $9.8bn.
A company nominated by CCCC would then assume $US5.6bn of 1MDB’s debt in return for assets held on the sovereign fund’s books at the same amount, Sarawak Report said.
How much those assets are actually worth is unclear. The reliability of 1MDB’s book values was plunged into doubt last week following US government moves to freeze more than $US1bn of assets allegedly pillaged from 1MDB, with the fund and its most recent auditor, Deloitte, saying its 2013 and 2014 accounts should no longer be relied on.
Sarawak Report alleged that as part of the plan a second company nominated by CCCC would pay $US315m to buy 70 per cent of Putrajaya Perdana and 90 per cent of Loh & Loh Corporation.
The two Malaysian companies are linked to 1MDB as subsidiaries of conglomerate UBG when it was taken over in 2010 in a complex deal allegedly funded by the sovereign fund and benefiting colourful businessman Jho Low.
Mr Low is alleged by US investigators to be a key figure in the alleged looting of 1MDB.
CCCC told The Australian it had “no knowledge of the claims in those (Sarawak Report) articles”. “We will continue to follow those false accusations made by certain media and will take necessary steps to defend our lawful rights,” it said.
The Malaysian government has also denied the allegations.-The Australian/Ben Butler