Najib’s 1MDB Trial: Day 13

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An audit would have revealed that US$700 million from the US$1 billion meant for a 1MDB-PetroSaudi Joint Venture was diverted to Jho Low’s company Good Star Limited.

9.30am: Najib Razak enters the court and takes a seat at the front row of the public gallery to await proceedings to begin.

9.53am: Court is in session, with Najib entering the dock for the resumption of the prosecution’s examination-in-chief of former 1MDB CEO Shahrol Azral Ibrahim Halmi.

10am: Shahrol continues his testimony by reading from his witness statement.

Shahrol, who served as the CEO from 2009 to 2013, testifies that he was officially appointed to the position by Najib, who was also chairperson of the 1MDB board of advisers, on Sept 17, 2009.

He says that the appointment by the prime minister was made in accordance with Article 68 of 1MDB’s Memorandum and Articles of Association, which had been amended prior to that.

Shahrol says that the appointment was to signify that only the PM can appoint 1MDB board members and senior management.

10.05am: Lead prosecutor Gopal Sri Ram asks Shahrol about his letter of appointment.

Shahrol says the appointment letter as a 1MDB board member was issued by Najib on September 17, 2009, made by the prime minister in accordance with the requirements of article 68 of M&A 1MDB.

10.10am: The court hears from Shahrol that a huge part of the money raised from the selling of bonds in 2009 was spent on investment in PetroSaudi International (PSI).

Shahrol testifies that 1MDB used US$1 billion, which was approximately RM3.4 billion according to the exchange rate then, to invest in PSI on Sept 30, 2009.

He says the balance of about RM1 billion in the 1MDB account was then used to service interest payments, or coupon payments, for the RM5 billion bonds.

He says the coupon payment was done every six months, usually at RM100 million each.

10.24am: Najib used the minutes of a Minister of Finance Incorporated (MoF Inc) shareholders meeting to shield himself from accusation of misappropriation, the court hears.

Shahrol testifies that this was done through the MoF Inc shareholders’ minutes which gives power to the Terengganu Investment Authority (TIA) board to conduct large transactions.

TIA, which was acquired by the government through MoF Inc, later morphed into 1MDB.

“Now, after the revelation by the investigation into the misappropriation that took place in 1MDB, I understood that the minutes of this shareholder meeting was intentionally released by Najib at that time (Sept 16, 2009) to shield Najib from accusation of misappropriation and then put (the) responsibility on the TIA board of directors,” Shahrol reads from his Witness Statement.

He says this is because two days later (Sept 18, 2009), there was a board meeting to discuss on the use of funds from the TIA bonds to enter a Joint Venture (JV) project with PetroSaudi, which was a company owned by Prince Turki and Tarek Obaid.

It had already been established in court yesterday that 1MDB had in 2009, raised RM4.396 billion from the selling of RM5 billion bonds, which Shahrol said the difference in the amount accounted for between RM100 million and RM200 million of fees to AmBank while the other between RM500 million and RM600 million accounted for the selling of bonds at a discounted price.

The witness also said yesterday he learned from police last year that the bonds were sold at a discounted price to two companies based in Singapore and Hong Kong that were linked to Jho Low.

10.25am: The court hears from Shahrol that several names were considered before the company changed its name from TIA.

Shahrol says that among the other names deliberated as TIA’s new name included MDB Wealth Berhad, Malaysia Development Berhad dan Malaysia Wealth and Capital Creation Berhad.

However, according to the witness, the names were prohibited by the Companies Commission as they are ‘controlled words’ (dikawal).

The company then received a letter from Najib to register its name as 1Malaysia Development Berhad.

TIA’s name was officially changed to 1MDB on Sept 25, 2009.

10.30am: Shahrol testifies that it was “far more effective” for him to go through Jho Low to reach Najib.

He testifies this in court when asked by Sri Ram to compare which way was more effective for him to get to the premier compared to Najib’s then special officer Amhari Efendi Nazaruddin.

Sri Ram: You said that in order to access the accused, you either have to go through Jho Low or PMO officer Amhari?

Shahrol: Yes, (true) at the time.

Sri Ram: From your experience, which (way) proved more effective?

Shahrol: From my experience, Jho Low is far more effective.

Sri Ram: So you can get to the accused more effectively through Jho Low?

Shahrol: Yes.

This testimony by Shahrol comes as he had earlier told the court that he had no direct access to Najib back in 2009 and had to go through Jho Low or Amhari when he needed to reach the accused.

10.40am: Shahrol tells the court that he had written a letter to Najib in Dec 2009, stating there was no necessity for an audit exercise to be conducted on the company.

Shahrol testifies that he was advised to write the letter to Najib and copy it to the then Auditor-General Ambrin Buang by Jho Low.

According to Shahrol, prior to writing the letter, 1MDB management received information that MoF Inc wanted due diligence to be performed on 1MDB following the transfer of its shares from the Terengganu state government to MoF Inc.

“As per the normal course of events, I updated Jho Low, and he reverted back to me saying that an audit or due diligence by the Audit Department could present a political risk to Datuk Seri Najib.”

According to Shahrol, he then asked for Najib’s instruction for the next course of action through Jho Low.

The witness says that he was later told there was no need for an audit exercise on 1MDB as the company has already appointed (accounting firm) Earnst and Young, and that an audit report will be submitted to MoF Inc once it is ready.

To a question by Sri Ram, Shahrol testifies that after he sent the letter to Najib, there was no adverse reaction from the premier to challenge its content.

10.50am: An audit would have revealed that US$700 million from the US$1 billion meant for a 1MDB-PetroSaudi JV was diverted to Jho Low’s company Good Star Limited.

Shahrol tells this to Sri Ram during the examination-in-chief.

Shahrol says that back in 2010, 1MDB’s Board of Advisors made a decision that there was no need for due diligence or auditing by the Auditor-General on the sovereign wealth fund.

Sri Ram: What would an audit had revealed?

Shahrol: The audit at that point in time (2010) would have revealed that we invested US$1 billion with PetroSaudi International, but that US$300 million went to the JV company (between 1MDB and PetroSaudi) while US$700 million went to another company purportedly owned by PSI, which is Good Star Limited.

11.12am: Court is in recess.

11.37am: Court is in session.

11.45am: Sri Ram asks Shahrol about a 1MDB letter to Najib on December 22, 2010, about the due diligence request from the auditor-general’s office.

Shahrol says in this letter, he informed Najib of additional document requests by the audit team.

Shahrol says the board of directors approved by Najib himself had agreed to not provide the additional information required by the auditor-general.

11.50am: Najib and Jho Low had a symbiotic relationship, Shahrol testifies.

During examination-in-chief by Sri Ram, the prosecution’s ninth witness says this is the impression in his mind on the duo’s relationship between 2009 and 2010.

Sri Ram: What impression was in your mind of the accused (Najib) and Jho Low’s relationship?

Shahrol: The relationship was symbiotic in the sense that Jho (Low) executed what Najib wanted and Najib’s role was to approve decisions that are required not only by the company but also government machinery.

12pm: The court hears that the idea of a JV between 1MDB and PSI was conceived when Najib was having a holiday together with Prince Turki Abdullah on a yacht in Aug 2009.

Shahrol testifies that he was informed about this by Jho Low, who told him (Shahrol) that he was also there when the discussion happened.

“Jho Low also informed me that before the discussion, Datuk Seri Najib had met King Abdullah (of Saudi Arabia) and both leaders had agreed to form a JV worth US$2.5 billion as investment by both countries.”

12.05pm: Shahrol says he handed over the responsibility of dealing with PSI for their JV to Casey Tang on Jho Low’s suggestion.

Shahrol testifies that 1MDB then had nobody else with the knowledge and experience in handling finances, including matters pertaining to fund-raising and corporate structure.

The witness says he also trusted Casey Tang, whom he described as being very close to Jho Low, as the person involved in TIA even before Shahrol joined the company, among other reasons.

Shahrol says he also believed that Jho Low was more comfortable with Tang handling the JV with PSI as they had known each other for a long time and Tang was more experienced in corporate matters.

12.19pm: Najib never asked Shahrol whether there were really oil fields in Argentina and Turkmenistan, the court hears.

Sri Ram asks Shahrol this question in relation to the witness testimony that one Edward L Morse was appointed by 1MDB to value its oil fields assets in the two countries, which was worth over US$1.5 billion.

Sri Ram: As chairperson of the (1MDB) Board of Advisors, did the accused (Najib) instructed you to go and check whether the oil fields in Argentina and Turkmenistan existed?

Shahrol: No, he did not.

12.23pm: Sri Ram asks Shahrol about the letter from Ernst & Young (EY) with proposal to provide a discussion paper on the JV between IMDB and PetroSaudi International (PSI).

Shahrol says he saw the document at that time but was not involved in discussions with EY as stated in the letter.

He says 1MDB representatives were Kelvin Tan and Vincent Koh, and the purpose of the letter was to engage EY as a tax adviser for the JV agreement.

He says a special board meeting was scheduled for September 18, 2009.

Shahrol says as a personal preparation, he had asked Low to inform him about the whole project.

He says Low told him about the important things that he needed to know and how to answer questions that might be asked by the board.

12.30pm: Shahrol tells the court that Najib had called up the company’s board of directors (BoD) chairperson, Bakke Salleh, before a BoD meeting on Sept 26, 2009.

Shahrol testifies that Bakke, after ending the call with Najib, had told the meeting that the premier had ordered them to speed up the decision-making process and approve 1MDB’s JV with PSI.

According to him, Najib had given the order citing that the Saudi royal family would have a working visit to Malaysia, during which the JV agreement would be signed.

He says the BoD, after hearing Najib’s order, then felt that they should not delay the process any longer as not to humiliate the Malaysian government.

Shahrol says that he believed Najib had made the call under Jho Low’s advice, as he had earlier told the businessperson of doubts raised by 1MDB BoD members on PSI during their earlier meeting.

“After the project paper on this JV with PSI was presented by Casey Tang on Sept 18, 2009, Tan Sri Bakke and Tan Sri Azlan Zainol (1MDB director then) seemed not convinced with this investment.

“They were not confident if the investment we were about to do was with a real company owned by Saudi Arabia or not.

“They also queried on the breakdown of the JV where 60 per cent comes from PSI’s oil assets. The board wanted to have a more in-depth understanding of the assets through independent valuation or site visit.

“Tan Sri Bakke even wanted a PSI representative to come personally to present the join-venture to the board,” Shahrol testifies.

The witness says that he then informed Jho Low about this and told the businessperson that the latter would have to do something, including attending the BoD meeting, to convince the board members of approving the JV with PSI.

Shahrol says he, however, did not know about the idea for Najib to call Bakke, and believed that Jho Low was the one who asked Najib to do this.

12.53pm: Court is in recess.

2.42pm: Court is in session.

2.57pm: Sri Ram asks Shahrol about documents involving Good Star Limited and IMDB.

Shahrol says he didn’t know anything about it, he never directed it and never ask Casey Tang to sign any agreement with Good Star.

He says that Tang was only given the mandate to manage the Foreign Exchange such as the transaction with Deutsche Bank (Malaysia) Berhad for a US$1 billion transaction via DCR dated September 26, 2009.

Shahrol says that throughout his tenure as CEO of 1MDB, he did not perform any business matters on behalf of Good Star Limited.

“I also confirm that this agreement has never been tabled at any 1MDB board meeting. I confirm I had never seen this document,” Shahrol says.

Sri Ram: “Did anyone gave any authority for Tang to enter into the agreement (with Good Star)?”

Shahrol: “No.”

Sri Ram: “Did any of the BoD give consent?”

Shahrol: “No.”

Shahrol also confirms that this agreement was never presented at any 1MDB BoD meeting and he had not viewed the document.

3.10pm: The court hears from Shahrol that the company transferred a total of US$1 billion to two bank accounts on Sept 30, 2009, as an investment in a JV with PSI.

According to Shahrol, one of the accounts belonged to Good Star Ltd, which received US$700 million. The remaining US$300 million was transferred into an account belonging to the 1MDB-PSI JV company itself.

3.23pm: Sri Ram asks Shahrol about the 1MDB and PSI JV.

Shahrol says that after all the JV processes were successful, he called for a BoD meeting to inform the board of its current status. The meeting was held on October 3, 2009, chaired by Bakke and attended by all BoDs.

Shahrol says he reported the current status of the JV where 1MDB has paid its share of US$1 billion under 2 tranches of US$700 million each into a Good Star Ltd account affiliate to PSI, as well as US$300 million to the 1MDB-PetroSaudi JV account.

Yusof Mat Isa

Shahrol says Bakke asked for justification why US$1 billion was banked directly into the PetroSaudi JV MDB account. Shahrol told him that it was carried out based on feedback from Jho Low.

The witness says that he was informed by Jho Low that the Good Star Ltd account belonged to PetroSaudi, and that the payment was for a cash advance made by PetroSaudi to their JV company.

“This means that PetroSaudi Cayman was a subsidiary of PetroSaudi (PSI) and that PetroSaudi Cayman was in debt to PSI through assets worth over US$1.5 billion.

“So, they would have to pay the debt because those assets had been made the joint venture company’s equities.

“I could accept the explanation by Jho Low as it made sense, and moreover the share certificate also showed that the joint venture company had already received the US$1 billion that we (1MDB) injected through the two tranches,” Shahrol testifies.

3.31pm: Sri Ram continues questioning Shahrol on the transactions to PSI.

Shahrol says that Bakke became angry with him and management, including Tang, on managing the transaction.

He says Bakke told them to recover the US$700 million from PSI because it was not entered into a valid account, which was that of the 1MDB-PetroSaudi JV.

3.49pm: Sri Ram questions Shahrol on why he didn’t consult the BoD on the transactions.

Shahrol says they were under pressure to sign the JV agreement and they had to complete payment by September 30, 2009.

He says there were emails and Blackberry Messenger messages (BBMs) between him, Mahoney, Jho Low and Tang.

Sri Ram: “To what end?”

Shahrol: “Until the transactions were complete.”

Sri Ram: “Did Najib know about the transactions?”

Shahrol: “No.”

3.42pm: Bakke stepped down as 1MDB director on Oct 19, 2009, Shahrol testifies.

Shahrol says the resignation followed Bakke’s dissatisfaction with the way the 1MDB-PetroSaudi joint venture was handled, especially in relation to the alleged diversion of US$700 million from the venture.

“Not long after that, Bakke resigned as 1MDB director on Oct 19, 2009. I do not know the real reason for the resignation. But I can feel the possibility that he was dissatisfied with what happened in the joint venture process,” Shahrol says.

3.50pm: Shahrol tells the court that he faced difficulties to get cooperation from 1MDB PetroSaudi Ltd, which was the JV company 1MDB had set up with PSI.

Shahrol says that between Oct 2009 and Feb 2010, he and Casey Tang had tried to get information from 1MDB PetroSaudi Ltd for submission to auditor Ernst & Young.

However, according to him, they could not get enough information from the company as they could not get the cooperation of Patrick Mahony and Tarek Obaid.

“They didn’t have the slightest interest to entertain us and were more prone to communicate only with Jho Low,” he testifies.

Shahrol says he had also contacted Low to seek his assistance.

According to the witness, he had also asked Tang to arrange for a 1MDB PetroSaudi Ltd BoD meeting but this never happened.

Shahrol says PSI, Low and Tang had then in early 2010 suggested to him to terminate the JV agreement.

4.15pm: After 1MDB could not get cooperation from its JV company with PetroSaudi, 1MDB decided to terminate their 1MDB PetroSaudi Ltd (JV Co) agreement, the court hears.

Shahrol testifies that this decision was agreed by its BoD and the Finance Minister as 1MDB shareholder.

For the record, the finance minister then was Najib, who was also the prime minister.

Shahrol says that the BoD and Najib gave formal approval to sell 1MDB’s US$1 billion shares in the JV Co through a directors’ resolution dated March 22, 2010.

According to Shahrol, PSI had allegedly agreed to turn 1MDB’s US$1 billion investment into Murabaha notes worth US$1.2 billion, which leaves 1MDB with a profit of US$200 million.

“However, the Murabaha subscription agreement also obliges 1MDB to subscribe to an additional US$1 billion notes,” he says.

Being queried by Sri Ram what this meant to 1MDB, Shahrol testifies that it meant that PetroSaudi would have the ability to ask more money from 1MDB.

Sri Ram: Did that happen?

Shahrol: Yes.

Sri Ram: How much?

Shahrol: In several tranches, totalling US$830 million.

Sri Ram: “Did the US$700 million to Good Star produce any benefit to 1MDB?”

Shahrol: “No.”

Sri Ram: “Did the US$300 million to PSI Cayman produce any income for 1MDB?”

Shahrol: “No.”

4.30pm: The proceedings adjourn with Shahrol stopping at page 129 of his 270-page Witness Statement.

Earlier reports:

Sept 24, Najib’s 1MDB Trial: Day 12

Sept 23, Najib’s 1MDB Trial: Day 11

Sept 19, Najib’s 1MDB Trial: Day 10

Sept 18, Najib’s 1MDB Trial: Day Nine

Sept 18, Najib’s Ex-Aide Led MACC to Raid on Jho Low’s Apartment

Sept 18, Najib’s 1MDB Trial Halted Briefly for Najib to See Eye Specialist

Sept 17, Najib’s 1MDB Trial: Day Eight

Sept 17, Witness Identifies Riza Aziz, Arul Kanda and Five Others as Key Players in 1MDB Saga

Sept 17, Bono, Queen of Jordan, Rosmah Floated as Trustees for TIA

Sept 17, Witness Says 1MDB Najib’s Baby, Defence Claims It Was Terengganu Sultan’s Idea

Sept 11, Najib’s Eye Infection Halts 1MDB Trial

Sept 10, Najib’s 1MDB Trial: Day Six

Sept 10, Rosmah Fond of Jho Low

Sept 10, Najib’s Ex-Aide: Jho Low Provided Scripted Responses to Deny His Involvement in 1MDB

Sept 10, Istana Negara Questioned Jho Low’s Role in 1MDB Predecessor TIA

Sept 5, Najib’s 1MDB Trial: Day Five

Sept 5, 1MDB Trial: Judge Raps Shafee over Najib’s Tardiness

Sept 5, 1MDB Trial: Najib’s Ex-Aide Took US$200K Loan from Jho Low to Buy Property

Sept 5, 1MDB Trial: Najib’s Ex-Aide Accused of Lying

Sept 4, Najib’s 1MDB Trial: Day Four

Sept 4, Najib’s Ex-Aide: Mudabala CEO Was Promised All Sorts of Things

Sept 4, Najib’s Ex-Aide, Jho Low on “Secret China Mission” to Bail Out 1MDB

Sept 4, Jho Low Ordered Najib’s Ex-Aides to Open Overseas Bank Accounts

Sept 3, Najib’s 1MDB Trial: Day Three

Sept 3, Najib’s Ex-Aide: Jho Low Drew Out Wealth Fund Concept on Kitchen Whiteboard

Sept 3, Jho Low Gave Possibly Forged Letters from Saudi Arabia to Stop 1MDB Probe

Sept 3, Only Najib and Jho Low Knew “Full Picture” of 1MDB Plan

Sept 3, Jho Low in Najib’s Inner Circle

Aug 29, Najib’s 1MDB Trial: Day Two

Aug 28, Najib’s 1MDB Trial: Day One

Aug 28, Shafee: Prove Najib Knew Arab Donation Letter Faked, Jho Low Is Najib’s Alter Ego

Aug 28, Najib’s 1MDB Trial: Shafee Again Questions Sri Ram’s Appointment

Aug 28, Najib’s 1MDB Trial: Gopal Sri Ram’s Full Opening Statement

Aug 28, Najib’s 1MDB Trial: Prosecution to Show Saudi Donations a Sham

Aug 28, Najib’s 1 MDB Trial: Prosecution to Prove Jho Low Was Najib’s Alter Ego

Aug 28, Najib’s 1MDB Trial Begins