1MDB was Najib, Najib was 1MDB.
9.39am: Accused Najib Abdul Razak enters the dock as proceedings begin.
9.41am: Court is in session. Former 1MDB CEO Shahrol Azral Ibrahim Halmi takes the stand. Defence lead counsel Muhammad Shafee Abdullah begins his cross-examination.
Earlier, Shafee made an application before Judge Collin Lawrence Sequerah to inspect evidence from former PetroSaudi executive Xaiver Andre Justo. Sequerah fixed October 31 for case management of the application.
10am: Shahrol answers Shafee’s questions on the mechanics of the joint venture 1MDB had with Petrosaudi Holdings (Cayman) Ltd (PSI) in 2009.
Shahrol explains to the court that the joint venture company called 1MDB-Petrosaudi Ltd was already in US$700 million debt when he signed their joint-venture agreement on Sept 28, 2009.
He says this was due to two assets injected by PSI into the joint-venture entity was purportedly valued at US$2.2 billion, which was US$700 million higher than the US$1.5 billion that PSI agreed to contribute.
When Shafee asks him to name the two assets, Shahrol says he can’t remember their names except that one of them was an oil field in Turkmenistan.
The court also hears from Shahrol that 1MDB board of directors, however, had never seen ownership papers on these assets that were purportedly owned by PSI.
10.15am: Shahrol testifies that a joint-venture agreement he signed for the company with PSI in 2009 only gave 1MDB a window of fewer than two days to terminate the cooperation.
According to cross-examination by the defence on Shahrol, the agreement he signed stipulated that 1MDB had until Sept 30, 2009 to terminate their joint-venture with PSI if 1MDB finds PSI assets injected into their cooperation was of lower value than it was said to be.
Shahrol signed the agreement on Sept 28.
10.25am: Shahrol only learned that its joint-venture company with Petrosaudi Holdings was in huge debt on the same day he was scheduled to seal the cooperation deal in 2009, the court hears.
Shahrol testifies that he, however, went ahead with the signing of the agreement out of trust on Casey Tang, who was then 1MDB executive director.
The witness says he had queried Tang upon learning about the US$700 million debt already incurred by 1MDB-Petrosaudi Ltd hours before signing the agreement on Sept 28, 2009.
Tang, who was an associate of Jho Low, then advised Shahrol that it was okay for him to ink the deal with PSI.
“At that time, my perception was this was not something out of the ordinary and had been part of the negotiation that I was not involved in.
“At that time, I asked Casey the question, is this ok to sign. And he said ok.
So, I had trusted in his advice. So, I went and did it,” Shahrol testifies.
10.30am: Jho Low also played the role of advisor for Petrosaudi when the two companies were going into a joint venture in 2009, the court hears.
Shahrol testifies that he knew this when Low himself informed him about the matter.
The witness says that he, however, did not see that as a conflict of interest albeit Low was also advising 1MDB at the same time.
Under cross-examination by Shafee, Shahrol tells the court that Low had stated that he was trying to get a win-win situation for both 1MDB and Petrosaudi.
Shafee: Now, early Sept you knew about this. Didn’t it occur to you… You don’t have to go to a law school or business school… He had a conflict of interest.
Shahrol: He had been advising Datuk Seri Najib earlier than he was with Petrosaudi. When he called me saying he played role adviser to Petrosaudi, he was also clear to me he wanted to create a win-win between the two countries on behalf of the PM.
Shafee: He is advising your potential partner, and he is advising 1MDB, attended your board meeting, heard your secrets when you make decisions. Isn’t that a conflict of interest?
Shahrol: That time I take him as a trusted adviser of Najib, and that the PM knew what he was doing to facilitate the deal (between Petrosaudi and 1MDB).
10.40am: Judge Sequerah allows a short break to allow Shafee and lead DPP Gopal Sri Ram to attend to a separate court matter before another judge.
Shafee and Sri Ram are acting for opposing parties in a mediation in the separate court case.
Court takes a break.
11.43am: Proceedings resume after the break.
Shafee asks Shahrol about Edward Morse, who was brought in to evaluate the joint venture.
Shahrol says Morse was brought in because he had worked with PetroSaudi before.
He says they had vetted four other valuers before they settled on Edward Morse.
11.55am: Shahrol says board meeting discussions on Edward Morse’s valuation were very heated. Shafee asks him why did he not intervene. Shahrol says he didn’t want to, to which Shafee says he seems to always be playing second fiddle even though he was the CEO.
“You are always playing second fiddle in your role. You said that you make decisions in your role as CEO, but you are always seen as playing second fiddle,” he said.
Shahrol says he had to bulldoze the deal through. He had to reconcile what Najib wanted and what the board had decided so that the JV would go through fast as per the former prime minister’s instructions.
11.58am: “1MDB was Najib, Najib was 1MDB.” This is what Shahrol tells the court during cross-examination by Shafee.
The key 9th prosecution witness is explaining the rush in signing the deal between 1MDB and Petro Saudi International.
“It is important to set the context on why the decision on the PSI deal was done quickly and that I bulldozed everything through.
In a nutshell, I believed this was what (then prime minister) Najib (Abdul Razak) wanted.
“The difference between 1MDB and Najib did not exist in my mind. 1MDB was Najib and Najib was 1MDB.
“Whatever he wanted done, I needed to get it done.
“At that time, i was trying to reconcile what the (1MDB) board wanted and (1MDB board of advisors) chairperson Najib wanted”, Shahrol says.
12.05 pm: Shafee further queries Shahrol on assets purportedly worth US$2.2 billion injected by PSI into their joint-venture company in 2009.
The assets in Turkmenistan and Argentina, valued by a firm appointed by PSI, had affected in the joint-venture company being in US$700 million debt to PSI.
Shahrol testifies that he had never checked with the joint venture company if the US$700 million advance value was recorded in the latter’s books.
Shahrol says that he did not check because he had left the matter to then 1MDB executive director Casey Tang and businessperson Jho Low.
12.10pm: Shahrol says he doesn’t know if Tarek Obaid was responsible for the incorporation of the JV between 1MDB and Petro Saudi.
12.35pm: Najib said he was not out to destroy the country, Shahrol claims.
During cross-examination by Shafee, Shahrol testifies that this was what Najib allegedly said during a meeting, also attended by senior Finance Ministry officials, at an unspecified date and venue.
Shahrol is explaining why he did not put into the 1MDB board meeting minutes for late 2009 on Jho Low’s involvement in advising both 1MDB and Petro Saudi International over the joint venture between them.
“It is similar to a lot of patterns before this deal and after that deal. Certain matters involving Jho Low was not minuted and this is to protect Najib.
“This was how Najib wanted things done, I remember up close of when we were federalising TIA (Terengganu Investment Authority) into 1MDB.
“There was a meeting in which Najib shared about 1MDB and that he wanted 1MDB to do things differently and quickly and to leave the old ways behind.
“There was one specific meeting he said, attended by MoF senior officials, that “I am not going to destroy the country”.
That is why I believed in him (Najib) and whatever was done for him was proper and good for the country, and that was the underlying reason for all decisions I made in 1MDB,” Shahrol says.
12.40pm: Shafee suggests to the witness that he didn’t have a fiduciary duty to the company. Shahrol disagrees.
After this exchange, Shafee asks Justice Sequerah if they can break for lunch. The judge allows it.
2.40pm: Court is in session. Shahrol takes the stand.
2.43pm: Shahrol says he has not kept in contact with Tarek Obaid or any other associates.
2.54pm: Shahrol testifies that no one from 1MDB had done any search or any research on Petrosaudi. He said that because the nature of the deal was rushed, so they had just trusted Petrosaudi.
2.58pm: Shafee asks Shahrol about the evaluators who did not want to report to 1MDB about the ownership of Petrosaudi.
Shahrol said that it was not part of the scope of their work.
2.59pm: Shahrol said Casey Tang’s team had merely done an internet search on PSI before going into the joint venture.
Shafee: Were you happy with the search?
Shafee: You trusted Casey enough to place that US$1 billion investment in PSI and put it at risk?
Shafee: You agree with me that internet search was not enough to determine PSI ownership? Couldn’t you tell Jho Low or Casey to give you documents? To what extent did you ask to determine ownership?
Shahrol: I can’t remember.
Shafee: You know finally that more than 90% of the property of PSI is from Turkmenistan?
Shahrol: The majority was in Turkmenistan.
Shafee: Did you learn that PSI’s properties were owned by Turkmenistan.
Shahrol: I think I found out in the media.
Shafee: How come you as the CEO couldn’t find out, but media like The Edge found out?
3.07pm: Shahrol said when he found out that PSI didn’t own its assets, he brought it to the 1MDB board, but none of them did anything. He said that Lodin was the chairman of the board along with Ismee, who was part of the board.
3.10pm: Shahrol testifies that the company had relied on the words of Petrosaudi Holdings to believe that the latter actually owned oil and gas assets in Turkmenistan and Argentina.
For the record, PSI was using the purported oil and gas assets as their subscription in the joint venture, with the properties valued at US$2.2 billion.
The partnership required 1MDB having to inject US$1 billion into their joint-venture company.
“To the best of my knowledge, Casey Tang’s team did an internet search,” the witness says, referring to the then 1MDB executive director.
Shahrol testifies that even the internet search did not return the result of ownership, but rather information on the location of the purported PSI assets.
The search also showed a territorial dispute between Russia and Turkmenistan over the area where one of the assets was located.
Answering further questions by Shafee, Shahrol says he only learned that PSI claims on the assets were untrue sometime in 2015.
This, he adds, was when he read about it in media reports.
3.45pm: The court hears that valuer firm Edward Morse had valued oil-and-gas assets purportedly owned by PSI in Turkmenistan at US$3.95 billion.
According to the defence’s cross-examination on Shahrol, the firm also valued another asset purportedly owned by PSI in Argentina at US$108 million.
This was based on a report that the firm prepared in 2009 when 1MDB went into a joint-venture with PSI by setting up a company called 1MDB-Petrosaudi Ltd.
The joint venture saw 1MDB pumping in cash of US$1 billion, while PSI was supposed to inject US$1.5 billion worth of assets to make up 60 percent of their partnership.
However, the court hears, the assets purportedly owned by PSI in Turkmenistan was never in its possession.
Shafee based on a media report by The Edge, which stated that the assets in Turkmenistan was owned by Buried Hill Energy (Cyprus) Co Ltd.
According to the lawyer, The Edge had obtained all the information as they paid former Petrosaudi executive Xavier Andre Justo for rights to documents that Justo had stolen from the company.
3.46pm: Shafee tells Shahrol The Edge paid US$2 million to Xavier Justo to get information about 1MDB.
Shahrol says that he did not know about this report.
3.47pm: Shahrol is asked if he’s still a director in 1MDB, he said he hasn’t been a director since 2016.
Court takes a short recess.
4.07pm: Court resumes.
4.20pm: During cross-examination by the defence on Shahrol, the court hears that the company’s joint-venture with Petrosaudi in 2009 would benefit Malaysia in terms of locking in foreign direct investment worth US$1.5 billion.
This is based on a statement that was made in the position paper and venture agreement between the companies, which had been tendered as evidence in the court.
“This was the definition of the US$1.5 billion “Saudi money” which was supposed to be in the form of assets, would be counted as FDI from the country level calculation,” Shahrol testifies when asked to explain the matter.
“When we sign the joint-venture, 60-40, it counts against the FDI number for the country,” the witness adds.
The court later hears that 1MDB and Petrosaudi had also in 2009 planned to invest in the Bakun Hydroelectric Dam project in Sarawak.
He says that the plan came as the project was in trouble regarding its funding, as the federal government, which owned it, could not sell electricity to the Sarawak government according to their asking price.
This was because the law stipulated that the electricity can only be sold to one party, which was the Sarawak state government, and thus making it difficult for the federal government to negotiate pricing.
Shahrol testifies that this was also the reason that 1MDB and Petrosaudi didn’t proceed with the plan.
4.24pm: Shahrol testifies that 1MDB relied on purported representation from PSI that Petro Saudi Holdings (Caymans) is a fully owned subsidiary of Petro Saudi International.
The ninth witness says that they relied on this representation when informing Bank Negara through a letter in 2009.
Shahrol says that in the letter written by then 1MDB chief financial officer Radhi Mohamad to Bank Negara, the central bank was informed that Petro Saudi Holding (Cayman) is a 100 per cent subsidiary of PSI and that PSI was a unit of the Saudi royal family.
4.31pm: Judge Sequerah allows proceedings to adjourn for the day.
Proceedings will resume on Tuesday as Monday is a replacement public holiday for Deepavali.
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Sept 18, Najib’s 1MDB Trial: Day Nine
Sept 17, Najib’s 1MDB Trial: Day Eight
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