DEBUNKED

Najib’s 1MDB Trial: Day 35

Chris Chan

May 21, 2020

813

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Comic relief with reference to “pain in the a” and a “nasi goreng” anecdote.**

9.31am: Former prime minister Najib Abdul Razak enters the Kuala Lumpur High Court.

The accused takes a seat at the front row of the public gallery to await proceedings to begin.

9.45am: Najib enters the dock as Judge Collin Lawrence Sequerah emerges from his chambers.

Seen in the witness stand is former 1MDB CEO and ninth prosecution witness, Shahrol Azral Ibrahim Halmi.

Also seen in court is lead defence counsel Muhammad Shafee Abdullah and other members of the defence team, as well as lead DPP Gopal Sri Ram and other members of the prosecution team.

The lawyers and DPPs are seen seated together, two per table in front.

9.52am: Shafee asks Shahrol about 1MDB’s stake in PetroSaudi Oil Services Ltd (PSOSL), a subsidiary of PetroSaudi International Ltd (PSI).

Shahrol says the board never saw the audited financial accounts of PSOSL.

Shafee: Did the management get the accounts?

Shahrol: I didn’t. I don’t know if Jasmine [former 1MDB general counsel Jasmin Loo, who is currently missing] did.

Shahrol says he cannot say whether there is a copy of the audited financial statements in 1MDB’s management office.

Shahrol had also never seen for himself two oil exploration vessels named Discoverer and Saturn, which were supposedly owned by PSOSL and fully equipped for operations.

To recap, 1MDB had purchased a 49% stake in PSOSL in 2012 via Murabaha notes.

1MDB had paid US$1.5 billion to participate in the Murabaha financing scheme by the 1MDB-PSI joint venture (JV) in 2010, on top of the US$1 billion the fund had already invested into the partnership.

The JV – in which 1MDB had a 40% stake while PSI had another 60% stake, via injections of oilfield assets – was set up for oil and gas exploration purposes. It was later revealed that the oilfields were either not owned by PSI or were overvalued.

10.07am: Shahrol says that the agreement for a 49% stake in PSOSL was due to sanctions imposed by the US, which prevented the operation of Malaysian companies in Venezuela.

He says that owning a 49% stake in PSOSL does not make 1MDB the major shareholder of PSOSL, and therefore 1MDB may be able to justify its presence in Venezuela and not be in breach of the sanction.

Shafee asks why 1MDB had then disposed the stake to Bridge Partners International Investment Ltd later on, to which Shahrol says that it was a move to reduce risk.

10.18am: “This is a scam no doubt, at the height of it the leader is Jho Low but it cannot operate alone (without) minions under him, including you and Jasmine, and the management placed nicely by Jho Low,” Shafee says, among others.

To this, Shahrol says “disagree”.

When Shafee insinuates to Shahrol that Najib was conned in this matter too as the accused could not be micromanaging, Shahrol says he cannot comment on what Najib knew or not at the time.

10.25am: The court hears from Shahrol that billions of ringgit in the form of “fund units” 1MDB had invested in Petrosaudi was similar to the fund units in Permodalan Nasional Berhad (PNB).

Shahrol says this under cross-examination by Shafee when asked to explain what the fund unit actually is.

“The fund units are units similar to our PNB units. (These) units are held in a trust, and the trust is supposed to go and invest in actual companies and such,” Shahrol testifies.

10.26am: Shafee points out that Bridge Partners was formed a month before the deal and says that it was probably formed by Jho Low.

Shahrol replies that the responsibility to handle all the due diligence lay with Loo, 1MDB’s former chief financial officer (CFO) Azmi Tahir and deputy CFO Terence Geh.

Shafee: Didn’t you huddle together and asked them where’s the money? How long you would have to wait for the money?

Shahrol: I see where you are going with this. This was something that started from a G2G [government-to-government, involving Malaysia and Saudi Arabia] deal. I had no reason to be suspicious that this is something good for the government.

Shafee: You were the captain. You owe a fiduciary duty to the company. Do you take a big share of responsibility of 1MDB’s losses during your tenure?

Shahrol: No comment.

10.35am: Shahrol is asked by Shafee about the history behind names of several projects that the company was doing in 2012.

Among the projects was one that they called “Pita”.

Explaining this to the court, Shahrol says that the name was derived from an internal joke in the 1MDB management at that time, where they referred to Petrosaudi as a “pain in the a**”, or in short, Pita.

Shafee: As a matter of curiosity. You remember this project Pita. What does Pita stand for?

Shahrol: That’s an internal joke. P is for PSI, while ITA is “in the a**”.

Shafee: Pita is Petrosaudi pain in the a**?

Shahrol: To repatriate the fund, yes.

Shafee: Why was it a joke in the management? Because you recognised it as such right? That the money is not coming?

Shahrol: Yes.

10.50am: Shafee asks why the presentation of a paper on PSI during two board meetings in March 2012 was delayed, which Shahrol explains was due to the management needing to sort out the extension of contract with PSI.

He says that the management was waiting for a representation from PSI.

Shahrol: At that time, PSI was considered a trustworthy partner, representing the government of Saudi Arabia.

He then says that it was Loo’s responsibility to obtain a representation from PSI.

Shafee: Datuk Shahrol, whenever you are put into a corner, you either blame my client or the others – Jho Low, Jasmine Loo and so on. You never take fault. You blame everybody else.

Shahrol: Disagree.

11.06am: The proceedings take a short break, by Shafee’s request.

11.33am: Proceedings resume. Shafee brings up some housekeeping matters about the upcoming dates of the trial in June.

11.43am: Shafee asks the witness about PetroSaudi Holdings BVI, which was formerly the 1MDB-PSI JV company.

Shafee: Do you know if you have a copy of the certificate that shows that this is, in fact, a change of name for the JV and not another company?

Shahrol: No I don’t.

Shafee: You haven’t seen the certificate.

Shahrol: No.

The lawyer moves to a directors’ circular resolution (DCR) for the approval of the redemption of the Murabaha notes.

The DCR states that the termination of the Murabaha facility will see the repayment of US$2.22 billion and once this occurs, the obligation of the parties involved is discharged following the repayment.

11.53am: Shafee moves on to another DCR. While the previous DCR dealt with the redemption of the Murabaha notes (DCR 1), the second DCR dealt with the purchase of a 49% stake in PSOSL (DCR 2).

Both documents shared the same date.

DCR 2 states the proposal for 1MDB to acquire the 49% PSOSL stake for US$2.22 billion, with commercial arrangements for 1MDB to be entitled to 100% of the economic benefits.

Shafee: It says the acquisition is for 49% but the commercial arrangement is for 100% of economic benefits of PSOSL. How does that work?

Shahrol: That was the agreement that was negotiated between Jasmine Loo, Jho Low and PSI – that all the profits get channelled to 1MDB.

Shafee: It sounds bizarre that a 49% equity can benefit 100% of the economic benefits. What about the 51% share of PSI?

Shahrol: They still own it.

Shafee: But they don’t get any profit. Nothing.

Shahrol: Yes

Shafee: Do you agree that this sounds too good to be true?

Shahrol: Yes. It is not usual.

The witness further explained that the deal was in line with PSI’s previous generosity, as PSI had agreed to indemnify 1MDB of any adverse forex impact of the redemption of the Murabaha notes.

Shafee: It doesn’t look much like a JV company does it. It’s more like they are doing us a big favour.

Shahrol: Yes.

12.05pm: Shafee asks why the two DCRs were done on separate documents, when, in fact, the converted Murabaha notes will be used to acquire the 49% stake in PSOSL.

He asks Shahrol who came up with the idea to split the proposal into two DCRs, to which Shahrol says it was Jasmine Loo.

Shahrol: At the time, I didn’t question why it was that way. She’s a lawyer so I thought she should know why it was done that way.

Shafee: Who instructed her to do this?

Shahrol: I didn’t instruct her to do this. I don’t know if anyone else instructed her.

Shahrol adds that the two documents were circulated together.

Shafee: Wouldn’t the separation of the documents create an illusion that there are two separate transactions for two separate entities?

Shahrol: I disagree.

Shafee: But this is a possibility.

Shahrol: It’s possible.

12.26pm: Shahrol says he did not verify Low’s claims related to 1MDB buying a stake in PSOSL in 2012.

“I took it on good faith as this was done on the highest level consistent with the talking points (by Low) and actions. I was not suspicious,” Shahrol says.

Shafee then asks him that even if he had in mind that Low had a close relationship with Najib, Shahrol still could have taken it upon himself to verify Low’s claim.

“Not every time,” Shahrol says, agreeing with Shafee that he is not sure whether Low was telling the truth as he (Shahrol) took it on good faith.

12.30pm: Shafee points out that Deloitte said there were no documents to show that PSOSL was a subsidiary of 1MDB, despite the latter having acquired a 49% stake.

Deloitte said that the stake was disposed before the financial year ended March 31, 2013, and the proceeds were below the materiality level set.

Shafee asks Shahrol what “below the materiality level set” means, but Shahrol says he does not know.

12.50pm: Shahrol tells a surprising “nasi goreng” story to explain why he trusted Low.

“I trusted Low because of his actions…Najib was around him from the very beginning. He seems to have access (to Najib).

He says that Low was able to access Najib’s Taman Duta home at any time and had even passed Shahrol the phone numbers of all the assistants there.

Shahrol says these observations accumulated over time, which led him to believe there was a close relationship between Jho Low and Najib.

“One anecdote I can share with the court, I am well known to make good nasi goreng. I gave some to Jho Low, and he asked me if he can bring some to Najib.

“And then later he told me that Najib said it was good,” Shahrol says, triggering chuckles from those present in court.

1.08pm: Shafee points out that the Bridge Global Absolute Return Fund was only set up on Aug 8, 2012, and that a resolution for 1MDB’s investment into the fund was made before the fund existed.

Shafee: Are you surprised that this resolution was made when the fund was not there?

Shahrol: Yes.

To recap, Bridge Global Absolute Return Fund was an affiliate of Bridge Partners Investment Management Ltd that was incorporated specifically to “restructure” the ownership of 1MDB in PSOSL, according to a statement of facts by Singapore’s prosecution against BSI Bank’s Yeo Jiawei when he was charged and jailed in 2017.

Shafee then quoted an article by The Edge titled ‘A 1MDB flashback’, dated July 26, 2018, which stated that Bridge Partners International Investment Ltd – which is also an affiliate of Bridge Partners Investment Management Ltd – was incorporated on Aug 9, 2012.

He asks that the article be marked as an exhibit.

Shafee then proceeds to call Bridge Partners a total sham.

1.17pm: Shafee requests for proceedings to end for today, as he will be moving to a different area.

Shahrol also says that his throat is getting dry from testifying.

Judge Sequerah obliges.

Court is adjourned for the day.

It will resume on June 3.

Earlier reports:

May 21, Najib’s 1MDB Trial: Day 34

May 19, Najib’s 1MDB Trial: Day 33

Nov 11, Najib’s 1MDB Trial: Day 32

Nov 7, Najib’s 1MDB Trial: Day 31