The Malaysian Insight

UNDER the stewardship of former prime minister Najib Razak, 1Malaysia Development Bhd transferred US$1.83 billion (RM5.5 billion) to entities later revealed by investigators to be sham companies, the Kuala Lumpur High Court heard last week.

The amount was transferred between September 2009 and October 2011 to companies controlled either by Low Taek Jho, or Jho Low, or his associate, PetroSaudi International CEO Tarek Obaid, according to witness testimony by former 1MDB CEO Shahrol Azral Ibrahim Halmi.

Prosecutors have accused Najib of conspiring with Penang-born Low to defraud the state investor of billions. Najib was then finance minister and, due to his position as head of Minister of Finance (MoF) Inc, had been the sole shareholder of 1MDB.

The 66-year-old accused was also chairman of 1MDB’s advisory board. Defence lawyers have said that Najib was not fully aware of 1MDB transactions and that he was misled by Low and others.

During cross-examination, Shahrol said US$1.83 billion left the country due to a number of schemes later discovered to be fraudulent.

The first was a supposed 1MDB-PetroSaudi International energy venture, whereby 1MDB had injected US$1 billion for a 40% stake in a joint venture company, 1MDB-PetroSaudi Ltd.

Days after the joint venture deal was signed on September 25, 2009, US$300 million was instead paid to PetroSaudi Holdings (Cayman) Ltd and US$700 million to Good Star Ltd.

Both were later revealed by investigators to be sham companies, with Seychelles-based Good Star controlled by Low. The Cayman Island-based entity, meanwhile, was not formally affiliated with PetroSaudi International.

In August 2010, PetroSaudi executive Patrick Mahony had discussed with Tarek in an email exchange about meeting Najib to explain the US$500 million loss in the joint venture between 1MDB and PSI, documents tendered to the court showed.

When prompted, Shahrol denied knowledge of communications between the executives.

Despite the failure of the 2009 joint venture, 1MDB’s board was persuaded to enter yet another joint venture with PetroSaudi International the following year, Shahrol testified.

PetroSaudi International, via Tarek, pitched a proposal to jointly invest in French energy firm GDF Seuz for a 4.23% stake. 1MDB’s contribution was supposed to be US$1 billion.

The proposal was later abandoned in favour of a US$500 million Murabaha financing agreement, which was perceived to be less risky. The amount was paid on September 14, 2010, to 1MDB-PetroSaudi Ltd, which was then 100% controlled by PetroSaudi International.

Days after receiving the amount, Tarek transferred about 82 million Swiss francs (RM250 million) to Good Star.

As part of a second Murabaha financing agreement deal, 1MDB put up a further US$330 million, paid out in four tranches between May 20, 2011 and October 25, 2011. Shahrol said he was not aware then that the money was actually transferred to Good Star, or that the entity was controlled by Low.

Shahrol testified that after reading a series of news articles, including those published by The Edge in 2015, he questioned Low on whether he owned Good Star.

“I asked Jho to explain. But he said Good Star was owned by PetroSaudi and he would get PetroSaudi to write a letter to confirm that,” he said.

The witness agreed with a suggestion by lead defence counsel Muhammad Shafee Abdullah that a subsequent letter from Tarek later claiming PetroSaudi International’s ownership of Good Star was deceptive and false.

Najib is on trial for four counts of power abuse to enrich himself with RM2.3 billion from 1MDB and 21 counts of laundering the same amount.

He is represented by a dozen lawyers, led by Shafee. Former Federal Court judge Gopal Sri Ram leads the prosecution.

The trial presided over by judge Collin Lawrence Sequerah continues tomorrow. – November 10, 2019.