A RETIREMENT Fund Inc (KWAP) investment panel led by its chairman, the then Treasury chief secretary Wan Abdul Aziz Wan Abdullah, had approved loans amounting to RM4 billion to SRC International Sdn Bhd in 2011 and 2012, the Kuala Lumpur High Court heard today. 

Witness Azlida Mazni Arshad, who is a vice-president of KWAP’s legal and secretarial department told the court hearing former prime minister Najib Razak’s criminal charges involving SRC International, that all investment decisions by KWAP has to be approved by an investment panel that included the KWAP chairman.

This was required by the Retirement Fund Act (Act 662) that governs KWAP.

When asked by the prosecution why the loan process was hastened, she said she received instructions to do so, but did not know where the instructions came from. 

Azlida said the KWAP board, in 2011, then comprised Wan Abdul Aziz; government representatives Public Service Department pension department managing director Yeow Chin Kiong and solicitor-general Idrus Harun; finance ministry representative Mohd Irwan Serigar; Bank Negara representative Muhammad Ibrahim; private sector representatives Ahmad Johan Mohammad Raslan, Cheah Teik Seng and Siow Kim Lun; contributors’ representative Cuepacs president Omar Osman; and KWAP CEO Azian Mohd Noh.

Azlida said the KWAP board has the power to approve matters relating to the fund’s investments.

Any company under Section 14(1)(d) of Act 662, can apply for a loan from KWAP that is deemed profitable by the panel, she added.

The investment panel can then go about two ways to decide whether to approve such applications.

One is by a meeting attended by all panel members, while the second is via circular paper. If it is a meeting, panel members take a consensus, whereas if it is by circular, the panel goes by a majority vote.

The circular paper method was frequently used to approve loans from 2011 to 2013, she added.

As for the RM4 billion loan to SRC International, Azlida said the investment company had sent a letter addressed to Najib that was received by KWAP on June 3, 2011.

The letter sought RM3.95 billion for SRC International to carry out general investments.

On July 5, 2011, an investment paper for a RM1 billion loan was tabled before the investment panel, but was not approved as the panel wanted more information about SRC International and its functions.

Azlida said this decision to not approve the loan was recorded in the minutes of the meeting that was chaired by Wan Abdul Aziz.

On July 19, 2011, an investment paper for RM2 billion was brought to the panel.

SRC International had requested the money for working capital and general investments, said Azlida, adding that she had served as a recording secretary for this meeting.

She said Wan Abdul Aziz told the panel that Najib, who was then prime minister and finance minister, had urged him as KWAP chairman to expedite the loan approval. 

The panel had agreed that RM2 billion was too large a sum to give a company that only had a starting capital of RM2.

The panel decided it would consider the loan if it were made directly to 1Malaysia Development Bhd, instead of SRC International, which was its subsidiary.

The panel felt that 1MDB, which was owned by Ministry of Finance (MoF) Inc, had proper money management under the purview of the ministry.

Azlida said the panel was wary of the risks in granting the loan to SRC International.

The panel also questioned the ability and qualifications of SRC International’s management in making investments.

The panel found there was no urgency to give the money in a lump sum and proposed that the loan be disbursed in stages.

She said, however, the six panel members voted on approving that loan later through the circular paper method via reply forms.

They were Wan Abdul Aziz, Mohammed Azlan Hashim, Abdul Wahid Omar, Norizah Bahari, Cheah Tek Kuang and Che’ Zakiah Che’ Din.

The six panel members then voted in agreement to give the RM2 billion to SRC International.

A letter of offer was issued to SRC International by KWAP for the loan on August 26, 2011.

A facility agreement between the two entities was drawn the same day by lawyers, she said.

The first transaction of RM2 billion, in four tranches of RM500 million, to SRC International was carried out on August 29, 2011.

Azlida said KWAP was later informed of the transfer of ownership of SRC International to MoF Inc on February 6, 2012.

A second loan of RM2 billion was then tabled to the panel on March 20 the same year, chaired by Wan Abdul Aziz.

 It was approved and a letter of offer was issued three days later, on March 23. The loan was issued on March 28.

The total loan of RM4 billion was the biggest lending KWAP had approved in the time she worked there, Azlida said.

Najib’s charges in this trial relate to the RM4 billion loan, for which he is accused of receiving RM42 million in his personal accounts in 2014 and 2015.

He faces three counts of criminal breach of trust, three counts of money-laundering and one count of abuse of power.

Najib is represented by a dozen lawyers led by Muhammad Shafee Abdullah.

Attorney-General Tommy Thomas leads the prosecution, while justice Mohd Nazlan Mohd Ghazali presides over the trial.

The trial adjourns to May 14. – May 9, 2019