1MALAYSIA Development Bhd (1MDB) used part of US$3 billion (RM12.4 billion) to buy a plot of land in 2013 in Ayer Itam, Penang, as part of Barisan Nasional’s election campaign which promised affordable housing, the Kuala Lumpur High Court heard today. 

The land was touted as the site of an affordable housing project by former prime minister Najib Razak when he campaigned in Penang before the 13th general election.

Former 1MDB chief executive officer Mohd Hazem Abdul Rahman said the US$3 billion was supposed to fund the Abu Dhabi Investment Company (Admic), a joint venture with 1MDB to develop the Tun Razak Exchange.

Instead, it was used to buy the land in Ayer Itam and to pay off other debts.

“This money was used to buy Ayer Itam Estate Lands in Penang, which roughly cost RM1 billion, and to pay back the debts to Standard Chartered (which) was around RM2 billion, and also to pay other loan interests,” he said when reading out his witness statement. 

Hazem is the 10th prosecution witness in the graft trial against Najib, who was charged with four counts of power abuse to enrich himself with RM2.3 billion from 1MDB and 21 counts of laundering the same amount.

Hazem, 47, said Najib announced that the land would be used by 1MDB to help build affordable homes while campaigning in Penang for the 13th general election in 2013.

“When Najib campaigned in Penang, he stated in a forum that the land will be developed by 1MDB and will be used to build affordable housing,” Hazem said.

Najib had promised 9,999 affordable houses in Ayer Itam in late April of 2019 while he was caretaker prime minister. The general election was held the following month.

The Penang government was led by DAP, a federal opposition party, and Najib’s promise was part of efforts to wrest the state back for Barisan Nasional.

Hazem said the US$3 billion was raised as debt by 1MDB for the joint project with Admic. 

Hazem said he signed a document which was the guarantee by the Malaysian government for the bond issuance. The guarantee was also signed by Najib.

“It was signed by Najib as then finance minister, representing the government. This matter was also agreed by the highest (decision-makers) at 1MDB, which was Najib, as then prime minister and chairman of the board of advisers.

The money came through a bank account opened in Switzerland via 1MDB’s special purpose vehicle, 1MDB Global Investment Limited (1MDB GIL), with Goldman Sachs making the necessary arrangements.

“This was planned by Low and instructed by Najib, who agreed to the bond issuance by 1MDB GIL,” Hazem said, referring to fugitive businessman Low Taek Jho. 

Hazem said the company only got US$2.721 billion instead of the US$3 billion which was issued.

However, Hazem said 1MDB never saw the full money despite paying a high fee of 9.3% to Goldman Sachs to underwrite the bond, which would allow the money to be channelled in fast. 

The defence team objected to all of Hazem’s claims in his witness statement, saying the information was hearsay. – September 15, 2020.