NAJIB Razak had prevented an audit of 1MDB by the then auditor-general in December 2009, just months after the federal government took over ownership of the sovereign wealth fund, a witness told the high court today.

Former 1MDB CEO Shahrol Azral Ibrahim Halmi testified he had written a letter dated December 11, 2009, addressed to Najib, who was also finance minister at the time, to request that no audit be carried out by the government.

The letter was forwarded to the then auditor-general Ambrin Buang, then Treasury secretary-general Wan Abdul Aziz Wan Abdullah and then 1MDB board chairman Che Lodin Wok Kamaruddin.

Shahrol was previously CEO of 1MDB’s precursor, the Terengganu Investment Authority (TIA), which was established on February 27, 2009. The entity changed its name to 1MDB on September 25, 2009, after it was taken over by the Minister of Finance (MoF) Inc, then also headed by Najib.  

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 faces up to 20 years in prison if convicted.

During examination-in-chief this morning, Shahrol said Najib had instructed him, via 1MDB intermediary Low Taek Jho, commonly known as Jho Low, to write the letter.

“In the days preceding this letter, I don’t remember exactly how, but I received a notification that the MoF Inc would like an audit performed on 1MDB due to the transfer of shares from TIA to the federal government.

“As per normal course of events, I updated Low and he reverted saying that an audit by JAN (National Audit Department) could present a political risk to DSN (Datuk Seri Najib). I then sought further direction and advice from Low to ask Najib and tell us what to do.

“Low had instructed that I write this letter to Najib because this was Najib’s instruction to ensure that 1MDB no longer needs to be audited ever again.

“The letter’s request was made on an ‘as is where is’ basis, where there was no need for an audit or due diligence to be carried out by the National Audit Department.

“I was not involved in the early discussions over this matter, but I believe Low and Najib went over the content of this letter beforehand.

“Based on what I know now, I believe that the acquisition of 1MDB from TIA… was to hide misappropriation (by Najib) during the issuance of RM5 billion in Islamic medium term notes in May 2009.”

Najib responded with a letter dated December 22, 2009, stating that the 1MDB advisory board agreed to have the “federalisation” of TIA approved by the cabinet and it was done on an “as is where is” basis.

“(Najib) said there was no need for an audit or for due diligence to be conducted by the auditor-general because the transfer of shares has already been completed,” Shahrol said.

Shahrol said Najib had also said the 1MDB board had agreed that a third party should be appointed to do the audit. The letter was also forwarded to Ambrin, Wan Abdul Aziz and Che Lodin.

Accounting firm Ernst and Young was later appointed to carry out an audit, the witness told the court.

Later, senior deputy public prosecutor Gopal Sri Ram asked what an audit by JAN would have revealed.

“It would have revealed that we had invested US$1 billion into a joint venture with PetroSaudi International Ltd and that US$300 million had been transferred into the joint venture company, while a further US$700 million was transferred into an account belonging to Good Star Ltd, which was at the time purportedly owned by PetroSaudi International,” Shahrol said.

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

Sri Ram, a former federal court judge, is leading the prosecution before Kuala Lumpur High Court judge Collin Lawrence Sequerah. – September 25, 2019.