FORMER prime minister Najib Razak had pushed for the Social Security Organisation (Socso) to give a RM3 billion loan to 1Malaysia Development Bhd (1MDB) so that the sovereign wealth fund can loan it to PetroSaudi International Ltd (PSI), the high court heard the past week.

Najib, who is on trial for siphoning billions of taxpayers funds, was said to have approved the plan based on 1MDB’s minutes dated March 30, 2011, according to former 1MDB CEO Shahrol Azral Ibrahim Halmi.

1MDB was to have lent PSI US$750 million (about RM3 billion then) should the former receive the RM3 billion loan from Socso, the witness said.

This was the first mention of a Socso loan in any 1MDB-related trial. Shahrol did not reveal whether the RM3 billion loan, or any loan, from Socso was ever approved.

At the time, 1MDB was in an oil exploration joint venture deal with PSI worth US$2.5 billion.

Citing the minutes, Najib has said the US$750 million loan was to focus on investments in the London-based Maybourne Hotel Group, SRC International and the Kuala Lumpur International Financial District, later renamed Tun Razak Exchange.

For the 1MDB trial, Najib faces four counts of power abuse to enrich himself with RM2.3 billion from 1MDB and 21 counts of laundering the same amount. The 66-year-old faces up to 20 years in prison if convicted.

Najib expedited 1MDB-PSI joint venture

Shahrol also testified that Najib, in September 2009, had instructed the 1MDB board of directors to expedite the joint venture with PSI, allegedly in anticipation of an imminent visit by the Saudi royal family.

As a result of the joint venture, US$700 million (RM2.9 billion) ended up being transferred to a company called Good Star Ltd, Shahrol said. The witness said he later found out from investigators that the company was controlled by Low Taek Jho, popularly known as Jho Low.

The witness described Low’s relationship with Najib as “symbiotic”, saying Low did what Najib wanted and in return the former prime minister gave the necessary government approvals in required by 1MDB.

Shahrol added that the idea of a joint venture with PetroSaudi was conceptualised while Najib was on holiday in the south of France with Saudi prince Turki Abdullah Abdulaziz Al-Saud, who owned the company. Also present at the holiday was Low.

Najib prevented govt audit of 1MDB

A month later, in November 2009, Najib ordered Shahrol to write a letter to the auditor-general to prevent a government audit into 1MDB, the court heard.

The same month, Najib followed up with a letter of his own stating that the 1MDB advisory board had agreed to have the “federalisation” of TIA approved by the cabinet and that this was done on an “as is, where is” basis.

Najib, who chaired the 1MDB advisory board, also recommended that a third party should be appointed to perform the audit. Asked on what a government audit might have revealed at that point, Shahrol said the transfer of US$750 million to an unknown company called Good Star Ltd would have been revealed to the public.

Accounting firm Ernst and Young was subsequently appointed for the job, the witness told the court. 

Najib opposed Agong’s wishes on RM5 billion TIA bonds issuance

The witness also testified on Najib’s role in 1MDB’s predecessor, the Terengganu Investment Authority (TIA). Shahrol was appointed TIA CEO on March 23, 2009. The company was renamed 1MDB on July 31, 2009, about four months after Najib became prime minister.

He said TIA had chosen to work with Ambank Islamic in April 2009 to raise RM5 billion through Islamic medium-term notes, which was to be government guaranteed. The sum was to fund a joint venture with Abu Dhabi sovereign wealth fund Mubadala to invest in a luxury hotel project in Pulau Bidong, Terengganu.

The witness testified that even then, Low had direct access to Najib and was known to call the then prime minister for his views during TIA board meetings.

Shahrol also told the court that Najib had given Low the mandate to carry out plans on TIA and later 1MDB. Low was then TIA special advisor and acted as an intermediary at 1MDB.

On May 22, 2009 Najib had ordered TIA to proceed with raising RM5 billion through Islamic medium-term notes, despite being told otherwise by then Yang di-Pertuan Agong Sultan Mizan Zainal Abidin.

The instruction was given to Shahrol via Low, who said the bonds issuance must continue, even if there was opposition from other shareholders.

Earlier that day, Shahrol, along with former TIA director Ismee Ismail, had appeared before the Agong at the Terengganu palace.

Sultan Mizan had demanded that the duo signed resolutions suspending the bonds issuance, but Shahrol told the court he was told later by TIA executive director Casey Tang and AmBank bankers that the bonds issuance could no longer be stopped.

Shahrol also testified that he was informed by a Malaysian Anti-Corruption Commission officer last year that Low owned the two entities, based in Singapore and Hong Kong, which had bought the bonds.

Raising yet more money with Goldman Sachs

The witness told the court that after the TIA bonds issuance and the PSI deal, 1MDB looked set to raise even more money when Najib met former Goldman Sachs CEO Lloyd Craig Blankfein on November 22, 2009 to court the investment bank’s support for further 1MDB ventures.

Also present at the meeting were Low and then Goldman Sachs Asia CEO Tim Leissner, whom the witness described as “matchmakers” for the meeting held at the Four Seasons Hotel.

Leisner resigned in 2016. He pleaded guilty in a US court last year to conspiracy to launder money and violation of the Corrupt Practices Act and agreed to forfeit US$43.7 million.

Blankfein stepped down as CEO in 2018. His successor, David Solomon, apologised in January this year to Malaysians over the bank’s role in the 1MDB scandal.

Najib is represented by a dozen lawyers led by Muhammad Shafee Abdullah. Gopal Sri Ram, a former Federal Court judge, is leading the prosecution before Kuala Lumpur High Court judge Collin Lawrence Sequerah.

The trial continues tomorrow. – September 29, 2019.