IT was the personal relationship between former prime minister Najib Razak and the late Saudi ruler King Abdullah that led to a failed joint venture between 1MDB and PetroSaudi International in 2009, the high court heard today.

Former 1Malaysia Development Bhd CEO Shahrol Azral Ibrahim Halmi said the joint venture, which was supposed to be worth US$2.5 billion, was the result of Najib’s personal relationship with the Saudi royal.

Prosecutors said little materialised from the deal and that billions were misappropriated by Najib with the help of fugitive financier Low Taek Jho, better known as Jho Low.  

During cross-examination today, lead defence counsel Muhammad Shafee Abdullah referred to proposal between PetroSaudi International (PSI) and 1MDB worth US$2.5 billion, in which 1MDB would inject a cash capital of US$1 billion.

PSI, on its part, would invest US$2 billion in assets, after which both firms would discount the value at US$1.5 billion only.

Shafee asked the witness if he was certain then there would be no undercutting or cheating, to which Shahrol replied he was confident there would not be as it was to be a government-to-government deal.

Shafee: You assume that governments won’t cheat?

Shahrol: This was represented to me as something personal between Najib and the king (Abdullah).

Shafee: Did you mean that Najib’s personal relationship with the head of government of Saudi Arabia, would assist 1MDB’s venture with PSI?

Shahrol: I would go a step further to say that the 1MDB-PSI joint venture was created by this personal relationship.

Shafee: Who told you that?

Shahrol: Jho (Low Taek Jho).

Shafee: He learnt this from where?

Shahrol: He was there apparently on the meeting on the yacht. He mentioned he was there at a discussion for a meeting on a yacht on one of the holidays.

The witness confirmed that he was was recorded as commenting at a special board meeting on September 28, 2009 that King Abdullah had viewed the deal as “a friend helping a friend”. Shahrol testified that the comment was made based on what Low told him. 

The witness added that there was no documentation showing due diligence was carried out into the joint venture. 

Najib, 66, 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.

During cross-examination today, Shahrol was referring to his previous testimony of an August 2009 meeting between Najib and PSI co-founder Prince Turki on board a yacht in southern France, where Low was also present.

Shahrol testified that it was during a special meeting on September 26, 2009 when 1MDB’s board of directors moved to back the joint venture.

Two days after the meeting, on September 28, 2009, he signed a joint venture agreement between PetroSaudi Holdings (Cayman) Ltd and 1MDB PetroSaudi Ltd.

The witness, 49, told the court that the agreement was drafted by 1MDB’s lawyers from Wong & Partners, Low and 1MDB executive director of business development Casey Tang.

In the joint venture worth US$2.5 billion, 1MBD was to inject capital of US$1 billion in cash for a 40% stake.

Of the US$1 billion 1MDB was supposed to inject into the joint venture company, US$300 million was wired to JP Morgan (Suisse) SA, which held a joint bank account 1MDB opened with PetroSaudi Holdings (Cayman) Limited under the name of JVCo.

The remaining US$700 million was remitted to an account owned by Good Star, a company controlled by Low. – October 16, 2019.