FORMER 1Malaysia Development Bhd (1MDB) director Ismee Ismail agreed with Najib Razak’s lawyer at the former prime minister’s corruption trial today that the state investment firm’s management had “conned” and misled him over its joint-venture with PetroSaudi International Limited (PSI).

Ismee, a prosecution witness, concurred with lawyer Muhammad Shafee Abdullah that the 1MDB management had misled Najib and also the firm’s board of directors by crafting detailed proposals to enter into the deal.

Shafee: This is a 100% con job. All the proposals were crafted by the (1MDB) management. It was detailed crafting by the management. 

Ismee: Yes.

Shafee was cross-examining the witness on 1MDB’s deal with PSI to convert a 40% stake in the joint-venture company 1MDB-PetroSaudi Limited that it had bought at US$1 billion (RM4.2 billion), into an Islamic loan to the same joint venture company. 

Under the deal, 1MDB agreed to sell off the 40% stake to the joint-venture by giving on paper the Islamic loan via Murabaha notes at a value of US$1.2 billion. 

With the conversion to the Murabaha notes, the joint-venture company would on paper owe US$1.2 billion to 1MDB, effectively giving 1MDB on paper a profit of US$200 million after accounting for the initial US$1 billion. 

Shafee called this a “magic show” by the 1MDB management, claiming his client Najib did not approve the Murabaha notes and was not in agreement with certain terms. 

“The management did a magic show. You (1MDB) will get the US$1.2 billion in paper, not the actual cash,” Shafee said in his cross-examination at the Kuala Lumpur High Court today.

Shafee then suggested a few names, whom he said had been involved in the drafting of the proposal for the investment.

Among the names he mentioned were former 1MDB general counsel Jasmine Loo Ai Swan, former 1MDB chief executive officer Shahrol Azral Ibrahim Halmi, former 1MDB chief financial officer Azmi Tahir and 1MDB business development executive director Casey Tang Keng Chee. 

Ismee agreed with the names mentioned.

Shafee then suggested that “very convincing” paperwork was required to mislead the board, which the former prime minister had nothing to do with. 

Ismee agreed.

Shafee: You have agreed this is a detailed nitty-gritty thinking of paperwork in order to mislead the board. You need to have paperwork convincing enough for the board. Agree with me?

Ismee: Yes.

Shafee: Can you imagine in your wildest imagination, the PM (would be) involved in the directing on how to con 1MDB. Can you imagine?

Ismee: I don’t think any prime minister would have time for that.

Najib is standing trial for corruption at the Kuala Lumpur High Court over the misappropriation of RM2.28 billion in 1MDB funds. 

He faces 25 charges – four for abuse of power and 21 for money-laundering – for offences committed between 2011 and 2013. 

Shafee also questioned Ismee on whether the change of equity in 1MDB-PetroSaudi Limited to Murabaha notes was a reflection of panic from the 1MDB management, after it came into problems with accounting firm Ernst & Young (EY), to which Ismee responded that “this was probable”. 

EY had raised concerns on why the 1MDB management was delaying its answers to queries US$700 million transferred to the joint-venture. This sum is part of the initial US$1 billion 1MDB put into the joint-venture, and it was later reported that it was paid to Good Star Limited, which was owned by fugitive businessman Low Taek Jho.

EY, which was appointed by 1MDB’s predecessor, the Terengganu Investment Authority in 2009, was terminated before the auditor completed the audit on 1MDB’s account for the financial year ended March 31, 2010. 

Shafee said if the 1MDB management could mislead professionals like EY, they could also easily mislead the then prime minister.

Shafee also suggested that Ismee would not know the kind of briefing Najib as prime minister then had received, and that he wouldn’t have been able to tell if he was briefed the same content as given to the board.

Ismee agreed with these suggestions.

The hearing before Justice Collin Lawrence Sequerah continues tomorrow. 

Najib has already been convicted of another set of corruption charges involving funds from former 1MDB subsidiary, SRC International Sdn Bhd, and is currently appealing. – March 23, 2022.