THE prosecution and defence in Najib Razak’s 1Malaysia Development Bhd (1MDB) corruption trial today got into a heated exchange over the defence’s questioning of a witness, former 1MDB director Ismee Ismail.

The argument started after lead deputy public prosecutor Gopal Sri Ram opposed lawyer Muhammad Shafee Abdullah’s questions on the joint venture between 1MDB and PertroSaudi International Limited (PSI).

Shafee, who called the joint-venture a “fake”, was trying to contend that the joint-venture’s move to convert 1MDB’s equity into Murabaha notes had been backdated by former 1MDB chief executive officer Shahrol Azral Ibrahim Halmi for the convenience of the state investor’s management. 

Sri Ram objected to the question, saying it was irrelevant to the witness. 

Shafee then suggested that the prosecution was trying to “rescue” Ismee, who is the 13th prosecution witness. 

“I’m not rescuing the witness. I seek to stop irrelevant questions,” Sri Ram replied.

At this juncture, Justice Collins Lawrence Sequerah interjected and said that the witness may not know the answers to the question as it was a matter of inference. 

Shafee then suggested that he was trying to get an answer from Ismee, who was then a board member at 1MDB.

The judge then allowed Shafee to continue with his questions. 

Shafee was continuing his cross-examination of Ismee on the joint-venture’s deal to convert 1MDB’s 40% stake in 1MDB-PSI 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 its 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. 

Yesterday, Shafee had said that the 1MDB management did a “magic show” by drafting very convincing, detailed paperwork to mislead Najib, who was then prime minster, and 1MDB’s board of directors. 

Shafee said that the management, led by Shahrol, backdated the equity-Murabaha notes conversion agreement because they panicked after it came into problems with accounting firm Ernst & Young (EY).

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. 

Previously, the prosecution had several times objected to the defence’s line of questioning, saying they were wasting the court’s valuable time. 

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. – March 24, 2022.