A former 1Malaysia Development Berhad (1MDB) CEO today said he had in hindsight found himself to have been tricked by fugitive businessman Low Taek Jho with even the company’s board kept in dark of Low’s alleged schemes, the High Court heard today.
Ex-1MDB CEO Datuk Shahrol Azral Ibrahim Halmi also confirmed to have only discovered later on that the US$2.318 billion that 1MDB was trying to get back in cash had only existed on paper as worthless promissory notes, and that these documents where 1MDB was promised that it would be paid were not backed by any securities.
Shahrol Azral was testifying as the ninth prosecution witness at the corruption and money-laundering trial of former prime minister Datuk Seri Najib Razak involving more than RM2 billion 1MDB funds.
Quizzed by Najib’s lawyer Tan Sri Muhammad Shafee Abdullah over a complex series of transactions where the purported overseas “investment” funds that 1MDB was trying to recover kept getting converted into new types of investment, Shahrol Azral conceded that he was tricked by Low, who is also known as Jho Low.
Shafee: Now with the benefit of hindsight, you agree with me, that Jho Low’s scheme of things was always to create the impression that legitimate money was coming from sources that were not legitimate?
Shahrol Azral: Yes, in hindsight.
Shafee: And he created that, and this ruse was executed even on the 1MDB board, the 1MDB board did not know what he was doing?
Shahrol Azral: Yes, correct.
Shafee went on to suggest that Jho Low’s specialty was in making people believe that the money that they are receiving are legitimate funds, which Shahrol Azral then said that he would broaden the description of Low’s speciality to be making “people comfortable that he was acting in their best interests” and also agreed that Low was able to convince others that what he was doing was legitimate.
Shahrol Azral also agreed that he himself was “taken up by the ruse set up by Jho Low and his team”, with Shafee then quizzing if it could be said that Najib himself as the prime minister and finance minister at that time could have been similarly tricked.
Shafee: So if I were to suggest to you, this same ruse that was created, even the minister of finance, Datuk Seri Najib at that time was taken up by certain impressions that he created?
Shahrol Azral: That I cannot comment.
Shafee: Neither can you refute.
Shahrol Azral: Correct.
Shafee then remarked that this was because Najib could have been in the “same position” as many others when it came to Low’s alleged schemes.
Later, Shafee also asked about Low and his alleged associates Jasmine Loo (1MDB’s then general counsel or in-house lawyer) and Terence Geh (1MDB’s then deputy chief financial officer) —- three individuals who Shahrol Azral had repeatedly mentioned today as being those handling and allegedly behind schemes to hide the fact that the funds that 1MDB was trying to bring back to Malaysia did not actually have cash value.
Shafee: Jasmine Loo, Terence Geh and Jho Low would have planned so many things. Most of them are without your detailed knowledge, whatever they are planning, you have no evidence it is also with the knowledge of Datuk Seri Najib? You agree to that?
Shahrol Azral: No direct knowledge, yes.
Throughout the trial, Shahrol Azral had however repeatedly mentioned how he had believed Low as having consulted Najib and having conveyed instructions allegedly agreed by the latter.
The promises backed by nothing
In 1MDB’s efforts to recover its initial US$1 billion “investment” abroad that is now alleged to have been a scam, the company had carried out various transactions on paper, including converting its US$1 billion stake in a joint venture company into a US$1.2 billion Islamic loan to the same company and then giving out additional US$830 million in loans.
1MDB had then gone on to convert its Islaimc loan — then worth US$2.2 billion inclusive of unpaid interest—into a 49 per cent share held by a 1MDB subsidiary in the company PetroSaudi Oil Services Ltd (PSOSL), before selling off the share to Bridge Partners International Investments Limited for US$2.318 billion promissory notes to be invested in purported hedge fund Bridge Global Absolute Return Fund SPC.
Instead of getting cash for selling off the 1MDB subsidiary’s shares, 1MDB’s new British Virgin Islands-incorporated special purpose vehicle Brazen Sky Limited received six promissory notes purportedly coming up to a total value of US$2.318 billion.
From the six promissory notes, British Virgin Islands-based Bridge Partners International promised to pay the sum of US$2.318 billion within one month of the notes’ expiry date, and to pay interest if it fails to pay within that time period.
Shahrol Azral agreed that he had believed that these six pieces of promissory notes were real and had value, and that he had taken it on good faith that Loo and Geh had checked on the matter for him to sign off on and he had not asked if any valuations were done on the promissory notes.
Shahrol Azral said he had only discovered during investigations by the Malaysian Anti-Corruption Commission (MACC) that these promissory notes were worthless.
Shafee: So all these are reduced into six promissory notes, they are all paperwork, there is in fact no proof that they are in fact funds?
Shahrol Azral: Correct.
Shafee: With the benefit of hindsight, you know now they are worth nothing?
Shahrol Azral: Yes.
Shahrol Azral confirmed that he had not known then that these six promissory notes for US$2.318 billion were not backed by any security — or essentially guarantees that 1MDB’s Brazen Sky would be paid in cash for that amount.
Shafee: But now you realise, at that time, there was no security backing the promissory notes. It’s just a promise, it’s just like you and me, I owe you (IOU), that’s it, there’s no backing that I am good enough to make payment of what I promise?
Shahrol Azral replied “correct”, further agreeing that there remains no securities to back the promissory notes until today.
Shahrol Azral again spoke of how he had not doubted Loo regarding the six promissory notes as she was the general counsel for 1MDB and had also relied on her for legal matters and the efforts to get the funds back, also confirming that he did not have any suspicion of Low at that time when 1MDB only had the six pieces of paper and despite the long length of time where 1MDB was still unable to recover and redeem its “investment” into cash.
Asked by Shafee if 1MDB had obtained written approval from the prime minister for the multiple transactions to recover the purported overseas “investment” as required by the company’s constitution’s Article 117 in relation to transactions involving national policies, Shahrol Azral pointed out that Najib’s signature in approval on behalf of 1MDB shareholder MOF Inc as finance minister then was sufficient.
“The accepted convention in 1MDB at that time, because the shareholder is one and the same, Datuk Seri Najib wearing the hats of special shareholder as well as Finance Minister and Prime Minister; it was deemed not necessary to get separate approval, so we had considered at that time the Article 117 was adequately satisfied by shareholder’s resolution,” Shahrol Azral said regarding Najib’s signing off on shareholder resolutions regarding the transactions.
The trial before High Court judge Collin Lawrence Sequerah resumes tomorrow.