KUALA LUMPUR (June 15): Despite 1Malaysia Development Bhd (1MDB) being a company under the Ministry of Finance (MoF), specifically MoF Inc, the state investment arm never sought MoF Inc’s approval when it entered into a joint venture (JV) with PetroSaudi International Ltd (PSI), opting instead to go directly through then finance minister Datuk Seri Najib Abdul Razak.
Testifying at the 1MDB-Tanore trial, the prosecution's 26th witness former Ministry of Finance deputy secretary-general Datuk Siti Zauyah Mohd Desa said she was unclear about the investment purpose of 1MDB with PSI because 1MDB did not seek the opinion or consideration from MoF Inc, which was her division.
MoF Inc is a corporate body established under the Minister of Finance (Incorporation) Act 1957. The Act provides the authority for MoF Inc to enter into contracts, acquisitions, purchases, possessions, holdings and to maintain tangible and intangible assets.
“I confirm [that] my division did not know and was not informed if 1MDB [had] obtained approval related to the investment with PSI directly through the MoF (the ministry itself) without going through my division," she said.
She said that the 1MDB management which was led by then chief executive officer (CEO) Datuk Shahrol Azral Ibrahim Halmi had told her division that they were dealing with the MoF directly, of which the accused in this case Najib was minister.
She also alluded to a report dated Dec 23, 2009 when a meeting took place where MoF Inc took note that the JV between 1MDB and PSI was still at the stage of identifying investments that can generate immediate income for 1MDB.
Shahrol was at this meeting.
They were evaluating a request from Shahrol, who had asked for a RM5 billion government guarantee which was previously issued to Terengganu Investment Authority (TIA) to be transferred to 1MDB, for the purpose of this JV.
It should be noted that TIA was transferred to MoF Inc from the Terengganu state government and rebranded 1MDB.
Siti Zauyah testified that in the meeting it was also agreed that the National Audit Department (NAD) continue its due diligence and for 1MDB to cooperate with NAD.
It was also agreed in the meeting that Shahrol would get the approval of the JV company with PSI to submit information on 1MDB's intention for the investment.
Furthermore, it was agreed that 1MDB will submit an interim audited report to the MoF.
However, none of this came to pass as 1MDB had bypassed MoF Inc.
“The management of 1MDB informed me that they will report directly to the then prime minister and minister of finance (Najib),” she said.
She also said Shahrol had been uncooperative and had dodged the ministry’s many requests for meetings to sort out issues.
"I would also like to state that during the period 1MDB was an MoF Inc company, my division did not get any corporation from 1MDB through its [then] CEO Shahrol.
"We have called him a few times to have a discussion on particular issues but it would be cancelled at the last minute.
"Therefore, many things that were carried out by 1MDB didn't get MoF's opinion nor was it reported to MoF," she said before Justice Datuk Collin Lawrence Sequerah.
The 40:60 JV involved 1MDB undertaking an equity investment of US$1 billion, while PSI would inject US$1.5 billion worth of assets.
After the JV agreement was signed, PSI said its US$1.5 billion asset injection into the JV company entailed a US$700 million advance for 1MDB, which meant 1MDB owed PSI.
Through the instructions of Shahrol, 1MDB had diverted US$700 million from the US$1 billion JV equity investment into an account belonging to Good Star Ltd, on grounds that PSI said Good Star was its affiliate. The company was actually associated with fugitive financier Low Taek Jho or Jho Low and was subsequently used to pay bribes and kickbacks.
In the 1MDB-Tanore trial, Najib is charged with four counts of abuse of power in enriching himself with RM2.3 billion of 1MDB funds and 21 counts of money laundering of the same amount. He could face a fine and up to 20 years' imprisonment if convicted.
Siti Zauyah was still on the witness stand testifying for the prosecution.
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