KUALA LUMPUR (Oct 16): What sort of due diligence did 1Malaysia Development Bhd (1MDB) perform on PetroSaudi International Ltd (PSI) before spending US$1 billion on a joint venture (JV) with the Saudi-based company?
An oral one, said former 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi.
Shahrol, who is the ninth prosecution witness in the 1MDB-Tanore trial of former premier Datuk Seri Najib Razak, told the High Court today that 1MDB did not have a paper due diligence on PSI when they formed a JV in 2009.
During the cross-examination by Najib's lead defence counsel Tan Sri Muhammad Shafee Abdullah, Shahrol repeatedly mentioned that the decisions made by 1MDB were on the basis that the 1MDB-PSI JV was a government-to-government (G2G) deal.
Shafee then questioned the relevance of that fact in relation to the due diligence towards the JV.
Shafee: We had many G2G deals, all would require due diligence… Did you do due diligence? First of all on PSI?
Shahrol: Yes. It was done separately by the team… There was no paper.
Shafee: So it was an oral due diligence?
Shafee: It will be the first in history. It was just oral?
Shahrol: It was not tabled to the board.
Shafee: Was it produced on paper?
Instead, all 1MDB had was an "information pack" that was provided by PSI, alongside a certain document seen by Shahrol which elaborated on "what PSI is, when it was formed, and which assets it invested in".
Shafee: If you look even harder, you cannot find a due diligence that was expressed as an opinion on paper. That is on PSI? Has it ever been reported to the board, the oral due diligence?
Shahrol: No… I remember reading a document on what PSI is, when it was formed, which assets it invested in…
Shafee: Can you produce that paper?
Shahrol: I do not have that paper.
However, Shahrol said he and the board still allowed the JV to go through — which saw 1MDB invest US$1 billion, of which US$700 million was diverted to an unrelated company, Good Star Ltd — because Shahrol had "trusted" PSI, which has been portrayed by its directors as a company belonging to the Kingdom of Saudi Arabia.
Good Star is a company linked to fugitive businessman Low Taek Jho — more widely known as Jho Low — whom Shahrol said was working behind the scenes to instruct 1MDB on its corporate activities on behalf of Najib.
Shahrol also said 1MDB was given a mandate by Najib, through Jho Low, to undertake the JV, which was deemed as a G2G initiative that "needed to be done".
Shahrol was 1MDB CEO from 2009 to 2013, during which 1MDB undertook numerous dubious business deals that saw the company lose billions through embezzlement, and paid hundreds of millions in exorbitant fees and charges imposed for the services it had taken.
Najib, who was prime minister, finance minister and chairman of 1MDB board of advisers at the time, is currently facing 25 criminal charges for the alleged embezzlement of billions of ringgit of 1MDB funds. The trial continues.
The Edge is reporting the proceedings of the 1MDB-Tanore trial live.