This article first appeared in The Edge Malaysia Weekly on August 23, 2021 - August 29, 2021
1MALAYSIA Development Bhd’s (1MDB) board of directors and CEO may have been uneasy over the presence of Low Taek Jho — also known as Jho Low — at internal meetings but no one publicly questioned the businessman’s presence as it was tacitly understood that he was the proxy of former prime minister Datuk Seri Najib Razak, the company’s former CEO Mohd Hazem Abdul Rahman contended last week. He said Najib and Low were in direct contact and Low had even attended a meeting involving top management of the sovereign fund at Najib’s house, ostensibly at Najib’s behest.
The fear of slighting Najib aside, nobody was prepared to risk their position in the company, including Hazem, who was paid RM80,000 a month and received a total of RM2.72 million in salary and bonus for the year ended March 31, 2014 for doing an “exemplary job”.
But perhaps Hazem saw fit not to clarify matters with Najib even when he had the opportunity to do so because the former had conspired to commit misappropriation of funds at 1MDB together with now-fugitive Low and had duped Najib for their benefit, the defence countered, when the case against Najib in the 1MDB-Tanore trial continued last week with Hazem on the stand as a prosecution witness.
The misappropriation in question was related to 1MDB subsidiary, 1MDB Energy Holdings Ltd, which obtained two loans totalling US$1.225 billion from Deutsche Bank Singapore. The loans were secured by guarantees provided by group units, 1MDB Energy and 1MDB Langat.
Deutsche Bank’s US$1.225 billion loan was made up of a US$250 million bridging loan and a facility loan of US$975 million. The first loan of US$250 million was made available on May 26, 2014. From this amount, almost RM240 million was paid into the account of 1MDB Energy Holdings Ltd with Falcon Bank Hong Kong on May 28, 2014.
1MDB had taken up the loans totalling US$1.225 billion to buy back the options it had given to Abu Dhabi’s Aabar Investments PJS to acquire shares in two 1MDB subsidiaries. This occurred at a time when 1MDB needed to raise US$3.5 billion to buy two independent power plants, namely Genting Sanyen (M) Sdn Bhd’s independent power plant and Tanjong Energy Holdings Sdn Bhd.
Of this sum, Energy Holdings paid US$175 million into the account of Aabar Investment PJS Ltd in BSI Lugano, Switzerland. Aabar Investment PJS Ltd was in fact a fake shell company set up by Low to mimic the real Aabar Investments PJS and to siphon off 1MDB funds.
Najib’s lawyers contended that Hazem had signed off on these deals and concealed this information from the company’s board to personally benefit from astronomical salary increments and bonuses.
Put in charge of 1MDB Energy Holdings, Hazem signed agreements in April and May 2014 involving option buyback agreements with the fake Aabar (BVI), while 1MDB chief financial officer Azmi Tahir signed another in June 2014.
Under the April agreement, the 1MDB subsidiary committed to paying US$989 million to Aabar BVI to buy back the options in 1MDB-linked firms, and to paying US$175 million of the US$989 million within 30 days of the date of the agreement, and the remaining sum by Sept 30, 2014.
Under the May agreement, the 1MDB subsidiary agreed to pay US$300 million in refundable deposit to Aabar BVI before Sept 30, 2014 and to pay the remaining sum required to buy back the options after its initial public offering on Bursa Malaysia. US$175 million from the bridging loan went to the fake Aabar as well as US$681 million.
Hazem agreed that he had signed the agreements, but had not informed the board as Low had instructed him not to.
Najib’s lawyer Tan Sri Muhammad Shafee Abdullah suggested that Hazem was in cahoots with Low, and that he had allowed Low and his co-conspirators to mislead Najib, as well as allowed matters that had not been approved by the Ministry of Finance Inc (MoF Inc) — of which Najib was in charge — to proceed.
“I put it to you that you were part of the entire scam to cheat 1MDB, and when the authorities discovered that you were part of the scam, you were pushed to cooperate and give adverse evidence against Datuk Seri Najib,” said Shafee.
“I disagree,” Hazem replied.
On his exceptional bonus, Hazem asserted that the board had said his performance that year had “exceeded expectations”.
Even so, he conceded that he had not felt himself the CEO of 1MDB as it was run by Low and that he was “led by the nose”.
“You said you were reduced to nothing, that you were led by the nose by Jho Low. But you were given a bonus in the face of the company going down the drain,” Shafee pointed out. “Did you not feel ashamed of accepting this bonus?”
Hazem said the remuneration was the decision of the committee, and that he had met the board’s targets.
He also contended that while he never brought up Low’s role officially, he had expressed his concerns to then 1MDB chairman Tan Sri Lodin Wok Kamaruddin, then director Tan Sri Ismee Ismail and Najib’s then principal private secretary Datuk Azlin Alias.
As he did not have “direct access” to Najib, he had hoped these individuals who did would have raised the concerns. Hazem also explained that his inaction as CEO stemmed from the company-wide belief that instructions from Low were equivalent to instructions from Najib.
He told the court that this was proven as he had seen Low at meetings with Najib on 1MDB affairs even though the former did not have any official role in 1MDB. He also claimed that Najib was in cahoots with Low and had known that there was misappropriation of funds at 1MDB.
Najib faces four counts of abuse of power for allegedly using his position as prime minister, finance minister and chairman of 1MDB’s board of advisers to receive gratification worth RM2.28 billion. Najib also faces 21 counts of money laundering involving over RM4.3 billion.
The trial continues on Monday before High Court Judge Collin Lawrence Sequerah.
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