This article first appeared in The Edge Malaysia Weekly on May 24, 2021 - May 30, 2021

DESPITE knowing the criminal implications of his actions, former CEO of 1Malaysia Development Bhd (1MDB) Mohd Hazem Abdul Rahman admitted last week to acting as a “puppet” of fugitive Low Taek Jho — while he was at the helm between 2013 and 2015 — and that everyone from the board to the management was well aware of it.

Testifying as the 10th prosecution witness in the 1MDB-Tanore corruption trial of former prime minister Datuk Seri Najib Razak before High Court judge Collin Lawrence Sequerah, Hazem was candid about the way the board functioned and how he acted as a puppet in his role as CEO even though he had misgivings (see “How most of the US$3 bil bond proceeds of 1MDB GIL ended up in Tanore Finance Corp”).

Even though Low did not have a formal role in the company, Hazem disclosed that he had a massive influence and that everyone fell in line with his wishes. “That was the work culture in 1MDB from the board to the management,” he said.

At that time, Hazem was overseeing Abu Dhabi Malaysia Investment Company (Admic) Ltd, a 50:50 joint venture (JV) between 1MDB and Aabar Investments PJS Ltd (Aabar BVI) — a company incorporated in the British Virgin Islands.

According to the terms of the JV, 1MDB Global Investments Ltd (1MDB GIL) — a subsidiary of 1MDB and of which Hazem was also a director — raised US$3 billion in bond issuances for the development of the Tun Razak Exchange (TRX) in Kuala Lumpur. Admic was supposed to raise another US$3 billion but did not hold up its end of the JV.

The US$3 billion raised was quickly siphoned out of 1MDB’s account in March 2013 to four shell companies owned mostly by Jho Low and his associates. The companies were Devonshire Funds Ltd, Enterprise Emerging Markets Fund, Granton Property Holding Ltd and Tanore Finance Corp.

Hazem admitted to blindly signing the JV documents when asked to do so by Jasmine Loo, the then 1MDB general counsel and a close associate of Low.

He conceded that he did not know what he was signing because Loo had given him only the signing page. He maintained that, as he was not an authorised signatory of the account, he did not know where the funds had been siphoned off to — all this despite the fact that billions of ringgit was involved.

Hazem admitted his actions amounted to a breach of fiduciary duty as he had not flagged the dubious transactions, but he had not wanted to “rock the boat” for fear of losing his job. Previously, he had testified to taking home RM97,000 a month as CEO while the directors were each paid RM130,000 a year and the chairman of the board, RM150,000 a year.

He had also previously testified that he had not confronted or clarified with Najib the bewildering activities undertaken by 1MDB, as he feared for his job.

Questioned by Najib’s lawyer Wan Aizuddin Wan Mohammed, Hazem said that, while he suspected the transfer of bond proceed funds amounted to criminal activity, neither he nor the board members had raised any red flags concerning this matter.

Wan Aizuddin: As a matter of general principle, when a crime or suspected crime is happening, you have the obligation to report to the authorities. Did you think there was any crime or had any suspicion?

Hazem: There could be.

Wan Aizuddin: Did you raise your suspicion to the BOD (board of directors)?

Hazem: I already knew the scheme. It (the complaint) would have been made off the record. At that particular time, you (Hazem himself) were dealing with a company being managed and run by the most powerful person in Malaysia. I would not dare to even ask. You either work with it or go.

Hazem then said he knew the people in 1MDB were aware that he was a puppet of Low. Asked how they were aware, he replied that they would have to answer for themselves.

Wan Aizuddin: Having said that you had a suspicion of the conduct of Jho Low, wouldn’t you think that the chairman of the board of advisers, the PM (prime minister) and the minister of finance, who was Najib, would be the person you should have informed?

Hazem: I did tell the chairman of 1MDB at the time, Tan Sri Lodin Wok Kamaruddin.

Whether the board knew that the US$3 billion had been withdrawn from the 1MDB GIL account was unclear. Hazem said, however, that neither he nor former chief financial officer (CFO) Azmi Tahir had briefed the board of the transfers when the board finally met in December 2013, months after the money had vanished.

At the time, there was only a paltry RM60,000 balance in 1MDB GIL’s account, which no one questioned.The only question the board had asked Hazem when they met again in January 2014 was related to the progress of the JV. Hazem testified that he had briefed the board that there were no developments and that Admic had shown no further interest.

“I felt that they (Admic) were not interested in it,” Hazem explained, which was why he did not pursue Aabar for the US$3 billion it had agreed to raise.

Najib faces 25 charges in the 1MDB-Tanore trial: four counts of abuse of power involving RM2.3 billion worth of 1MDB funds said to have been siphoned through Tanore Finance Corp; and 21 counts of money laundering.

Last year, he was found guilty of seven criminal charges comprising one count of abuse of power and three counts each of criminal breach of trust and money laundering involving RM42 million from SRC International Sdn Bhd, a former 1MDB subsidiary, that ended up in his personal accounts.

He was sentenced to 12 years’ jail and a fine of RM210 million for the abuse of power offence, and 10 years of imprisonment for each of the CBT and money laundering charges. The court ordered the jail sentences to run concurrently, however, which means Najib would have to spend only 12 years behind bars. He is appealing the conviction and sentences. The trial before Sequerah continues on Monday.

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