The Edge Court Judgments Report / Part 1 (Part 2 next week)

This article first appeared in The Edge Malaysia Weekly, on October 5, 2020 - October 11, 2020.
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This monthly report is compiled and briefly summarised by a group of lawyers on a voluntary basis for the benefit of readers of The Edge.

Please consult your own lawyers if you need advice on the cases, issues and related matters highlighted here.

CRIMINAL LAW

Corruption, criminal breach of trust and money laundering (‘Offences’)

High Court finds former Prime Minister guilty of the offences

The offence of (a) abuse by an officer of a public body (‘Public Officer’) for gratification or corruption is governed by s23 of the Malaysian Anti-Corruption Commission Act 2009 (‘MACC Act’); (b) criminal breach of trust (‘CBT’) is governed by the Penal Code; and (c) money laundering is governed by the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (‘AMLATFPUAA’).

 

Note: Below is a brief summary of the facts, evidence and decision of the High Court in Pendakwa Raya v Dato’ Sri Mohd Najib Bin Hj Abdul Razak concerning the charge under the MACC Act. The charges for criminal breach of trust and money laundering will be addressed in a forthcoming issue.

 

ISSUES

The issues of whether the Prime Minister (‘PM’), who also holds the position of Finance Minister (‘FM’), (a) is a Public Officer; and (b) the rebuttable presumption in s 23(2) of the MACC Act that a Public Officer is presumed to have used his office or position for gratification were examined by the High Court in Pendakwa Raya v Dato’ Sri Mohd Najib Bin Hj Abdul Razak [2020] MLJU 1254. In the same case, the constituent ingredients of CBT under the Penal Code and money laundering under AMLATFPUAA were also considered.

 

CASE SUMMARY AND DECISION

 

The Accused and the charges

The Accused was the former PM of the nation, holding co-terminus office as FM. Under s 3 of the Minister of Finance (Incorporation) Act (‘MOF Inc.’), the Accused at the material times was constituted as MOF Inc., which directly wholly owned 1Malaysia Development Berhad (‘1MDB’) and indirectly, its subsidiary, SRC International Sdn Bhd (‘SRC’). In 2012, the shares in SRC were transferred to MOF Inc. The key officers of Kumpulan Wang Persaraan (‘KWAP’), a body established under the Retirement Fund Act 2007, report ultimately to the Accused, the FM.

The prosecution (‘Prosecution’) preferred seven charges against the Accused in respect of a sum of RM42 million belonging to SRC: (a) abuse of position for gratification under s 23(1) of the MACC Act (‘MACC Charge’); (b) three counts of CBT under s 409 of the Penal Code (‘CBT Charges’); and (c) three counts of money laundering under s 4(1) of the AMLATFPUAA (‘AMLATFPUAA Charges’). The RM42 million was said to be part of an aggregate loan of approximately of RM4 billion (‘RM4 Billion Loan’) that was borrowed by SRC from the lender, KWAP.

 

1MDB, SRC and the genesis of the RM4 Billion Loan

1MDB was incorporated in 2008 as Terengganu Investment Authority (‘TIA’). In 2009, TIA became wholly owned by MOF Inc. 1MDB was established to drive strategic initiatives for the long-term economic development of the country, particularly in the energy and real estate sectors. Jho Low was the special adviser to the board of 1MDB. The chief executive officer (‘CEO’) of 1MDB was Shahrol Azral Hilmi (‘Shahrol’).

 

Application for grant from EPU

In August 2010, prior to the incorporation of SRC, Shahrol, as CEO of 1MDB, wrote to the Accused requesting for RM3 billion grant to set up SRC as a strategic resource vehicle to maintain strategic stakes in key resources, including coal, alumina, uranium, iron and oil and gas. The Accused wrote a minute on the said letter to the minister in charge of the Economic Planning Unit (‘EPU’) to study and review the proposal — ‘Untuk dikaji dan dibuat ulasan’.

The EPU declined to award the RM3 billion grant (equivalent to about 7% of the country’s development budget). Its response to the PM was (a) although it supported the setting up of SRC, SRC’s proposed focus should be confined to only coal and uranium — oil and gas were already pursued by Petronas and iron and alumina should continue to be driven by the private sector; and (b) SRC’s funding should be sourced from financial institutions or raised from the capital markets, not from public finance. Nonetheless, EPU was prepared to provide a launching grant of RM20 million to set up SRC and fund its initial activities. The Accused agreed with the EPU’s recommendations.

 

Incorporation of SRC and the Accused’s control in SRC

SRC was incorporated on 7.1.2011. Its key objects were identifying and investing in projects associated with exploration, extraction, processing and trading of conventional and renewable energy resources, natural resources and minerals. Its subscriber shareholders were Nik Faisal (‘Nik’) and Vincent Beng. At the outset, articles 67 and 116 of SRC’s constitution empowered the PM

(a) to appoint and remove the directors; and (b) SRC’s constitution cannot be amended without the PM’s consent.

Prior to the change of ownership of SRC from 1MDB to MOF Inc., documentary evidence in the form of a letter dated 9.1. 2012 showed that SRC only reported to the PM.

[1445] … the letter from SRC to the Prime Minister dated 9 January 2012 … at paragraph 3 reads:-

“SRC Reporting to the Government of Malaysia and MOF Inc.:

For avoidance of doubt, the Memorandum of Articles of Association of SRC will remain unchanged with SRC’s Board of Directors, Managing Director and Chief Executive Officer (“CEO”) all reporting directly to the Prime Minister of Malaysia.”

[1446] Incontrovertibly, the accused wrote a minute on [the letter dated 9.1.2012] expressly agreeing with the proposal. He stated, “Bersetuju dengan cadangan ini. Sila uruskan perkara ini”.

Further, there was a set of shareholder’s resolutions signed by the Accused, which included decisions to accept a RM2 billion loan from KWAP, appointment of Nik as CEO, opening of SRC’s bank account at AmBank, establishment of a wholly owned subsidiary of SRC in the British Virgin Islands, the opening of accounts with Julius Baer in Hong Kong/Dubai with a deposit of USD$100 million and with Falcon Private Bank in Dubai with a deposit of USD$500 million and the establishment of a joint venture between a subsidiary of SRC (to be established) and Aabar Investments PJS, an Abu Dhabi Government sovereign wealth fund and the contribution of USD$500 million in cash to the joint venture (‘First Set of Shareholder’s Resolutions’).

 

Accused’s greater control in SRC when ownership transferred to MOF Inc

After MOF Inc. directly owned SRC, the Accused approved the amendment of SRC’s constitution by adding article 117 — appointing the PM as advisor emeritus and all major investment and strategic decisions of SRC must first be referred to him for approval. Documentary evidence also showed that the Accused agreed that SRC should report to the Ministry of Finance (‘MOF’) and matters of strategic and national security importance should be reported to him.

[1447] … in another letter from SRC to the Prime Minister dated 2 December 2013 …, at paragraph 6, it is stated in plain terms:-

“Given that SRC is now 100% owned by the Minister of Finance, we would like to enhance our reporting structure from the Minister in-charge of EPU to now directly to the Ministry of Finance. In addition, on items of strategic and national security importance, SRC will report directly to YAB Prime Minister of Malaysia and/or the Economic and Financial Advisor to YAB Prime Minister of Malaysia.”

[1448] Again, the Accused noted his agreement, given his minute on the reporting to the MOF. He wrote “Saya bersetuju SRC melaporkan kepada MOF seperti para 6”.

On the evidence, the learned Judge observed that the internal powers and authority of the Accused in SRC was ‘overarching’.

Oversight and supervision of SRC

Externally, entities owned by MOF Inc. are supervised and monitored by Bahagian Menteri Kewangan Diperbadankan (‘BMKD’) and guidelines are issued by BMKD for compliance by such entities. However, the learned Judge found that SRC did not comply with BMKD’s requirements as SRC only reported to the PM.

The former second Finance Minister (‘SFM’) testified that the Accused’s management style on matters related to 1MDB and SRC as ‘autocratic’. Also, the Accused refused to give him permission to go to Switzerland to inquire about SRC’s frozen monies. The Accused testified that he did not give permission because (a) it was an informal request; (b) there was absence of a proper proposal to support the request; (c) the trip was unnecessary as the Accused understood that SRC was taking efforts to resolve the issue; and (d) the matter would ultimately be resolved on a government-to-government basis. The learned Judge found the reasons offered ‘difficult to accept’.

[1428] … In his insistence that the problem was for the board of directors to resolve, the accused even denied that an official delegation led by a government minister such as [the SFM] would have been more effective than leaving the matter to the board of directors of SRC to try address. This I find difficult to accept.

[1429] The accused also said that ultimately the matter would have to be dealt with in the context of a government-to-government discussion. But no evidence was presented in his defence to show that as Prime Minister until his resignation he had ever initiated any such discussion.

The argument that the appointment of a deputy Secretary General of the Treasury (‘Datuk Mat Noor) as ‘special advisor’ at SRC suggested that there was supervision to protect the interest of the Government was rejected. Datuk Mat Noor testified that his appointment was ‘very vague’, he was unsure of his terms of appointment and said that the supervision of SRC should be done by BKMD.

 

Application to KWAP for the first RM2 Billion Loan

After SRC’s incorporation, Nik wrote a letter to the Accused to pursue the strategic plans of SRC. It suggested SRC’s funding should be in the form of a loan of RM3.95 billion from KWAP. The Accused wrote a minute on SRC’s Letter to the CEO of KWAP (‘Datuk Azian’) — ‘YBhg. Datuk Azian, setuju dengan cadangan ini’, or he agreed with the proposal. KWAP processed the loan application and asked for information and supporting documents from SRC. Nik responded to KWAP’s inquiries — SRC’s real estate projects (Bandar Malaysia, KL International Financial District and other projects) ‘are in the master planning stage’ and ‘Disclosure of the detailed information’ is subject to the approval of the Accused. In effect, information and supporting documents were not forthcoming. Nonetheless, KWAP prepared a proposal paper (‘1st Proposal Paper’), which were tabled to KWAP’s Investment Panel (‘IP’) for consideration.

 

KWAP declined RM3.95 billion financing and deferred financing of RM1 billion

The 1st Proposal Paper suggested the approval of a RM1 billion loan was subject to certain verification of matters on SRC — SRC was a newly formed company with no track record, the general unavailability of supporting documents and risk of overexposure to a single borrower. The IP deferred its decision pending submission of information from SRC. The Accused was informed of the status. At that material time, Tan Sri Wan Abdul Aziz (‘TSWAA’) was the chairman of KWAP, head of the IP and the Secretary General of the MOF and his superior was the Accused as the FM. When the Accused was first briefed about the status of the loan application, he did not express any views. In evidence, TSWAA said that if there was no further communication with the PM, the matter would have been left at where it ended.

 

Accused requested expeditious processing of the loan

During a meeting at the PM’s Office, the Accused informed TSWAA to expedite SRC’s loan application and that RM2 billion would suffice. Following that, KWAP prepared another proposal paper (‘2nd Proposal Paper’) for the financing of RM2 billion. The 2nd Proposal Paper was tabled to the IP for consideration on 19.7.2011. The Accused request for the loan to be expedited was recorded in the minutes of that meeting.

The IP approved the financing of RM2 billion to 1MDB (not SRC) subject to a guarantee by the Government of Malaysia (‘Government’). Alternatively, KWAP would extend the financing to the Government who would then provide the financing to 1MDB. SRC disagreed that the borrower should be 1MDB. A further proposal paper was prepared (‘3rd Proposal Paper’) and the IP approved the financing of RM2 billion to SRC (‘1st Tranche’).

 

SRC’s application for additional loan of RM2 billion

On 4.2.2012, the share ownership of 1MDB in SRC was transferred to MOF Inc. It was pre-approved by the Accused. The Deputy General Secretary of the Treasury described the change in ownership as a ‘top down decision-making process’. The transfer was executed by the Accused on behalf of MOF Inc.

On 13.3.2012 (about six months after the 1st Tranche), SRC applied to KWAP for an additional loan of RM2 billion by way of a directors’ circular resolution of SRC (‘DCR’) passed on 17.2.2012. The DCR was in concordance with a shareholder minute dated the same day signed by the Accused. SRC’s application was approved by the IP (‘2nd Tranche’) subject to (a) a guarantee by the Government; and (b) drawdowns were to be released progressively to ensure the existence of viable opportunities to support the release of funds. The progressive release of funds approach was subsequently reversed to a lump sum drawdown at SRC’s request.

 

SRC’s applications for the guarantees

SRC applied for the guarantee of RM2 billion from the Government for the 1st Tranche before KWAP had finally decided to lend RM2 billion to SRC. The Cabinet papers (Memorandum Jemaah Menteri or ‘MJM’) were prepared on an urgent basis — two days before the Cabinet meeting. Evidence was led that due to the extreme urgency, MOF had to rely on verbal information provided by SRC, which was impossible to verify due to shortness of time. It was said that the ‘pressure to rush’ the MJM papers for the Cabinet meeting on 17.8.2011 not only came from SRC but also the principal private secretary to the PM and TWAA, and that TWAA, in turn, had received instructions from the PM.

[211]    … this MJM dated 15 August 2011 did not disclose that SRC had applied for financing of RM2 billion from KWAP. However, at that point in time, approval from the Investment Panel had not been obtained by SRC. More importantly, the MJM stated that the guarantee from the Government was warranted because SRC was a new company about to operate in a sector that necessitated huge funding capabilities such that support from the Government was essential. Given that SRC would be executing a strategic role in natural energy resources in consonance with the 10th Malaysia Plan and the National Energy Policy, the guarantee would serve to facilitate SRC obtain financing at a cheaper cost. There is no mention however of any specific use of the financing from KWAP proposed to be guaranteed. Neither is any investment project identified in the MJM.

The Cabinet approved the guarantee for the 1st Tranche at a meeting chaired by the Accused (‘1st Guarantee’). The MJM papers for the approval of the guarantee for the 2nd Tranche was tabled by the Accused at a Cabinet meeting on 8.2.2012 — about a month in advance of the date SRC had applied to KWAP for the 2nd Tranche on 13.3.2012. The Cabinet approved the issue of the guarantee for the 2nd Tranche (‘2nd Guarantee’), which was signed by the Accused.

BORROWED MONIES TRANSFERRED OVERSEAS

Out of the 1st Tranche, a sum of RM1.8 billion was remitted abroad. It was deposited with Falcon Bank and Julius Baer. It was said that the remittance was upon the instructions of the board of directors of SRC. However, the evidence showed that the remittance followed the First Set of Shareholder’s Resolutions signed by the Accused.

Prior to receipt of the 2nd Guarantee by KWAP, the Accused in a telephone call to the Secretary General of the Treasury requested for immediate disbursement by KWAP. The latter issued a letter to KWAP asking for immediate disbursement. TSWAA testified that it was unusual for KWAP to make disbursement prior to compliance with formal requirements.

SRC’s board minutes recorded the 2nd Tranche was to be utilised based on the shareholder’s minute of 17.2.2012 signed by the Accused — USD$500 million be placed in the account of a wholly owned subsidiary of SRC at BSI Bank in Lugano, Switzerland. The Accused testified that the monies transferred overseas was for time deposit purposes to mitigate the negative carrying costs of the loans as an interim measure pending actual investment. The learned Judge held that ‘this seems very reasonable’ but on closer analysis, the explanation was not credible.

[1483] …this lack of ready investments is perplexing given that even the accused testified that the financing requests at KWAP were expedited as communicated to [TSWAA] (in respect of the first financing) because SRC was in urgent need for funds to take advantage of some investment opportunities. [The division head of the MOF’s Loan Management, Financial Market and Actuary Division] at MOF also testified that he was told by [TSWAA] that the request for drawdown by KWAP before formalisation of the second government guarantee (in relation to the second financing) was conveyed by the accused to [TSWAA] because SRC needed funds urgently.

[1484] In other words, for the first and second financing, all the haste was to accommodate SRC, which was represented by SRC and the accused to have been in very urgent need for large sums of monies for investments in the energy sector overseas. However, what in fact transpired was that upon the drawdowns of the two separate financings of RM2 billion each, the funds were immediately transferred out of the account of SRC.

It was found that there was no evidence of ‘any robustly verified concrete investment opportunities that justified the release of the loans to SRC’. After the release of the loans, there was no evidence that the Accused was concerned with the use of its proceeds, which was inconsistent with his conduct prior to the grant of the loans to SRC.

Justice Mohd Nazlan


 

[1516] … there is no evidence that shows that the accused was even concerned with the use of the funds loaned to SRC by KWAP, both in terms of the fact that the monies was sourced from the country’s retirement pension fund, hence part of the public funds, as well as whether the pursuit of promoting the national energy strategic initiatives was anywhere closer to be met.

[1517] … even though the accused was insistent that such manner of oversight would be within the responsibility of the board of directors of SRC, and not his, considering his understandably busy schedules as the Prime Minister of the nation, this line of argument is in my judgment, in the context of this case, seriously lacking in credibility.

[1518] This is because the unexplained transfer and fate of an enormous amount of monies from SRC’s account, a wholly owned company of the MOF Inc., which monies was originally sourced from the country’s retirement fund must surely bother any responsible leader of this country. Even if a Prime Minister knew nothing about the matter until the problem surfaced, such a responsible leader would have taken immediate steps, which could most probably have included contacting his counterpart in the country in question to try resolve the matter. The accused, however, did not offer any such evidence.

[1519] It is especially difficult to accept that line of argument … by the accused since … as the Prime Minister and Finance Minister at the time actually had the knowledge about and had himself been directly involved in the process on the loans granted by KWAP to SRC as guaranteed by the Government, purportedly on the basis of the stated purposes of the loans being for national interest …

[1524] Furthermore, the accused could not provide a clear answer to the question whether he was satisfied with the progress of SRC after the first drawdown of the RM2 billion before agreeing to support the second RM2 billion financing. There was a period of about six months in between the two Cabinet meetings. The accused claimed that he did ask and was told that the monies had been set aside for immediate investment requirements, but did not inquire further …

[1525] In addition … the accused also agreed that the Cabinet at its meeting deliberating on the second government guarantee, was not made aware that no energy ventures were embarked on by SRC in respect of the first financing by KWAP, a fact known to the accused.

[1526] This, according to the accused was therefore a matter for the board of directors to oversee. The accused also disagreed that there was a duty to update on the status of the disbursement of the first loan secured by the first government guarantee when the proposal for the second government guarantee was tabled at the meeting of the Cabinet. Again, I find this hard to fathom when the source of the funding was the pensions fund and the sum involved was extremely large …

RM 42 MILLION TRANSFERRED TO ACCUSED’S PERSONAL ACCOUNTS

The Accused had personal accounts at AmBank (Account 880, Account 898 and Account 906), which were established in August 2013. Nik was an authorised signatory of SRC and the Accused’s “Authorised Personnel” to operate the Accused’s personal accounts — instructing transfers of funds amongst the Accused’s personal accounts but could not withdraw funds from or issue cheques out of the personal accounts. RM42 million was first transferred out of SRC’s account to intermediary companies. The money trail was (a) on 24.12.2014, RM40 million was transferred to Gadingan Mentari Sdn Bhd (‘GMSB’), which maintained an account with AmBank; (b) on the same date, AmBank was instructed to transfer out of GMSB’s account the RM40 million to the account of Ihsan Perdana Sdn Bhd’s (‘IPSB’) at Affin Bank; (c) on 26.12.2014, IPSB transferred RM32 million received from GMSB to the personal accounts of the Accused at AmBank; and (d) in February 2015, RM10 million was transferred to GMSB and onward to IPSB and from IPSB into the Accused’s personal Account 880 and Nik instructed for the transfer of RM10 million from Account 880 to Account 906. The learned Judge held that the roundabout way of transferring funds into the personal accounts had the effect of making the source of funds ‘less transparent or to avoid detection altogether’.

 

Utilisation of the RM42 million

On 24.12.2014 (two days before the arrival of RM32 million from IPSB into the Accused’s personal accounts), the Accused instructed AmBank to transfer a sum of RM27 million to a company (‘PBSB’) and RM5 million to another company (‘PPC’), subsidiaries of Putrajaya Perdana Berhad (‘PPB’). The Prosecution contended that the two transfers were to repay loans extended to the Accused by the two companies — PBSB in July 2014 had transferred RM27 million to the Accused’s personal account and PPC in September 2014 had transferred RM5 million into the Accused’s personal account. The transfers by PBSB and PPC were made at a time when the Accused’s Account 880 had a low balance of about RM194,000.00 and Account 906 was overdrawn by about RM4.7 million. The Prosecution’s case was that the transfers by PBSB and PPC were made to ensure cheques of the Accused drawn on the accounts would be honoured. The contention of the Defence that the transfers by the Accused to PBSB and PPC was ‘a reversal (instead of a repayment) in the form of a reimbursement’ was rejected. The notes to the audited consolidated financial statements of PPB disclosed the transactions as loans.

[753] The prosecution says this constitutes a repayment to PBSB and PPC of the total advances of RM32 million. The defence asserts this is a mere reversal of transaction. I cannot accept the latter’s contention … First, the audited consolidated financial statements of Putrajaya Perdana Berhad … for the financial year ended 2014, in particular in its notes … appear to describe the transfers which involved PBSB and PPC with the two accounts whose owner was not disclosed therein (factually the accused’s) as a loan and repayment exercise…

[769] All these payments, utilized from the funds of RM27 million sourced from PBSB and RM5 million from PPC, were crystal clearly for the personal benefit of the accused. And it is for this reason that the accused instructed on 24 December 2014 … for the RM32 million received from SRC on 26 December 2014 be transferred to PBSB and PPC on 29 December 2014 as repayment of the advances by PBSB and PPC to him.

During the period December 2014 and February 2015, the Accused issued a total of fifteen cheques from his personal accounts.

THE MACC CHARGE

Section 23(1) of the MACC Act prohibits a ‘Public Officer’ from using his office or position for any gratification, whether for himself, his relative or associate. The learned Judge observed that the word ‘interest’ does not appear in s 23(1) but in s 23(2), which provides for a rebuttable presumption that a Public Officer is presumed to have used his office or position for gratification under s 23(1) ‘when he makes any decision, or takes any action, in relation to any matter in which such officer, or any relative or associate of his, has an interest, whether directly or indirectly’. Since the Prosecution was relying on the rebuttable presumption, the direct or indirect interest of the Accused in the subject matter of the charge must be proved. Gratification is widely defined in s 3 to include money or any other similar advantage.

 

THE MAIN POINTS IN THE DEFENCE AND DECISION

The Prosecution’s evidence relating to the Accused’s involvement in the events between 2010 and 2012 including the grant of the RM4 Billion by KWAP and the Cabinet’s decisions to issue the Government Guarantees did not establish a corrupt arrangement which the Accused could be said to a party to.

The Defence did not challenge that the Accused was a Public Officer. It contended that s 23 was inapplicable because of the exception in s 23(4).

The argument premised on s 23(4) was rejected. The learned Judge held that (a) s 23(4) contemplates two public bodies; (b) the Accused was not an officer in SRC and the representative of the Government; (c) the Accused was involved in SRC because SRC’s constitution empowered the PM with special powers; (d) his role as shareholder of SRC as MOF Inc. was incapable of making him an officer of SRC; and (e) no evidence that the Government had appointed the Accused as its representative in SRC. In any event, it could not be said that what the Accused did was for the interest and advantage of the Government. On examination of the evidence as a whole, the learned Judge also rejected a key argument of the Accused that he was merely acting in accordance with the 10th Malaysia Plan and National Energy Policy. The proposal for SRC as a new energy player ‘came from someone associated with 1MDB, not the Government’.

[336] Further, apart from the initial assessment by the EPU which was generally supportive of the establishment of SRC to further fortify the nation’s energy sector, the EPU did not support the request for the RM3 billion grant to set up SRC. There was no other evidence of any discussions or analyses by any governmental department or agencies on the need to support or promote SRC.

[337] There was simply no basis for the Government to go out of its way to assist SRC, a newly established company with no proven track record, by issuing two government guarantees and in the process which was described as being rushed and expedited, facilitated the granting of financing to SRC from the country’s pension fund in the aggregate colossal amount of RM4 billion, merely because the company’s objectives are consistent with the energy requirements of the country as outlined in the 10th Malaysia Plan and the National Energy Policy. However there is paucity of evidence as to for what purposes the RM4 billion had actually been utilised for. What is clear, however, is that SRC has defaulted on its loan repayments to KWAP.

The Accused had no ‘interest’ in SRC and the rebuttable presumption in s 23(2) of the MACC Act is inapplicable.

The learned Judge noted that the word ‘interest’ is not defined under the MACC Act and ‘interest’ under the rebuttable presumption in s 23(2) may be direct or indirect. The Defence asserted that the Accused’s position and involvement in relation to SRC was not a form of a personal or private interest. Rather, it was professional in nature arising from and attributable to his public office. Therefore, it was argued that the Accused did not have interest. The nature of the interest, the learned Judge held that he had to consider, was not whether the Accused or any member of his family is the registered or beneficial owner of SRC’s shares. On the facts and evidence presented, the contextual question was whether the Accused could be said to have an ‘interest’ in SRC that went beyond mere public office. The learned Judge held that the Accused had ‘interest’ in SRC on the totality of evidence.

[136] … having examined the facts and evidence … the interest of the accused in SRC cannot be characterised as one that was entirely professional in the public office context. It was not just because the accused as the Prime Minister had control over the appointment of the directors of SRC under article 67 of its M&A or that as the Finance Minister he was as MOF Inc. the sole shareholder of the company or that as its advisor emeritus matters of importance must be referred to him under article 117 of the M&A. It was more than that …

[139] In my judgment because of his position as the Prime Minister and the Finance Minister of the country, the accused was able to endorse the establishment of SRC, which although stated to be a strategic natural resources development company for the country, was in truth designed to be and did become, for all intents and purposes, a vehicle utilised by the accused for his own private advantage, and importantly managed to secure for SRC the RM4 billion financing from KWAP and the government guarantees for the entire financing, all made possible by the accused’s own overarching authority in SRC … the accused had helped to establish SRC which he then used for his private interest …

[267] …The accused had a secret design and private interest in a company he controlled as demonstrated in the course and series of his conduct and action concerning the establishment, financing, guarantee and ownership of SRC which were outside the remit of the exercise of official and public responsibilities …

[313] The accused …treated SRC as an entity that could be used to his personal advantage and private benefit. This was in consonance with the overriding and whole motive of the accused in his active and personal involvement in the approval processes at KWAP and MOF, and beyond. In short, it is irresistible that the decision made or actions taken was clearly in relation to a matter in which the accused had an interest … As such, the presumption under Section 23(2) of the MACC Act applies and the accused is therefore presumed to have used his office or position for gratification …

[342] … The interest of the accused in SRC must be seen in the correct context, which is from the time of the establishment of SRC … to the approval of the applications for loans by SRC from KWAP… which were guaranteed by the Government …until the time the monies, being the property of SRC in the amount of RM42 million, were deposited in the bank accounts of the accused, which evidence will also demonstrate eventually used by the accused for his personal interest and own advantage.

The ‘interest’ was also evidenced by the various decisions or actions the Accused took before and after the loans were disbursed. It included the fact that when SRC could not service its loan, the Government provided three short-term loans to SRC to service the repayment and the Accused personally approved two out of the three short-term loans (approximately RM550 million) without reference to the Cabinet.

The Prosecution’s evidence did not establish any nexus between the Accused’s participation in matters that led to the Government Guarantees and the RM42 million transferred to the Accused’s accounts in late 2014 and early 2015.

The learned Judge held that on the totality of evidence presented before, during the two Cabinet meetings and thereafter, provided the nexus. In particular, the Accused knew that KWAP’s agreement to lend was predicated on guarantees of the Government and his presence and involvement at the Cabinet meetings as chairman resulted in the Government’s decision in issuing the guarantees. The Accused also did not declare he had ‘interest’ in the subject matter concerning the Government Guarantees. He also did not withdraw from the Cabinet meeting and discussion, contrary to the Code of Ethics applicable to members of the administration. The non-declaration of interest and non-withdrawal from the meeting showed the Accused had plainly intended not to disqualify himself to avoid a conflict of interest.

[343] In my view, the intention to obtain gratification in this case could be readily inferred from the circumstances, given the failure of the accused to avoid a conflict of interest position at the Cabinet meetings, supplying the criminal intention against him, in view of the case law authorities I mentioned earlier, particularly when it has already been shown that the accused had an interest in SRC which he also controlled, the entity which was the subject matter of the decision to grant the government guarantees at the Cabinet meetings.

[344] The Cabinet approval of the guarantees made the loans to SRC possible. Given the accused’s control over SRC, including his role in helping secure a massive RM4 billion financing from KWAP to SRC, by reason of the Cabinet approval which the accused participated in, the accused could at any time cause the transfers of the company’s funds. This indeed happened in respect of the December 2014 and February 2015 transactions totalling RM42 million which was transferred out of SRC, made to flow through GMSB and IPSB, and credited into his personal accounts at AmIslamic Bank, all in a mere matter of days. This sum was utilised and expended by the accused to his own advantage. This is gratification to the accused pure and simple.

The Defence that the evidence leads to reasonable inferences that the transactions involving the RM42 million were carried out without the Accused’s knowledge and involvement and the Accused genuinely believed that the RM42 million was ‘Arab donation’ monies.

The defence for the Accused was (a) he was not involved in the management of his own accounts and did not have knowledge about the balances; and (b) his belief in good faith that it was ‘Arab donation monies’ and the donor was the late King Abdullah (‘King Abdullah’) of the Kingdom of Saudi Arabia (‘KSA’). The evidence was that in January 2010, the Accused (with members of the Malaysian delegation) visited KSA to receive an award from King Abdullah, a matter that was intimated to the Accused by Jho Low sometime before January 2010. Jho Low, according to the Accused, had shown influence with ‘the members of the Saudi royalty’.

Genesis of ‘Arab donation’ monies

The Defence contended that during a private audience between the Accused and King Abdullah (‘Private Audience’), King Abdullah mentioned to the Accused ‘his support for the accused’s administration of Malaysia’. As to the nature of the ‘support’, the Accused did not say in his witness statements and answers in cross-examination and re-examination that King Abdullah mentioned intention to provide financial support or donation monies to the Accused. Rather, in the Accused’s witness statement, the Accused said it was in the middle of 2010 that Jho Low informed him that King Abdullah wished to make financial donations and, in his mind, this was consistent with what King Abdullah told him during the Private Audience. A witness (DW5) for the Accused testified that he accompanied the Accused at the Private Audience and listened to the discussion. In short, DW5 said that the Accused made the request for donation and King Abdullah told the Accused that shortly after the Private Audience, money would be deposited into the Accused’s private account so as not to complicate disbursement process of monies out of the account. The learned Judge found too many inconsistencies in the evidence. It included (a) the Accused said it was Jho Low who told him about the financial donations in mid-2010; (b) the version by DW5 that it was the Accused who made the request for donation contradicted the evidence of the Accused; (c) the evidence that monies would be sent shortly after the Private Audience did not happen and in the Accused’s witness statement, it was Jho Low who told the Accused that donations would be sent at the end of 2010. As it happened, monies purportedly from King Abdullah were only first deposited in February 2011.

The four ‘Arab letters’

In substantiation of the genuine belief of the Accused that the foreign remittances into his personal account (Account 694 at that material time) came from King Abdullah, four copies of ‘Arab letters’ were relied upon to justify his genuine belief that the remittances were from the Saudi monarch. The four letters were signed off by “HRH Prince Saud Abdulaziz Al-Saud” (‘Prince Saud’). Jho Low delivered the letters. The four letters were: (a) first letter (D601) dated 1.2.2011 specifying USD$100 million; (b) second letter (D602) dated 1.11.2011 specifying USD$375 million; (c) third letter (D603) dated 1.3. 2013 specifying an additional sum of USD$800 million; and (d) the fourth letter (D604) dated 1.6.2014 specifying a sum of GBP50 million.

The learned Judge held that there were many problems with the letters in the context of the totality of the evidence. It was concluded that the four ‘Arab letters’ were ‘orchestrated self-serving defence’. The reasons included: (a) the Accused did not verify with King Abdullah or his KSA officials; (b) in two letters written by the Accused to King Abdullah in September 2012, there was no mention of the donations or even thanking the Saudi monarch, although the Accused said in cross-examination that he had thanked the Saudi monarch orally; (c) the Accused did not know Prince Saud or that he is related to King Abdullah; (d) after the conclusion of the 13th General Elections, the Accused returned a sum of USD$620 million (as surplus requirements) in 2013 out of the donations he had received; (e) the USD$620 million was returned to an entity known as Tanore Finance Corp based on information received from Jho Low and there was no evidence that that company was related to the Saudi Royal family save for his belief; (f) out of the funds received and the return of USD$620 million, a balance sum of RM162 million was transferred from Account 694 upon its closure to the Accused Account 880 (established in August 2013); and (g) the RM162 million had been fully utilised by the Accused by September 2014. Specifically, the learned Judge found the fourth letter (D604) to be ‘extremely peculiar’, that having returned USD$620 million in 2013, there was another Arab donation for GBP50 million in circumstances where (i) the Accused did not approach the Saudi monarch for further funds; and (ii) GBP50 million was never remitted save for a sum of about GBP10 million, which arrived in six batches (one of which was in the sum of GBP2,216.01); and (iii) the donation arrived at a time when the Accused personal accounts were ‘very low’. On the totality of evidence, the learned Judge rejected the contentions that the Accused could genuinely hold a belief that RM42 million was ‘Arab donations’.

[2278] … from the evidence, it is quite plain that the accused could not have honestly believed the Arab royalty donation story, especially vis-à-vis the fourth letter fund (D604) to present him with a defence that he did not know of the RM42 million paid into his account because he thought he was spending on the Arab funds. As has been made demonstrably clear, this defence is unsustainable because it is wholly contrived.

[2279] Quite apart from the remittances pursuant to the three letters in D601, D602 and D603 during the years 2011, 2012 and 2013, which the defence argues the accused honestly believed to have been from King Abdullah — which I have shown to be unsupported by evidence and plainly false, the remittance in 2014 was even more indefensible because the accused himself had in 2013 returned the balance of USD$620 million to the donor, whom the accused did not know but conveniently assumed to have been King Abdullah after the conclusion of the 13th General Elections …

[2280] … as for the fourth letter (D604) despite the full amount of funds promised never materialised, the accused seemed contented for as long as the exact amount of funds needed arrived at the moment it was most needed to address insufficiency of balances in his accounts. The accused appeared unperturbed as to why the full amount was not flowed into his account, much less if it was actually from King Abdullah. Further, the letter in D604 does not name the entity that will be giving the funds to the accused unlike the previous donation letters.

[2281] As such the contention that the accused had a bona fide belief of the purported Arab donations arriving in 2014 through the fourth letter in D604 as being consistent with the earlier received funds during the years 2011 to 2013 does not pass muster the threshold of not only the requisite evidential support but also of the basic logic and common sense.

Concerning MACC’s trip to Riyadh to investigate the authenticity of the letters signed by Prince Saud, the learned Judge was not satisfied with the evidence presented. It included (a) no MACC’s officers could identify Prince Saud save from a passport shown to one of the officers who could not verify the authenticity of the passport; (b) Prince Saud did not sign any statement, but an agent; and (c) the agent who signed the statement did not give evidence.

[2260] The statement purportedly obtained by MACC from Prince Saud is riddled with infirmities rendering it not admissible in law. First it was signed by another person … And the person who purportedly gave the statement too did not testify. Secondly, the statement does not have any supporting documents whatsoever to show its veracity …Thirdly, the excuse that Prince Saud could not sign the statement as he enjoyed immunity is wholly unverified …

[2261] … It is thus no surprise that the defence too, to its credit, did not attempt to admit the MACC statement signed by the agent to Prince Saud.

No knowledge of balances in personal accounts

The Accused testified that Nik, his late private secretary and Jho Low managed his accounts and he had no knowledge of the balances in his accounts. The learned Judge held that the Accused knew that the RM42 million was from SRC. Amongst other matters, in the pleadings and an affidavit affirmed by the Accused in 2016 in his defamation action against a former Cabinet minister who was alleged to have said he ‘stole money’ from 1MDB, the Accused knew that the RM42 million was from SRC save he did not know it was channelled through GMSB and IPSB. Various Blackberry Messenger (‘BBM’) messages between Jho Low and Joanna Yu (‘JY’, the relationship manager at AmBank) showed that the Accused had knowledge of the state of his accounts. In some BBM conversations, Jho Low had on-sent messages received from the Accused to JY and Jho Low had on-sent messages to the Accused after making enquiry with AmBank on the account balances.

[888] The many BBM chats … between Joanna Yu … and Jho Low thus even show actual knowledge on the part of the accused concerning the status and transactions involving his personal accounts. This is because these BBM conversations exhibit situations where Jho Low on-sent messages he received from the accused to [JY], or where Jho Low sent copies of messages that he delivered to the accused on the account balances (after making the enquiry with the bank). There are also situations where Jho Low informed [JY] of cheques that the accused may be writing, on incoming remittances into the accused’s accounts, as well as on proposed transfers by the accused. And there are also situations where Jho Low contacted [JY] upon receiving instructions from the accused ...

[911] The strong if not also an irresistible inference is that under such circumstances as demonstrated by this body of BBM and text messages evidence, the accused must surely have had actual knowledge of the status and of the countless transactions involved, and his bank balances, including those concerning SRC relevant to the seven charges which occurred in December 2014 and February 2015.

The evidence leads to reasonable inference that the transactions involving the RM42 million were done at the behest of others for their own ulterior purpose and benefit.

It was contended that Jho Low engaged in subterfuge in relation to the RM42 million transactions, including reasons that Jho Low was (a) keeping up the ruse that the Accused would continue believing that the funds in his personal accounts being sufficient were from ‘Arab donations’; and (b) avoiding discovery by the Accused of his self-dealings and interests in transactions involving SRC. The learned Judge rejected this contention. In summary, Jho Low did exactly what he was tasked to do by the Accused — to ensure there were sufficient funds in his accounts.

[2431] …to take a best-case scenario for the defence — which is that the whole shenanigan was a fraud perpetrated by Jho Low against the Prime Minister… thus to assume that the Arab donation story was concocted by Jho Low to deceive the accused who then honestly believed the remittances as a result came from King Abdullah (which belief is in any event already shown to be patently contrived), Jho Low continued as shown by evidence to pump in funds and avoid cheques written by the accused from being rejected.

[2432] The reason advanced by the defence now is that this was done to prevent the accused from discovering the truth if the funds stopped being channelled into his accounts and the cheques get bounced ... This explanation is a conjecture, not evidence … It is inconsistent with the totality of the evidence … Jho Low was tasked by the accused himself to ensure sufficiency of funds in the accounts of the accused… Evidence which reveals Jho Low’s many and various efforts in his interactions with Joanna Yu to avoid the cheques issued by the accused being rejected by giving him time to effect transfers of funds into the relevant accounts of the accused …

[2433] The defence argued that the trend on cheque issuance shows that on some occasions, Jho Low did not know in advance of the plans by the accused to issue cheques and his efforts to put in funds were largely reactionary to what had already been done by the accused (in issuing the cheques). The defence also submitted that this corresponds with the accused’s assertion that he did not check his account balances. I have earlier shown this was not at all the case in all situations. The theory that Jho Low did not know in advance of the plans of the accused is lacking in merit … Jho Low did what the accused had asked him to do …

[2436] The issue of the accused making any enquiry into his accounts in the event any of his cheques did bounce does not arise because the accused knew that his cheques would never get dishonoured. Indeed, even Joanna Yu … had provided her own money to help Jho Low fund the accounts of the accused to avoid cheque rejection.

[2437] It is way too far-fetched and self-serving for the accused to claim that he was deceived and defrauded by Jho Low ...The accused, despite claims of being scammed, agreed that he did not lose any money. Instead he benefitted immensely by the remittances of huge sums of monies into his accounts.

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