This article first appeared in The Edge Financial Daily on May 15, 2019

KUALA LUMPUR: Datuk Seri Najib Razak, in his capacity as the then finance minister, signed a government guarantee letter for the second RM2 billion loan extended to SRC International Sdn Bhd, testified a witness on the 17th day of the SRC trial yesterday.

Kumpulan Wang Persaraan (Diperbadankan) (KWAP) legal and secretarial vice-president Azlida Masni Arshad, who was the 35th prosecution witness, said during her cross-examination by defence lawyer Harviderjit Singh that Najib allowed SRC to apply for a guarantee to back the second loan before it was discussed by the retirement fund’s investment panel in a meeting on March 20, 2012.

She said the terms of the second loan followed those of the first RM2 billion loan given in August 2011.

“The RM2 billion additional loan was based on the same terms of the first loan where, as stated in paragraph 3.2 of the Investment Panel minutes, the finance minister (Najib) approved the application for a guarantee on the loan, and the minister wanted SRC to ask for the loan from KWAP as [SRC] had applied [for funds from KWAP] previously,” said the witness.

Najib then signed the government guarantee dated March 27, 2012, and on the next day a finance ministry official named Maliami Hamad then wrote to KWAP to approve the loan, said Azlida.

SRC was a subsidiary of 1Malaysia Development Bhd (1MDB) before Minister of Finance Inc took over the company on Feb 14, 2012.

Meanwhile, Najib was the chairman of 1MDB’s board of directors until it was dissolved in May 2016, and the ministry of finance (MoF) took over its remaining assets.

The witness said for the first RM2 billion KWAP financing facility, the loan agreement and government guarantee were signed by then second finance minister Datuk Seri Ahmad Husni Hanadzlah on Aug 26, 2011 — the same day the loan was disbursed.

However, Maliami informed the retirement fund three days before (Aug 23, 2011) that the government had agreed to guarantee the first loan.

Azlida also noted that SRC was given the go-ahead to apply for the second loan in a cabinet meeting in February 2012.

She agreed that the second RM2 billion loan could be given to SRC in one lump sum with the government guarantee.

The legal and secretarial vice-president of KWAP also agreed that while the fund could have asked for more documents from SRC to further support the company’s applications for the two loans, the presence of the government guarantee had satisfied KWAP’s investment panel.

The witness was testifying in Najib’s trial, where he faces seven charges for criminal breach of trust, money laundering and abuse of power involving RM42 million of funds from SRC.

Minutes did not show panel forced to approve loan

Earlier in the day, Azlida agreed that in the meeting minutes in 2011, there was no indication that KWAP was forced to approve the first loan to SRC.

She also affirmed that the minutes of the meeting on July 19, 2011 did not reflect any opposition from the investment panel members to provide the RM2 billion facility to SRC.

Agreeing with lawyer Harvinderjit Singh that this should be reflected in the minutes, she noted that in her meeting minutes, she did not record any opposition to the lending.

“It was also not in the minutes that the panel had no choice on the matter as Najib had asked for the loan to be approved,” said Harvinderjit, to which the witness agreed.

Azlida, when testifying during examination-in-chief by deputy public prosecutor Datuk Ishak Mohd Salleh, told the court that KWAP had reservations about granting the loans and initially the panel wanted to only give RM1 billion out of the RM3.95 billion sought by the RM2 company.

This led to the panel suggesting that there should be a government guarantee, or a corporate guarantee or a letter of comfort or awareness issued by the MoF.

Azlida also agreed with Najib’s lawyer that the handwritten note by Najib in SRC’s letter dated June 3, 2011 for the first loan to be approved was not an instruction from the ex-premier but rather just a statement in agreement for KWAP to consider the loan.

She also agreed that the then prime minister and finance minister would not have any power to approve the facility.