Najib sought RM100m govt loan to cover SRC's late repayment of RM4b KWAP loan, says ex-Cabinet deputy chief secretary

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KUALA LUMPUR (June 18): Datuk Seri Najib Razak had put forth a memorandum during a Cabinet meeting in November 2015 to ask for a RM100 million loan from the federal government to SRC International Sdn Bhd, formerly a subsidiary of 1Malaysia Development Bhd (1MDB), to cover the interest and late payment penalty for the RM4 billion loans from Kumpulan Wang Persaraan (Diperbadankan) KWAP.

The High Court was informed about this development by former deputy chief secretary to the Cabinet Tan Sri Mazidah Abdul Majid, who is the 40th prosecution witness in the Najib-SRC trial.

"The loan was proposed to [keep] SRC from defaulting on its loans to KWAP, which would drag the government as the loan guarantor to repay the principal and interest totalling over RM4 billion. This situation would impact the government's fiscal position and the planning of the national budget," Mazidah said.

She added that SRC's default would result in KWAP having to categorise the SRC loan as a doubtful loan, which would further implicate the fund.

"If that was done, it would raise speculation and finally a negative perception [on] the government, taking into account SRC is a unit of Ministry of Finance Inc," she added.

Mazidah: Najib did not declare interest in SRC during Cabinet meetings
Earlier, Mazidah also said Najib did not declare his interest in SRC when he chaired the Cabinet meetings in 2011-2012 which discussed matters pertaining to the loans of the company.

At that time, Najib was the prime minister, the finance minister, the officer in charge of Ministry of Finance Inc — SRC's shareholder — and also the adviser emeritus of SRC.

During cross-examination, however, the 70-year-old retiree clarified that during her tenure, she did not know that Najib held the advisory role in SRC.

She also refused to say whether the position implies a conflict of interest for Najib as the chairman of these Cabinet meetings.

"If I am not sure, I will refer to the legal advisor of the government [the Attorney-General's Chambers]. It has always been my philosophy. I am not a lawyer. I cannot say anything. Saya minta maaf [I apologise]," said Mazidah, when pressured by the defence.

What were Najib's memoranda about?
Mazidah's written statement underlined at least five Cabinet meetings which discussed details of a loan of up to RM2 billion for SRC, which was later given by KWAP in March 2012.

On Aug 17, 2011, a Cabinet meeting which was attended by all Cabinet ministers save for then foreign affairs minister Datuk Seri Anifah Aman raised a memorandum from Najib — received from the Ministry of Finance — entitled "Government Guarantee of up to RM2 billion loan for SRC International Sdn Bhd".

The memorandum proposed for the government to provide the guarantee for the loan — both principal and interest — which will have a tenure of up to 10 years and is intended to fund investments in natural resources.

The memorandum, however, was not discussed in that meeting, but was deliberated and approved in another Cabinet meeting a week later on Aug 24, 2011.

Another Cabinet meeting on Feb 8, 2012, raised another memorandum by Najib for SRC to be given exemption from tax and stamp duty as well as for the finance minister to be given the power to dictate the terms and conditions of the SRC loan.

The Feb 8 meeting saw the absence of then minister of finance II Datuk Seri Ahmad Husni Mohamad Hanadzlah and then minister in the Prime Minister's Department Datuk Seri Idris Jala.

The memorandum was approved on Feb 15, 2012.

On Feb 16, 2012, yet another Cabinet meeting took place — this time without Najib as he was on a working visit to the US.

Also absent was then agriculture and commodity minister Tan Sri Bernard Giluk Dompok, then minister in the Prime Minister's Department Datuk Seri Mohamed Nazri Abdul Aziz, and then home minister Datuk Seri Hishammuddin Hussein.

The last meeting underlined another memorandum from Najib entitled "Amendment to the Purpose of Loans by SRC International Sdn Bhd and 1MDB Real Estate Sdn Bhd (1MDBRE)", which was approved by the Cabinet.

The memorandum proposed to add 'working capital' as another purpose for SRC's loans, and for 1MDBRE's loan to be used to cover the cost of installation for settlement for soldiers operating in the Sungai Besi Air Force Base, which was involved in the development of Bandar Malaysia and other investments in the real estate industry.

Additionally, the finance minister will also to be given the power to conduct any amendments for the purpose of determining the terms and conditions of the aforementioned loans. The decision was made and confirmed on May 23, 2012.