This article first appeared in The Edge Malaysia Weekly on May 6, 2019 - May 12, 2019

WHEN 1Malaysia Development Bhd (1MDB) was given a government grant of only RM20 million, although it had sought RM3 billion for SRC International Sdn Bhd, the latter, led by its director Nik Faisal Ariff Kamil, turned to Kumpulan Wang Persaraan (Diperbadankan) (KWAP) to obtain the funds.

The High Court learnt this last week from two prosecution witnesses, who also said SRC had the support of former prime minister Datuk Seri Najib Razak to get the funds from KWAP.

Nine witnesses testified during the week but the testimonies of Datuk Dr Kamariah Noruddin — former Economic Planning Unit (EPU) deputy director-general (macro) in the Prime Minister’s Department — and Amirul Imran Ahmad — former assistant vice-president of the Fixed Income Department at KWAP — on Thursday were important with regard to SRC’s formation.

While SRC was formed in January 2011 as a RM2 company with Nik Faisal as one of the directors, 1MDB had attempted in 2010 to secure RM3 billion from the government.

However, according to Kamariah, 61, who retired last year, the EPU rejected 1MDB’s request to avoid being seen as negligent.

“I assumed that it was a serious proposal since it was submitted directly to Najib by the 1MDB CEO (Datuk Shahrol Azral Ibrahim Halmi). But the EPU could not, at that juncture, provide the RM3 billion grant, given that it was only a three-page letter. At the time, the annual allocation for development was RM42 billion for the entire nation, so if we took RM3 billion out of it, that would have been 7% of the entire development budget for the entire nation.

“We didn’t have such a huge development budget to give a grant of RM3 billion to a company that had not been formed and we had not seen any return on investment. If we had provided the RM3 billion, it would have amounted to negligence,” Kamariah said during re-examination by appointed prosecutor and lawyer Datuk V Sithambaram.

Only RM20 million granted by EPU

Kamariah added that 1MDB was given a grant of RM20 million to set up a special purpose vehicle, SRC International Sdn Bhd.

The witness said the grant application made by Shahrol on Aug 24, 2010, stood out because applications for allocations, even by government-linked corporations, were normally made through ministries.

“What struck me the most [about the 1MDB application] was that it was difficult to process as it was unusual in that we were required to respond directly to the prime minister,” she said in response to questions from Deputy Public Prosecutor Mohd Ashrof Adrin Kamarul.

Kamariah explained that SRC was set up to ensure the security of the country’s energy supply. The country’s dependence on Tenaga Nasional Bhd was high, at 80%, because of the supply of coal. As petroleum and natural gas were taken care of by Petronas, the proposal to set up SRC was limited to coal and uranium.

The witness also identified a memorandum written by the then EPU director-general the late Datuk Noriyah Ahmad, dated Oct 12, 2010, after Najib remarked three days later that he agreed with the idea (see picture).

KWAP loan made through Najib

In his testimony, Amirul, in response to questions from Deputy Public Prosecutor Datuk Ishak Mohd Yusoff, agreed that it was strange to receive a two-page letter from SRC asking for a loan.

“The letter was addressed to Datuk Seri Najib Razak as the PM and finance minister to get a RM3.95 billion loan as capital and investment for SRC. The letter was signed by Nik Faisal.

“What I understood from the letter was that Najib was agreeable with the idea to give the loan. I recognised Najib’s signature due to my service with KWAP at the time,” the witness said.

Amirul, who is now a vice-president at SME Bank, said despite the letter, KWAP asked for supporting documents but SRC failed to provide any.

In an email on July 1, 2011, Nik Faisal informed KWAP that SRC was unable to disclose further information of the Bandar Malaysia, KL International Financial District and other projects because they were in the master planning stage of development and that disclosure would be subject to the approval of the PM and chairman of 1MDB’s board of advisers, the witness said.

He added that KWAP initially wanted to only give a RM1 billion loan [due to the incomplete supporting documents] but when brought before its investment panel that met on July 5, 2011, it deferred its decision as its then CEO Datuk Azian Mohd Noh directed that a working paper be made for RM2 billion, which would be used as working capital and general investments for SRC.

Amirul said that on July 19, he got to know that the special investment panel had approved the RM2 billion loan and that it would be guaranteed by the Malaysian government. And on Aug 12, 2011, KWAP received a letter from SRC wanting the RM2 billion to be deposited directly into its account.

“On Aug 22, we (KWAP) received a letter from the finance ministry, giving a guarantee to SRC’s RM2 billion loan for 10 years,” Amirul said.

“With the letter, KWAP issued a letter of offer to SRC to give the RM2 billion loan and an agreement was signed on Aug 26, 2011, to give the facility. The then second finance minister Datuk Seri Ahmad Husni Hanadzlah signed a letter of guarantee to the Islamic term financing that was also dated Aug 26, 2011, where the government guaranteed the loan of RM2 billion to SRC.”

Another RM2 billion was given out in 2012, he said.

Najib’s wages and golden handshake

Civil servants attached to the Prime Minister’s Department and the Prime Minister’s Office also testified on Najib’s wages as the prime minister last Thursday.

Farah Nurdiana Azhar, 42, an administrative officer for parliamentary affairs, testified that Najib’s income as a member of parliament and allowances as head of Dewan Rakyat (being the PM) amounted to RM19,846.59.

Deputy chief accountant in the Prime Minister’s Department Zarina Yusuf, told the court that Najib’s last known salary for his service as a member of the administration (that is as PM and finance minister) in April 2018 was RM58,605.15.

Zarina, 49, who was the prosecution’s 27th witness, testified that Najib’s salary was deposited into his Affin Bank account and sometime in May 2018, after the 14th general election, the former PM received RM1.017 million.

Although Zarina told the court that she did not know what the RM1.017 million was for, it is understood that it was a golden handshake in lieu of his services as PM.

According to the testimonies of Farah and Zarina, Najib’s last drawn salary was RM78,451.74 for April 2018.

Amirul is expected to continue his testimony on May 6, when he is expected to describe the process through which KWAP gave SRC the RM2 billion loan in 2012.

The court has so far heard of two transfers of RM27 million and RM5 million made into Najib’s AmBank account on Dec 26, 2014, and another transfer of RM10 million made on Feb 10, 2015 — testimonies that will help the prosecution prove the three money laundering charges brought against Najib.

As the fasting month starts this week, court proceedings are expected to end by 3.30pm with a 30-minute lunch break for non-Muslims.

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