Najib’s SRC trial: KWAP’s initial RM2 bil loan approved via reply forms

This article first appeared in The Edge Malaysia Weekly, on May 13, 2019 - May 19, 2019.

Najib (left) and former Treasury secretary-general Tan Sri Mohd Irwan Serigar Abdullah sharing the dock last week for case mention to vacate the International Petroleum Investment Co case and make way for the SRC trial. Illustration by Nurul Aida Mohd Noor/The Edge

-A +A

DESPITE its earlier reservations about approving an initial RM2 billion loan to SRC International Sdn Bhd in 2011, the seven-member investment panel of Kumpulan Wang Persaraan (Diperbadankan) (KWAP) later voted to greenlight it. This was done through reply forms that were attached to an investment circular paper stating SRC’s request for the funds to be disbursed directly to it instead of to 1Malaysia Development Bhd (1MDB) or the government.

This was disclosed by the 35th prosecution witness, KWAP vice-president of legal and secretarial affairs Azlida Mazni Arshad in the SRC trial of former prime minister Datuk Seri Najib Razak at the Kuala Lumpur High Court last Thursday.

Responding to questions from deputy public prosecutor Datuk Ishak Mohd Yusoff, Azlida named the six who gave the approval as the then KWAP chairman Tan Sri Wan Abdul Aziz Wan Abdullah, Bank Negara Malaysia representative Che Zakiah Che Din, Ministry of Finance representative Datuk Nozirah Bahari and representatives from the private sector Datuk Seri (now Tan Sri) Abdul Wahid Omar, Datuk Mohammed Azlan Hashim and Cheah Tek Kuang.

She said on July 19, the panel held a special investment panel meeting. “At the special investment panel meeting, chaired by Wan Abdul Aziz, [the then KWAP] CEO [Datuk Azian Mohd Noh] informed the members that [the then] prime minister [Datuk Seri Najib Razak] had told Wan Abdul Aziz to expedite SRC’s first loan application and that RM2 billion was sufficient.”

Azlida identified the minutes of the meeting, which was then marked as evidence.

The RM2 billion was part of a RM3.95 billion loan, for which SRC had requested Najib’s endorsement in a letter.

 

Wanted to impose stricter requirements

Azlida said after viewing the proposal or working paper from KWAP’s Fixed Income Department, the panel initially agreed on the need for tighter requirements, including for SRC to obtain a government guarantee, a guarantee from 1MDB and a letter of comfort/awareness from the Ministry of Finance (MoF).

“After the proposal was tabled, the panel approved the RM2 billion loan but had reservations as it agreed that it was too huge a loan to be given to a RM2 company (SRC).

“The panel offered a RM1 billion loan [instead],” she said, adding that it was only willing to approve the RM2 billion loan, provided that it was given directly to 1MDB — which was placed under Minister of Finance Inc — rather than SRC.

She said the panel also questioned SRC’s management capability to invest in natural resources as it would require specialist employees. It also felt that the loan should not be given out in a lump sum.

Azlida said after the investment panel meeting, KWAP agreed to either approve the RM2 billion loan based on a government guarantee or to give the money to the government, which would then disburse it to 1MDB.

She said on Aug 12, 2011, the then SRC CEO Nik Faisal Ariff Kamil wrote to Azian requesting the sum to be paid directly to SRC.

Given that KWAP needed to ensure the funds were in hand because the investment panel meeting was not scheduled to be held then, the Fixed Income Department was asked to write an investment panel circular paper — No 19/2011. The paper, together with reply forms, was sent to the investment panel members requesting them to state whether they were in favour of approving the loan. The decision to give the loan would be dependent on the number of “yes” votes received, she said.

“I received all six reply forms ... some were faxed to us. All six of them gave the same reply, that is, to approve the RM2 billion loan,” she said, adding an offer letter was issued on Aug 23, 2011, and the agreement signed on Aug 26.

Azlida said on March 11, 2012, the Fixed Income Department processed SRC’s application for the second RM2 billion loan, as about a month earlier KWAP had agreed to SRC’s purported change of ownership from 1MDB to the Ministry of Finance Inc. (KWAP’s approval for the ownership change was required under the terms of the first RM2 billion loan agreement.)

“On March 20, 2012, the investment panel, chaired by Wan Abdul Aziz, agreed to give the additional RM2 billion loan. It was to be used for general investments and as working capital. The letter of guarantee, dated March 27, 2012, for the loan was signed by Najib,” said Azlida.

She also said KWAP’s loans to SRC could only be used for the stipulated purposes and that if it was found that this was not complied with, KWAP was entitled to terminate the agreement and recall the loans with interest.

She added that the two RM2 billion loans were among the biggest given by KWAP during her tenure with the fund.

She told the court that her efforts to gather the original copies of five documents related to the loans had not been successful. “I have searched the safe at the Legal and Secretarial Department, and checked with other departments at KWAP for the documents. After exhausting all possible means to recover them, I have to say that they are lost.”

The documents are Investment Panel Papers No 8/6/2011, 13/2/2012, 11/3/2012 and 19/2011, and Special Investment Panel Paper No 1/1/2011.

Investment Panel Paper No 8/6/2011, which was prepared by KWAP’s Fixed Income Department, details SRC’s application for a RM3.95 billion loan and states that the department recommended to cap KWAP’s loan exposure to the company at RM1 billion. This paper was presented to the investment panel on July 5, 2011.

Special Investment Panel Paper No 1/1/2011 was also prepared by the Fixed Income Department. It details the first RM2 billion loan to SRC with stricter conditions, including obtaining a government guarantee, 1MDB corporate guarantee and letter of comfort/awareness from MoF.

Investment Panel Paper No 13/2/2012 states SRC’s request to change the company’s ownership from 1MDB to MoF Inc.

Investment Panel Paper No 11/3/2012 details SRC’s application for an additional RM2 billion loan.

Investment Panel Paper No 19/2011 states Nik Faisal’s request to disburse the first RM2 billion loan directly to SRC, instead of 1MDB or the government.

Prior to Azlida’s testimony, the then assistant vice-president of KWAP’s Fixed Income Department, Amirul Imran Ahmat, who prepared the investment panel papers, said he had to amend the dates on some of the documents because his department was pressured to expedite the loan applications.

He testified that SRC did not provide sufficient documents to support the loan applications and that he was of the view that they should not be approved.

 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.