This article first appeared in The Edge Malaysia Weekly on April 26, 2021 - May 2, 2021

DATUK Seri Najib Razak deliberately set up the corporate structure of his “baby”, 1Malaysia Development Bhd (1MDB), and its former unit SRC International Sdn Bhd such that both companies were placed under his direct control and no one else’s. Even the second finance minister and finance ministry officers had no access to the companies, to the extent that three years after SRC became fully-owned by the Ministry of Finance, finance officers had no inkling of what its business was, the prosecution asserted last week.

Ad hoc prosecutor Datuk V Sithambaram submitted that Najib, as the then prime minister (and finance minister), effectively had sole authority over SRC since its inception and that the transfer of ownership from 1MDB to Minister of Finance (MoF) Inc in February 2012 cemented his supremacy as SRC was now placed legally under his purview and control.

“It is to be remembered that the appellant (Najib) did not subscribe or pay for any shares issued by SRC. Thus, he did not become its shareholder in the usual way. Instead, he only became a shareholder by virtue of his official and representative position in MoF. Put it in another way, the ultimate shareholder of the company is the Government of Malaysia, of which the appellant was the ultimate executive head.

“By virtue of his position as the finance minister, he represented MoF Inc as its corporate representative in SRC. The appellant was representing MoF in SRC and had a legal duty to protect and preserve the interests of MoF in SRC. Instead, he was motivated by ensuring that monies totalling RM42 million, belonging to SRC, were credited into his personal accounts, which he then converted for his own use,” Sithambaram said in his rebuttal.

During submissions before the Court of Appeal last week, the prosecutor addressed the three charges of criminal breach of trust against Najib. To prove Najib guilty of the CBT charges, Sithambaram has to convince the judges that the former premier was entrusted with dominion over the funds in SRC but that he had betrayed the trust for his own gratification.

The transfer of the ownership of SRC was put into motion following a memorandum draft signed by Najib.

Prior to that, Najib had received a letter from SRC signed by the company’s ex-managing director and CEO Nik Faisal Ariff Kamil, and addressed directly to him as the then prime minister and finance minister, which stated SRC’s intention to have its ownership changed from a fully owned subsidiary of 1MDB to becoming a company fully owned by MoF Inc instead.

Already, this was noted to be a peculiarity, according to former Treasury deputy secretary-general (policy) Datuk Mat Noor Nawi, the prosecution’s 44th witness, who viewed the request as a “top-down decision making process”.

He testified at the High Court in 2019 that when companies make an application to MoF, the proposal will normally be processed and escalated to the top management, including to the Treasury secretary general, second finance minister and then only the finance minister — a process he described as a “bottom-up approach”.

Mat Noor further testified that in order to set in motion the change of ownership process, he was required to prepare a written proposal paper for Najib’s approval. He related to the High Court how he met Najib at the Subang Royal Malaysian Air Force (RMAF) airbase, and to his surprise, Najib immediately signed the draft proposal paper, which was not even on a formal letterhead, on the hood of the car that ferried Najib.

“This showed that the appellant was party to the decision to make SRC an MoF Inc company. It seems the appellant was in a particular rush to ensure that SRC becomes an MoF Inc company under his purview and control,” Sithambaram argued.

Sithambaram also brought up the testimony of former Treasury deputy secretary-general (investment) Datuk Fauziah Yaacob who told the court that 1MDB and SRC were the only two companies in which MoF did not have any board representatives. In fact, Sithambaram pointed out that the memorandum and articles of association (M&A) of SRC specifically did not allow for any government personnel to be a board member.

In normal circumstances, Fauziah said that MoF officers were usually placed on the board of directors (BOD) of all MoF Inc companies in order to advise and determine the direction of the company is in compliance with the rules and regulations of the ministry.

However, no supervision by the ministry was possible even though SRC was an MoF Inc company. Despite requests and efforts taken by the officers to acquire information on the status of SRC, none was provided, Sithambaram said.

In fact, three years after the transfer of ownership to MoF Inc, the ministry still seemed to have had no knowledge of what was happening in SRC, although it was tasked with the supervision of its own company.

In 2015, a request was made to appoint a representative of MoF on the SRC BOD, and was approved by the then second finance minister Datuk Seri Husni Hanadzlah. However, the aforementioned clause in SRC’s M&A prevented a government servant from sitting on the BOD.

“The only way to do so was by amending the M&A, which is allowed under Article 116. However, only the appellant as the PM could cause such an amendment. This was not done for the obvious reason that the appellant wanted no one else other than himself to be in control of SRC,” Sithambaram contended.

In his testimony, Husni had asserted that Najib was an “autocratic person” on matters concerning 1MDB and SRC, and that he had directed the two companies to be “off limits” to Husni, even though companies under MoF Inc were supposed to be under the purview of the second finance minister.

The prosecution last week wrapped up its case at the appellate court against Najib’s appeal over his conviction on all seven charges related to RM42 million of SRC funds.

The appeal is before a three-member bench consisting of Justices Datuk Abdul Karim Abdul Jalil, Datuk Has Zanah Mehat and Datuk Vazeer Alam Mydin Meera. It will continue for two more days next week — April 27 and 28 — during which the defence will reply to the prosecution’s case.

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