Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on September 26, 2019

KUALA LUMPUR: 1Malaysia Development Bhd (1MDB) was exempted from an audit by the National Audit Department as it would have revealed misdeeds by businessman Low Taek Jho (Jho Low) in relation to the issuance of RM5 billion Islamic Medium Term Notes (IMTNs) in 2009, said a witness in the 1MDB-Tanore trial.

Former Terengganu Investment Authority Bhd (TIA) and 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi said the audit would have revealed that the TIA management had pushed through with the bond issuance despite protests from the Terengganu royalty and that US$700 million out of US$1 billion earmarked for the 1MDB-PetroSaudi joint venture was chanelled to a Jho Low-controlled firm.

During questioning by senior Deputy Public Prosecutor (DPP)  Datuk Seri Gopal Sri Ram in the 1MDB-Tanore trial yesterday, the witness said the management of the company was notified that the Minister of Finance Inc (MoF Inc) would like to perform an audit or due diligence of 1MDB, due to the transfer of shares from Terengganu to the federal government.

“As per the normal course of events, I updated Jho [Low] and he reverted back to me saying that an audit or due diligence by the National Audit Department could present a political risk to [former premier and finance minister] Datuk Seri Najib [Razak].

“I was advised on what to do next by Datuk Seri Najib, via Jho [Low],” said Shahrol.

The on-the-run financier then told the witness that there was no need for a due diligence or audit exercise, as 1MDB had already appointed audit firm Ernst & Young and that the reports would be submitted to MoF Inc once they are ready.

This led to a letter being issued by 1MDB dated Dec 11, 2009 to Najib.

The letter entailed the updates and approvals for 1MDB and was copied to former auditor-general Tan Sri Ambrin Buang, former treasury secretary-general Tan Sri Dr Wan Abdul Aziz Wan Abdullah and TIA chairman Tan Sri Lodin Wok Kamaruddin.

In the letter, TIA referred to the decision by 1MDB’s board of advisers that TIA’s takeover was to be done on an “as is, where is” basis, and therefore there was no need for an audit and due diligence by the National Audit Department.

“Jho Low had asked me to write the letter to Datuk Seri Najib, with the reason being that it was Datuk Seri Najib’s request to ensure that there was no need to audit 1MDB. I was not involved in the initial discussions regarding this matter but I believe that the contents of the letter [were] discussed between Jho Low and Datuk Seri Najib,” said Shahrol.

He said the contents of the letter were likely discussed between Jho Low and Najib beforehand, based on a talking points document which was emailed to him by the fugitive businessman.

 

‘Takeover of TIA orchestrated by Jho Low, approved by Najib’

“Based on what I know now, I am sure that the takeover of TIA by 1MDB on an ‘as is where is’ basis was planned by Jho Low with the blessing of Datuk Seri Najib to hide the misdeeds during the issuance of the RM5 billion IMTN bonds with a government guarantee in May 2009,” Shahrol said.

On Oct 5, 2010, the National Audit Department requested 1MDB’s audit reports, along with supporting documents, although 1MDB said no supporting documents were needed, as agreed upon by Najib.

“What would an audit have revealed at that point in time?” asked Sri Ram.

“The audit would have revealed that we had invested US$1 billion into a joint venture with PSI (PetroSaudi International Ltd) and that US$300 million went into the joint-venture company and US$700 million went to another company, which was purportedly at the time owned by PSI,” said Shahrol.

“Which company was this?” asked the senior DPP.

“Good Star Ltd,” responded the witness.

It was reported in 2016 that the sole beneficial owner of Good Star was identified as Jho Low.

 

Conflict between Terengganu, federal govt over bond issuance

Besides that, the audit would also have exposed the conflict between Terengganu and the federal government over TIA, which came to a head when the team at TIA also bulldozed through the issuance of the IMTNs, despite the opposition by the state’s royalty.

On Tuesday, Shahrol told the court of his meeting with Tuanku Mizan Zainal Abidin and Tengku Datuk Rahimah Sultan Mahmud, during which the witness was told to sign a director’s resolution for the suspension of the IMTN issuance.

He said he was not aware of the reason behind Tengku Rahimah’s intention to suspend the issuance of the bonds, adding that Tuanku Mizan seemed angry and mentioned an “unsavoury character”, although Shahrol was not sure who he was referring to.

“[Najib] said something along the lines of ‘you go ahead, I will talk to Tuanku’. I saw that as an order and a mandate from the prime minister and finance minister to carry on with the IMTNs because he was the minister that was responsible for the government guarantee,” said Shahrol.

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