KUALA LUMPUR (April 9): Former 1Malaysia Development Bhd (1MDB) chief executive officer Datuk Shahrol Azral Ibrahim Halmi said that the Prime Minister Datuk Seri Najib Razak signed the document to approve the US$1 billion PetroSaudi joint venture deal.
 
“He [Prime Minister] signed the document, so that means he is aware,” Shahrol Azral told the PAC in response to a question by DAP Petaling Jaya Utara Tony Pua on whether the Prime Minister is briefed on the deal in the hansard.
 
Shahrol Azral also said that 1MDB had to obtain the shareholder’s approval for the deal after he was grilled by PKR Selayang MP William Leong on a proceeding on Nov 25, 2015.
 
Leong had asked him on whether the management briefed the MOF because they are ultimate shareholders, and whether the management briefed the Prime Minister because under Article 117 of the Memorandum & Articles (M&A) that he is the final person to make the decision.
 
The strategic investment fund was wholly-owned by the Minister of Finance Inc (MOF Inc) when it was set up in 2009.
 
Under the Article 117, any financial commitment, including investment, restructuring or matters related to the government guarantee for the interest of the company, the country, national security or any federal government policy must obtained written approval from the Prime Minister.
 
Najib who wore several hats at the same time, is the Finance Minister and also the chairman of the Advisory Board of 1MDB.  
 
Shahrol Azral said the legality is that the board of director is ultimately accountable. The board has already made the decision to agree with the joint venture agreement.
 
In terms of briefing the separate shareholders, it was the requirement under the Companies Act that the company needed to get the shareholder resolution to enter into the agreement and that was duly obtained, he added.
 
The joint venture agreement between PetroSaudi Holdings (Cayman) Ltd is the crux of the investigation of the PAC begun in March 2015. It was 1MDB’s first venture.
 
1MDB has signed a deal to participate in a joint venture with PetroSaudi (Cayman) to acquire 40% shares in the joint venture firm 1MDB-PatroSaudi Ltd with US$1 billion cash. Meanwhile, PetroSaudi (Cayman) will contribute asset no worth less than US$1.5 billion for the remaining 60% stake.
 
The JV was formed on Sept 18, 2009 -- the same day PetroSaudi (Cayman) was registered. Under the JV agreement, a clause says that 1MDB-PetroSaudi has received cash advances of US$700 million, one week after the JV was formed, from PetroSaudi (Cayman) on Sept 25. The JV needed to repay the US$700 million cash advances in full on Sept 30 -- barely five days after it received the sum.
 
The PAC findings have recommended that investigations to be carried out on Shahrol Azral and other management, without naming who the related parties are.  
 
When grilled by the PAC members, Shahrol Azral said that there was no independent valuation carried out to verify the value of the assets injected by PetroSaudi (Cayman). This is despite 1MBD’s board has ordered a due diligence to be carried out.
 
Shahrol Azral confirmed that a second independent valuation on the oil and gas assets injected by PetroSaudi (Cayman) was not carried out because there was a direction from the chairman of the Board of Advisors.
 
Pua has asked Shahrol Azral if the decision to not initiate a second independent valuation was based on the direction from the chairman of board of advisors, namely Najib, as stated in the meeting minutes of a board meeting on Nov 7, 2009.
 
Shahrol said, “If that is what the minutes says.”
 
The minute also stated that the direction from the chairman of the Board of Advisors after his meeting with non-executive directors of 1MDB on Oct 29,2009.
 
Shahrol Azral admitted that he had meeting with the Board of Advisor that was chaired by the Prime Minister. However, he did not recall exactly how many times. 

Earlier during the proceeding, he said the second valuation was not carried out because if the value was higher than the earlier value, 1MDB would have to top up the investment sum.
 
Shahrol Azral said that 1MDB did not carry out independent valuation on the before signing the agreement, because the valuation had been carried out by Daniel Ahn and Edward L. Morse, who have been working on the valuation before the joint venture agreement was signed.
 
It is worth noting that the joint venture was sealed on the Sept 28, 2009 but the valuation report dated Sept 29, a day after the signing of the JV.

The information was stated at the Parliament's hansard on the minutes of PAC proceedings in which several parties were called to testify. They include Shahrol Azral, Ministry of Finance officers, auditors Ernst & Young, KPMG, Deloitte Malaysia, and former 1MDB chairman Tan Sri Mohd Bakke Salleh. The minutes of PAC proceedings are now available on PAC’s official website.

The full transcript of the PAC hearing is available at  http://www.parlimen.gov.my/pac/hansard-pac-list.html