Poser over SRC’s RM1.8 billion that Najib directed to be transferred abroad

This article first appeared in The Edge Malaysia Weekly, on June 17, 2019 - June 23, 2019.

Najib was also adviser emeritus to SRC. Photo by Patrick Goh/The Edge

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FORMER prime minister Datuk Seri Najib Razak had instructed the transfer of RM1.8 billion — part of the first RM2 billion Kumpulan Wang Persaraan (Diperbadankan) (KWAP) loan obtained by SRC International Sdn Bhd in August 2011 — out of the country, it was revealed in the Kuala Lumpur High Court last week.

This raises the question of whether the money channelled to banks in Switzerland and Hong Kong remains intact as the testimonies over the week have revealed nothing conclusive.

During examination-in-chief by deputy public prosecutor Datuk Ishak Mohd Yusoff, former SRC chairman Tan Sri Ismee Ismail agreed that RM1.5 billion had been transferred to Switzerland’s BSI Bank, RM300 million sent to Bank Julius Baer Co Ltd in Hong Kong and RM200 million retained for SRC’s operational expenses.

Ismee, 54, the first witness from SRC to testify at the trial, revealed that the transfer was ordered by Najib through former SRC CEO Nik Faisal Ariff Kamil in a meeting on Sept 7, 2011.

Subsequently, Nik Faisal prepared the minutes of his meeting with Najib, which was brought up during a SRC board meeting on Sept 13, 2011. Ismee testified that he obtained the minutes of Nik Faisal’s meeting with Najib after or during the board meeting.

However, the authenticity of the minutes of the Sept 7, 2011, meeting was disputed by Najib’s defence team, even though it bears the former leader’s signature. Trial judge Mohd Nazlan Mohd Ghazali ordered that the minutes be marked as an ID (identification) and not as part of the prosecution’s evidence.

Ismee, the 39th witness, also told the court that the SRC board had no reason to suspect that anything was amiss in the transfer order and had subsequently approved it.

The court heard that Najib was also adviser 

emeritus at SRC, a subsidiary of 1Malaysia Development Bhd (1MDB). After SRC took the first RM2 billion loan from KWAP, it was made a subsidiary of Minister of Finance Inc, an entity also helmed by Najib as finance minister.

Secret bank account

Ismee seemed surprised by the existence of an AmIslamic Bank account (211-202-2009736) belonging to SRC that was opened on Jan 7, 2011, by former 1MDB CEO Datuk Shahrol Azral Ibrahim Halimi.

When asked by Najib’s lawyer Harvinderjit Singh, Ismee agreed that neither Shahrol Azral, who was also an SRC board member, nor Nik Faisal had informed the board about the account.

He also expressed surprise that KWAP’s first RM2 billion loan had been deposited into the account, along with a RM20 million launching grant for SRC and not into the designated SRC account (211-202-2010650) that was agreed to by the board.

In addition, Ismee appeared taken aback by the fact that the bulk of the RM2 billion loan had been transferred out before the board had been informed about it and deposited into the account ending with 736 or that there had been a board meeting on Sept 13, 2011, to discuss Najib’s directive.

He also agreed that the SRC board had not been informed that the fund had been transferred out earlier, as had been the RM20 million initial grant.

Board travelled to Switzerland to check on funds

When asked by Ishak whether the board had checked whether the money overseas was intact, Ismee said the entire board of directors had travelled to Switzerland in 2013. It was a trip initiated by the SRC management for the directors “to take comfort” that the funds deposited into the Swiss bank were safe.

Ismee said he felt comfortable after meeting a “very senior” BSI Bank personnel, whose name he could not recall, but conceded that neither Nik Faisal nor the BSI Bank official had shown the board of directors that the funds deposited remained intact.

On June 14 — Ismee’s fifth straight day in the witness stand — Harvinderjit raised the issue of the RM1.8 billion again. Ismee told the court, “The board had requested monthly management accounts to be prepared to keep the directors updated, but the management did not comply with it. There was some (financial) reporting format, but we keep (sic) telling them (management) this was not what we wanted, we want (sic) more.”

Even these financial updates were not done on a monthly basis, he added, but did not explain why the board had not asserted its authority and insisted that they be made.



Summary of witness statement

38 Datuk Azian Mohd Noh, 66

The former CEO of Kumpulan Wang Persaraan (Diperbadankan) (KWAP) intimated that she and the investment board had been influenced by the then prime minister Datuk Seri Najib Razak in approving loans of unprecedented size to SRC International Sdn Bhd because he was their “ultimate boss”.

The prosecution’s 38th witness testified that the note penned by Najib on SRC’s RM3.95 billion loan application letter dated June 3, 2011, in support of the application, did not amount to legal compulsion.

However, she could not say that there was no influence over KWAP’s decision to grant the loans to SRC as Najib still wielded a certain degree of influence, given that he was the prime minister and finance minister, whose ministry owned SRC. Moreover, KWAP comes under the Ministry of Finance.

“The letter came from my ultimate boss (Najib) and I cannot deny that there wasn’t any influence,” she said during re-examination by deputy public prosecutor Datuk Ishak Mohd Yusoff.

Asked whether she had allowed herself to make a wrong decision based on the hierarchical relationship with her “ultimate boss”, Azian insisted that notwithstanding any influence she received, she would not do something that would breach any law.

But despite the application not meeting the requirement of KWAP’s investment policy or that KWAP was not obligated or requested to approve the loan, Azian, in her previous testimony, said the retirement fund still approved the RM4 billion loan to SRC — a RM2 start-up company linked to 1MDB — in two tranches in August 2011 and March 2012.

When the loan was given out, SRC had made an offer to visit the sites of its purported projects and to monitor the usage of the loan. However, Azian said subsequently, there were no such offers for site visits as none was organised by SRC.



Board toed the line as Article 117 gave Najib control over company

Former prime minister Datuk Seri Najib Razak became adviser emeritus of SRC International Sdn Bhd and gained control of the company after an amendment was made to its memorandum and articles of association (MAA).

Former SRC chairman Tan Sri Ismee Ismail said Article 117 was inserted into the MAA after a board meeting on April 23, 2012.

The amendment was made following a letter by Najib to the board on the matter. The article stipulates that “the prime minister shall be appointed and hold office as adviser emeritus to the company. The adviser emeritus shall advise the board on material matters and matters of strategic interest to Malaysia, and the board shall give due consideration to and implement any advice of the adviser emeritus in the best interest of the company”.

Asked by deputy public prosecutor Datuk Ishak Mohd Yusoff to explain the implication of the article, Ismee replied, “The implication to SRC is that the views of the adviser emeritus would have to be taken into account for all material and strategic issues concerning the company.

“At the time, the adviser emeritus was Najib.”

Ishak: Does the amendment to the MAA show that the adviser emeritus has control over the company?

Ismee: Yes, he has control.

Ismee indicated that decisions by Najib were brought to the SRC board by Nik Faisal Ariff Kamil, who was the company’s CEO.

During cross-examination by defence counsel Harvinderjit Singh, Ismee maintained that Najib had control over the company and that Nik Faisal, who had access to the then premier, was “the link” between the board and Najib.

He disagreed with Harvinderjit that it ought to have been the board to have total control of the company and not Najib. “I followed the instructions of the prime minister, who is also the adviser emeritus [of SRC] and finance minister, who owns Minister of Finance Inc,” said Ismee, formerly Lembaga Tabung Haji chief executive officer.

He had resigned from SRC on Aug 15, 2014, after leading the board for three years, because of governance issues pertaining to the company’s management, particularly the manner in which the accounts and finances were managed.

Ismee testified that he resigned from SRC after reading a report by The Edge that the company had yet to submit its 2013 audited accounts, even though the company had earlier claimed, through Nik Faisal, that the audited accounts had been submitted.

Ismee is the 39th prosecution witness in the trial of Najib, who is accused of seven counts of criminal breach of trust, abuse of power and money laundering involving RM42 million of SRC funds.



Jho Low’s aunt was SRC company secretary

Goh Gaik Kim, the former company secretary of SRC International Sdn Bhd, is related to fugitive businessman Low Taek Jho, better known as Jho Low.

This was revealed in the Kuala Lumpur High Court in the testimony of former SRC chairman Tan Sri Ismee Ismail last week in the trial of former prime minister Datuk Seri Najib Razak in connection with the alleged misappropriation of RM42 million of SRC’s funds.

Najib’s defence was attempting to show the web of influence Low may have, not only in SRC but also in 1Malaysia Development Bhd (1MDB), as the businessman might have placed people loyal to him in important positions in the two companies.

Defence counsel Harvinderjit Singh asked Ismee about Gaik Kim’s relationship with Low, she being the younger sister of his mother, Goh Gaik Ewe.

Ismee, the prosecution’s witness who was SRC chairman from Aug 1, 2011, to Aug 15, 2014, replied, “I was not aware of Gaik Kim’s relationship with Gaik Ewe back then.”

Gaik Kim was the company secretary of 1MDB from March 31, 2011, and when SRC became a subsidiary of 1MDB in August 2011, she was also made its company secretary until she was replaced by Lim Poh Seng.

Gaik Kim’s name cropped up again last Friday when Harvinderjit questioned Ismee about a letter dated October 2011. Ismee was asked whether it was unusual for Gaik Kim to issue a letter concerning SRC matters using 1MDB’s letterhead.

After he said he was not sure whether such a practice was unusual, he was asked whether the SRC board would reject such a letter. Ismee replied that the board, which he chaired, might have overlooked such details.

Lim, who replaced Gaik Kim, was/is also company secretary to several of Low’s firms, including Javace Sdn Bhd, Majestic Masterpiece Sdn Bhd and The Wynton Private Equity Group (M) Sdn Bhd. Although the details regarding Lim were not revealed during the trial, The Edge Financial Daily had reported about them on July 22, 2015.

Gaik Ewe and Low are reportedly overseas. Both are sought by the Malaysian authorities in relation to an investigation into billions of ringgit missing from 1MDB.

Low did not hold any official position in 1MDB or SRC, but Malaysia and the US have accused him of being the mastermind behind the illegal transfers of funds from the sovereign wealth fund to several individuals, including himself, as well as Najib. Malaysia  is also seeking the forfeiture of assets and cash seized from various individuals, including Low, Gaik Ewe, Najib, his wife Datin Seri Rosmah Mansor, the couple’s two children and Rosmah’s son, Riza Aziz.

Some of the funds — RM1.3 billion — were reported to have been returned to Malaysia from abroad.

Ismee is the 39th prosecution witness to testify in the trial, which was into its fourth week.

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