Ex-1MDB CEO says Jho Low’s name kept under wraps to protect Najib, denies plot for kickbacks from Goldman Sachs

KUALA LUMPUR, July 15 — The involvement of businessman Low Taek Jho — who was said to be an adviser to former prime minister Datuk Seri Najib Razak — in 1Malaysia Development Berhad (1MDB) affairs was kept off the radar in order to protect the then prime minister, the court heard today.

1MDB former CEO Datuk Shahrol Azral Ibrahim Halmi, who was testifying as the ninth prosecution witness in Najib’s power abuse and money-laundering trial, confirmed that Low was actually involved in 1MDB’s 2012 plans to acquire power plant operator Tanjong Energy Holdings Sdn Bhd for RM10.6 billion.

While confirming that Low was the one who had proposed investment bank Goldman Sachs to act as the financial adviser for 1MDB’s RM10.6 billion bid, Shahrol denied omitting Low’s name in 1MDB board minutes as a means to receive kickbacks from Goldman Sachs if the deal went through.

In February 2012, Goldman Sachs was appointed to be financial adviser to 1MDB for the deal, with lucrative fees to be paid to Goldman Sachs in the form of 0.5 per cent of the bid price if the acquisition succeeds.

Documents shown in court today showed that Shahrol had on February 7, 2012 indicated his acknowledgment on an appointment letter for Goldman Sachs to act as 1MDB’s financial adviser for the Tanjong Energy acquisition bid, a day before the 1MDB board meeting where they were informed of this and subsequently gave their approval for the appointment.

Today, Najib’s defence lawyer Wan Aizuddin Wan Mohammed quizzed Shahrol regarding Low’s role in having Goldman Sachs appointed in February 2012 as the financial adviser for the acquisition bid.

Asked if Low had proposed for Goldman Sachs to be bookrunner, underwriter and arranger for 1MDB’s funding process for the acquisition on top of being its financial adviser, Shahrol indicated this to be the case.

“If I recall, Jho Low basically told me why don’t we get Goldman to do everything relating to the funding,” Shahrol replied.

Asked if Low had behaved like a broker for Goldman Sachs by proposing it to be 1MDB’s financial adviser, Shahrol said he did not hold this view then.

“No, I didn’t see it at that time, I see it more that he was in touch with all key stakeholders including Datuk Seri Najib, and Goldman has always been in the picture as far as TIA (Terengganu Investment Authority) and 1MDB was concerned, so I didn’t see Jho Low as a broker but more of a facilitator between all stakeholders,” Shahrol replied, alluding to Najib’s role as 1MDB shareholder on behalf of the Finance Ministry’s MOF Inc via his position as finance minister.

Agreeing that he had not informed the 1MDB board of directors during the February 8, 2012 meeting that Goldman Sachs’ appointment was at Low’s suggestion, Shahrol explained: “Because the convention at that time was to keep Jho Low’s name out of the board meeting.”

When asked why there was such a convention and why he had followed it, Shahrol said: “Because since the very beginning, Jho has informed me his involvement must be kept off the radar in order to protect Datuk Seri Najib.”

Wan Aizuddin however suggested “I put it to you that the reason why you have kept Jho Low’s name out from the knowledge of the board of directors was because you were colluding with him in order to secure this remuneration, in the event this acquisition is successfully undertaken by Goldman Sachs.”

Shahrol then disagreed to the suggestion.

Earlier, Wan Aizuddin had asked Shahrol about the February 7, 2012 appointment letter, where 1MDB agreed to pay Goldman Sachs a fee of 0.5 per cent of the Tanjong Energy acquisition price if the deal succeeds.

Asked who had suggested the 0.5 per cent for Goldman Sachs’ fees, Shahrol said this arose from negotiations involving Goldman Sachs’ official Tim Leissner and 1MDB officials Vincent Koh, Jasmine Loo, as well as with Low’s involvement in such talks.

Shahrol explained that he had told the 1MDB board that he had signed on 1MDB’s appointment letter of Goldman Sachs before the February 8, 2012 1MDB board meeting, in order for Goldman Sachs to attend the meeting and make presentations in the capacity as financial adviser.

Shahrol disagreed that Goldman Sachs representatives had in the meeting proposed the RM10.6 billion price for 1MDB’s proposed Tanjong Energy acquisition as he said the figure was based on presentations by other technical and tax advisers during the February 8, 2012 board meeting.

Wan Aizuddin suggested that the reason why Goldman Sachs had valued Tanjong Energy’s assets at RM10.6 billion was because Goldman Sachs’ fee would be higher if it overvalued the asset, but Shahrol said: “I have no comment on that, I don’t know why Goldman Sachs valued at RM10.6 billion other than the fact it was based on valuation of other technical and tax advisers.”

Shahrol agreed that the fees that Goldman Sachs would receive from 1MDB would hinge on how much 1MDB offered to buy Tanjong Energy, saying: “I agree the higher the purchase price, the higher their fees would be.”

Wan Aizuddin: This might be a bit controversial, I put it to you that you had colluded with Goldman Sachs in regards to pricing of the bid price, so Goldman Sachs would receive high fees and you would receive kickbacks in return from Goldman Sachs.

Shahrol: Absolutely disagree.

Shahrol further disagreed that the purported kickback scheme was why he had approved 1MDB’s engagement of Goldman Sachs before receiving the 1MDB board’s approval for the appointment.

Under further cross-examination by Wan Aizuddin, Shahrol disagreed that he had colluded with Low to make the deal happen after being purportedly promised remuneration by the latter.

During the February 8, 2012 1MDB board meeting, Shahrol was recorded as having informed the board that the deadline to submit the bid for the Tanjong Energy acquisition was due two days later on February 10.

Shahrol however disagreed that no prior valuation and due diligence exercise had been carried on the proposed purchase of Tanjong Energy at that time, asserting that 1MDB had worked through December and January to conduct a due diligence on the company based on publicly available information and that Goldman Sachs had also done prior due diligence work even before being formally appointed in February as 1MDB’s financial adviser for the deal.

Disagreeing that the publicly available information on the power plant assets were outdated, Shahrol said further due diligence was to be carried out by 1MDB once it had access to additional data by Tanjong Energy’s seller Usaha Tegas Sdn Bhd and once it entered into negotiations with Usaha Tegas.

Shahrol confirmed that he had agreed with the Goldman Sachs’ proposal of a RM10.6 billion offer despite not knowing the reserve price or the lowest price that Usaha Tegas would be willing to accept, explaining that 1MDB had relied on Goldman Sachs officials who had a previous close relationship with the seller with alleged back channels to find out what price the seller would be interested in.

Asked if there was a conflict of interest, Shahrol however said that Goldman Sachs’ Tim Leissner did not disclose any ongoing material relationship with the seller at the time when he was 1MDB’s financial adviser, further saying that the previous relationship was partly why he thought Leissner would be suited for the Tanjong Energy deal as he would be “coming from a position of strength” and would be able to communicate more clearly.

Shahrol also said he had at that time trusted in the “professionalism” of Leissner and Goldman Sachs, declining to comment on Wan Aizuddin’s suggestion that Goldman Sachs had proposed a RM10.6 billion valuation for Tanjong Energy due to the investment bank’s purported close ties to the company’s owner Ananda Krishnan and saying that he had accepted the recommended amount in good faith based on the valuation methods presented by Goldman Sachs.

Shahrol disagreed that he had appointed Goldman Sachs while knowing their quoted fees of a 0.5 per cent cut of the proposed RM10.6 billion deal or what would amount to be RM53 million was on the “high side”.

Also, in court today, Shahrol was shown a February 9, 2012 1MDB shareholders’ resolution which Najib had as finance minister signed on behalf of MOF Inc to approve 1MDB to make the RM10.6 billion bid for Tanjong Energy.

The final price that 1MDB eventually had to pay for Tanjong Energy later became RM8.5 billion after deducting RM2.1 billion of the latter’s liabilities.

1MDB then funded the RM8.5 billion purchase by issuing Shariah-compliant bonds or sukuk for US$1.75 billion, as well as by taking on RM6.17 billion worth of loans from Maybank and RHB.

1MDB’s US$1.75 billion bonds were guaranteed by Abu Dhabi sovereign wealth fund International Petroleum Investment Company (IPIC) in exchange for IPIC subsidiary Aabar getting the option to take up a 49 per cent stake of Tanjong Energy’s new owner 1MDB Energy Sdn Bhd, with Shahrol disagreeing that he knew that the IPIC guarantee was secured via purported bribes by Goldman Sachs to IPIC and Aabar officials.

Shahrol confirmed that Low was “deeply involved” with Leissner and the Goldman Sachs team in 1MDB’s financing stage for the Tanjong Energy purchase, saying that Low had brought in IPIC as a strategic partner and subsequently provided him with detailed instructions and updates on financing matters, including on the securing of the IPIC guarantee. Shahrol agreed in hindsight that Low was close to Leissner, and that the latter duo were close friends who had known each other since 1MDB’s predecessor TIA was started.

Among other things, Shahrol today disagreed that he was part of a scheme with Low, Goldman Sachs’ Leissner and Roger Ng, 1MDB officials Loo and Terence Geh, IPIC managing director Khadem Al-Qubaisi, IPIC subsidiary Aabar Investments PJS CEO Mohamed Badawy Al-Husseiny to purportedly “embezzle millions of dollars from the proceeds” of the US$1.75 billion bonds.

Asked by Wan Aizuddin, Shahrol said he had not known at that time in 2012 that Goldman Sachs’ employees such as Leissner and Ng had misled the 1MDB board on matters relating to the bonds.

But he agreed in hindsight that Goldman Sachs had misled the board and further agreed that the investment bank had breached its fiduciary duty to 1MDB by doing so.

The trial before High Court judge Collin Lawrence Sequerah resumes tomorrow morning.

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