Investigator: Terengganu Sultan wanted RM5b bond halted over unfavourable terms; Najib instructed TIA officials to carry on

KUALA LUMPUR, Jan 2 — The Terengganu Sultan had wanted the state’s Terengganu Investment Authority (TIA) — which would later be taken over by the federal government and renamed 1Malaysia Development Berhad (1MDB) — to stop the process to issue a RM5 billion Islamic bond in 2009, but then prime minister and then finance minister Datuk Seri Najib Razak had allegedly instructed for the bond issuance to continue, the High Court heard today.

Malaysian Anti-Corruption Commission’s (MACC) Senior Superintendent Nur Aida Arifin, who is the investigating officer on Najib’s alleged power of abuse offences over RM2.2 billion of misappropriated 1MDB funds, said this while testifying as the 49th prosecution witness in his trial.

In outlining the findings of her investigation on alleged 1MDB funds that entered Najib’s private bank accounts, Nur Aida traced the events before and after TIA was formed, including how Low Taek Jho now a Malaysian fugitive better known as Jho Low — had presented the idea of having Terengganu set up a sovereign wealth fund to Terengganu ruler Sultan Mizan Zainal Abidin’s sister, brother-in-law and subsequently the ruler himself in late 2008.

Among other events, Nur Aida said a hi-tea was held on December 10, 2008, at the Istana Terengganu at Jalan Kia Peng in Kuala Lumpur, which was attended by individuals such as the Terengganu ruler, the Terengganu menteri besar, Low and Najib who was then the deputy prime minister and finance minister.

Following this event where Low presented the proposal on TIA’s formation, TIA was formed on February 27, 2009, and the company then appointed various advisers to raise funds by issuing a RM5 billion Islamic bond through Islamic medium term notes (IMTN).

Nur Aida said TIA’s chief executive officer Datuk Shahrol Azral Ibrahim Halmi on March 27, 2009, then sent a letter to then finance minister Najib to seek a 30-year government guarantee for the RM5 billion bond, with the Cabinet on April 1, 2009, then agreeing to finance minister Najib’s memorandum for the Malaysian government to guarantee TIA”s borrowings to up to RM5 billion.

Najib had been finance minister since September 17, 2008, and became prime minister on April 3, 2009, holding both positions until 2018.

Nur Aida said TIA had on April 8, 2009, appointed both Low and the Terengganu ruler’s brother-in-law Datuk Abdul Aziz Mohd Akhir as TIA’s advisers.

She added that the Terengganu state government on May 13, 2009, issued a letter of comfort to match the federal government’s guarantee of TIA’s RM5 billion bond.

She said the Malaysian government on May 15, 2009 issued a government guarantee for the RM5 billion bond, and that TIA on the same day signed an agreement for the RM5 billion bond with AmInvestment Bank.

She said TIA then appointed law firm Kadir Andri & Partners to evaluate the Islamic bond agreement, with TIA discovering that some of the clauses in the trust deed agreement were “not favouring” TIA as the RM5 billion bond issuer.

“This situation would make the Terengganu state government responsible for the obligations for payments for the IMTN bond that will be issued by TIA, and the Terengganu state government would be fully responsible for repaying the bond if TIA fails to pay the IMTN bond issued,” she said of her findings.

She added that the Terengganu sultan then ordered the Terengganu menteri besar to prepare a directors’ resolution to suspend the RM5 billion bond issuance.

Nur Aida said the Terengganu sultan had on May 22, 2009, summoned both Shahrol Azral and Ismee to the same Istana Terengganu and handed them a TIA directors’ resolution for the RM5 billion bond issuance to be suspended.

Nur Aida said Shahrol Azral and Ismee later communicated with Low who instructed them to meet with Najib to convey the Terengganu ruler’s wishes, adding that the duo then went to Najib’s house the same day as instructed by Low.

“Datuk Shahrol Azral and Tan Sri Ismee informed Datuk Seri Najib that Tuanku Sultan Mizan had asked them to sign the directors’ resolution for the suspension of the IMTN bond issuance.

“In that meeting also attended by Jho Low, Datuk Seri Najib also informed Datuk Shahrol Azral and Tan Sri Ismee that he would discuss with Tuanku Sultan Mizan. At the same time, Datuk Seri Najib instructed Datuk Shahrol Azral and Tan Sri Ismee to continue with the issuance of the IMTN assigned,” she said, with Najib’s lead defence lawyer Tan Sri Muhammad Shafee Abdullah raising his objection over alleged hearsay in this part of her testimony.

“Acting on Datuk Seri Najib’s instruction, Datuk Shahrol Azral and Tan Sri Ismee issued a TIA directors’ resolution to proceed with the IMTN bond issuance. Datuk Shahrol Azral then issued a letter dated May 27, 2009, to AmInvestment to instruct the bond issuance to be continued,” she said, with Shafee again objecting. AmInvestment then proceeded with the issuance of TIA’s RM5 billion bond.

Throughout Nur Aida’s testimony today, Shafee regularly raised objections over alleged hearsay, which trial judge Datuk Collin Lawrence Sequerah then recorded and said he would decide on at a later stage of the trial.

Previously, Ismee told the 1MDB trial that both he and Shahrol had signed the directors’ resolution given by the Terengganu ruler to postpone the RM5 billion bond issuance, but that Shahrol had later told him that the RM5 billion bond’s issuance could not be postponed as instructions had already been given to the bond’s lead arranger AmBank.

In the same 1MDB trial, Shahrol Azral had previously testified that Najib had asked him to carry on with the IMTN bond issuance by saying: “You go ahead, I will talk to Tuanku’’.

Malaysian Anti-Corruption Commission investigating officer Nur Aida Arifin at the Kuala Lumpur High Court, January 2, 2023. — Picture by Sayuti Zainudin

After the bond was issued, Nur Aida said the Terengganu ruler had later ordered an oversight committee to be set up to discuss the RM5 billion bond issuance and the Terengganu state government’s position in TIA.

A June 3, 2009, Cabinet meeting chaired by then deputy prime minister Tan Sri Muhyiddin Yassin acknowledged the Terengganu ruler’s views that TIA should not have issued the RM5 billion bond as there were many issues yet to be finalised, while another Cabinet meeting chaired by Najib on July 8, 2009, agreed with Najib’s proposal for the federal government to take over TIA.

TIA was renamed 1MDB on September 25, 2009 and came under the Minister of Finance (Incorporated).

Nur Aida noted that 1MDB had on August 11, 2009 made changes to its company constitution, otherwise known as the Memorandum and Articles of Association (M&A), specifically Article 68, Article 93 and Article 117.

She said these three clauses in 1MDB’s company constitution showed that Najib “has the power and is involved in making decisions in the company 1MDB”.

She noted that Article 68 requires the prime minister’s written approval for the appointment and removal of any director, while Article 93 creates the 1MDB’s board of advisers (BOA) with the prime minister himself as the BOA chairman, and Article 117 gave the prime minister full power to approve and make the final and conclusive decision in various matters such as the M&A amendments, appointment or removal of 1MDB’s top management, and requiring the prime minister’s written approval for key financial and investment decisions.

She said this showed Najib as having three main sources of power for his role in 1MDB, namely as prime minister, finance minister and 1MDB BOA chairman, with Shafee then saying he intends to cross-examine Nur Aida on these points and also claiming that she is not qualified to give a legal opinion on the three clauses in 1MDB’s company constitution.

Najib’s 1MDB trial resumes this Friday, with Nur Aida expected to continue testifying.