KUALA LUMPUR, July 1 — Conspiracies involving top 1MDB personnel and bankers in Singapore were allegedly hatched to cheat state-owned 1Malaysia Development Berhad (1MDB) of its money, Datuk Seri Najib Razak’s lawyer told the court today.
Najib’s lead defence lawyer Tan Sri Muhammad Shafee Abdullah described such plots as akin to football with purported assets passed around and with paperwork designed to make the company lose more money.
In his argument today, Shafee pointed to a June 2012 meeting at the Mandarin Oriental hotel in Singapore — involving 1MDB top officials Azmi Tahir (chief financial officer), Terence Geh (deputy CFO), Jasmine Loo (in-house lawyer or general counsel) and Singapore’s BSI Bank Limited bankers Yeo Jiawei and Yak Yew Chee — as being where the alleged conspiracies were made.
The football analogy was made when Shafee questioned former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi about the June 2012 meeting, but the latter said he was not aware of the actual content of the meeting nor the identities of those the three 1MDB officials had met then.
Shahrol Azral said he had only known then that the general purpose of the meeting was to help 1MDB sort out the process of recovering and bringing back more than US$2 billion of the company’s funds to Malaysia.
Shahrol Azral also said he did not know in 2012 that the trio met with two Singapore bankers at the hotel, and had only discovered this when questioned by the police during investigations.
He also said that the senior 1MDB personnel did not have to report what transpired in the meeting, clarifying that they were not in Singapore to negotiate the return of the funds.
“It wasn’t negotiations, at that time, my understanding was that this was part of the process of administering funds. I would not micromanage people under me. When they came back, they said it was ok, so I would not interrogate them who they met, where they eat,” Shahrol Azral explained.
Asked by Shafee if he knew the Singapore meeting was very critical as it was where top 1MDB officials allegedly conspired with BSI bankers to carry out illegal acts, Shahrol Azral said he was not aware.
Shafee then suggested that Najib — who was the prime minister and finance minister and who chaired 1MDB’s board of advisers at that time — would similarly not have known about the meeting, but Shahrol Azral said he would not be able to confirm if this was the case.
Shafee: Now I’m going to detail to you, the nature of the conspiracy. But before that, this meeting – you didn’t know the content. Datuk Seri Najib wouldn’t know about this meeting, who’s going and for what purpose?
Shahrol Azral: Again, I cannot testify.
Shahrol Azral was testifying as the ninth prosecution witness against Najib in the latter’s corruption and money laundering trial involving 1MDB funds.
Just like football
Shafee then described the schemes that were made for a series of complex transactions, which he suggested was calculated to hide the fact that an investment worth over US$2 billion that 1MDB purportedly held abroad and was trying to recover were only linked to alleged assets in the form of two aging drill ships.
Shafee suggested that 1MDB’s 49 per cent stake — via its subsidiary 1MDB International Holdings Limited — in PetroSaudi International’s subsidiary PetroSaudi Oil Services Limited (PSOSL) valued initially at US$2.2 billion was only tied to PSOSL’s two drill ships, and that schemes were made to obtain a valuation to match the roughly US$2 billion figure even when the alleged assets had no such value.
Ultimately, 1MDB would go on to sell its 49 per cent stake for US$2.318 billion in promissory notes issued by Bridge Partners International Investments Limited, with the US$2.318 billion to be promised as payment to 1MDB’s new subsidiary Brazen Sky Limited to be then further invested in purported fund units in purported hedge fund Bridge Global Absolute Return Fund SPC. These promissory notes later were reported to be worthless, while the purported fund units were placed under BSI Singapore’s custody.
Shafee today cited facts read out by Singapore prosecutors in a separate trial involving Yeo, including how Bridge Partners took over ownership of 1MDB International Holdings which held the 49 per cent stake in PSOSL, and where 1MDB through Brazen Sky had actually continued to hold the same interests in PSOSL — but indirectly through the Bridge Global Absolute Return Fund units for US$2.318 billion — after the restructuring.
Shahrol Azral said he was not aware of these schemes and plans that were made during the June 2012 meeting and that he was not involved in them.
Shafee said that the schemes involved had meant Bridge Global Absolute Return Fund — where 1MDB was allegedly investing in — held the same two drill ships allegedly owned by PSOSL as its only assets to justify the US$2.318 billion.
Shafee: So you know between PSOSL to Bridge, it’s like football... it’s a passing of the football, just passing the ball; same assets, pass it on, you pass it on, you create, you make up an increment of value. Are you aware that this was done to hoodwink and cheat 1MDB?
Shahrol Azral: I wasn’t aware.
Shahrol Azral similarly said he was not aware that such transactions were created despite having no economic value, and that he was also not aware that these were done to create a false accounting to fraudulently inflate the purported value of 1MDB assets despite billions in ringgit actually being lost by 1MDB.
Shahrol Azral said he was not aware then, but in hindsight agreed with Shafee now that the conspiracies were intended to mislead and pull a wool over everyone’s eyes including 1MDB’s then-auditor KPMG, by adding more companies to made it difficult to detect that 1MDB still held its stake in PSOSL indirectly.
Agreeing in hindsight that these schemes were planned by fugitive businessman Low Taek Jho together with senior 1MDB individuals, Shahrol Azral however denied his involvement or that such plots could not have been carried out without him as the CEO being fully aware.
Shafee also highlighted the facts given by Singapore prosecutors, where a separate company named Bridge Partners Investment Management (Cayman) Limited charged 1MDB’s Brazen Sky yearly fees worth millions of US dollars to manage the “investment” for the 1MDB entity.
While Shahrol Azral said he was aware of fund managers’ fees then, he said he did not know how much had to be paid and was also not shown the agreements for such fees which he was 1MDB CEO.
Shafee: So 1MDB undertook to pay the fund management fees and they paid these fees. Now that you have hindsight knowledge, they paid these fees for these fund managers to literally create nothing out of the fund. What they did was they managed paper, it’s worse than playing football. They just managed paper, they were kicking around papers and they made money.
Shahrol Azral: Yes, with hindsight.
Shafee: So with these conspiracies, not only did 1MDB didn’t liquidate and bring back the funds home, 1MDB with the connivance of the top management of 1MDB was willing to allow 1MDB to further bleed, in the form of these payments to the fund managers?
Shahrol Azral: Correct.
Shahrol Azral said he had never met Yeo or his BSI superior then Kevin Michael Swampillai who were said to have made secret profits from the 1MDB-Bridge matters. The prosecution today confirmed that Yeo is not on its witness list, but Yak and Swampillai are expected to be called as witnesses.
Among other things, Shahrol Azral also said he did not recall that the Swiss bank BSI had queried why 1MDB as a Malaysian sovereign wealth fund needed a Swiss bank account, but confirmed that 1MDB officials had went to Switzerland to be assured that BSI was the appropriate custodians for the Bridge Global fund units that were valued at a purported US$2.318 billion. Having started off with US$1.83 billion in purported investments abroad that later morphed into the fund units, 1MDB ultimately failed to bring back these funds to Malaysia as cash.
The trial before High Court judge Collin Lawrence Sequerah is expected to resume on July 15.