SRC board reduced to rubber-stamping Najib’s directions, ex-director says

KUALA LUMPUR, June 6 ― SRC International Sdn Bhd was atypical as its shareholder did not seek the board’s expertise and opinions, the Commercial High Court heard today.

Former SRC International director Tan Sri Ismee Ismail said this while testifying as a third party in SRC International’s US$1.18 billion (RM5.58 billion) civil suit against former prime minister Datuk Seri Najib Razak.

Ismee said the firm’s board of directors was instead tasked with effectively approving the directions of its shareholder, Najib.

Najib, who was also the finance minister at the time, was SRC International’s sole and exclusive shareholder by way of Minister of Finance (Incorporated).

“The point I want to drive here is basically, when we were appointed to this newly incorporated entity called SRC, we did not get a piece of blank paper, saying ‘OK, board members, you tell us what to do with this company. Which government to government endeavours (to pursue).

“That is not the scenario. It was ‘OK, you are appointed as a board member, these are the directions or wishes of the shareholder for the board to execute’. That was the situation then,” he said under cross-examination by Najib’s lawyer Muhammad Farhan Muhammad Shafee.

Ismee was appointed director of SRC International in August 2011 and served on the board until his resignation in August 2014.

He would later testify in another criminal case (Najib’s RM42 million SRC International trial) the reason for his resignation was due to corporate governance issues, especially with regards to the company’s accounts and its finances as managed by former executive director Nik Faisal Ariff Kamil.

Under cross-examination, Ismee was also questioned why the board did not direct Nik Faisal ― who was the exclusive link between the company’s board of directors and Najib who was its adviser emeritus ― to raise the issue of micromanagement concerns within the firm.

To this, Ismee replied that Nik Faisal ought to have taken the initiative to highlight the matter in meetings with the former prime minister.

“Nik Faisal is not a clerk. He is a chief executive, he should know what to highlight and what not to highlight. The board cannot be instructing the chief executive to do A, B, C, D,” he said.

Ismee also told the court how he had confronted Nik Faisal after finding out the company’s accounts were not audited and closed in 2013, despite the latter’s reassurance everything was in order.

This, he explained, was after he read an article published by local daily The Edge on May 5, 2014 titled “SRC Yet to File Accounts or Seek Extension” which he had asked Nik Faisal to issue an immediate response.

“I shouted at him (furiously), that is when I took my own personal effort to ensure the accounts were closed,” he said, adding that it had never crossed his mind that Nik Faisal turned out to be a ‘liar’.

Imprisoned since August 23, 2022, Najib is serving his 12-year jail sentence and RM210 million fine for his conviction over the misappropriation of SRC International’s RM42 million funds, which has recently been reduced to six years of jail and RM50 million fine by the Pardons Board.

SRC, under its new management, had filed legal action against Najib and its former directors Suboh, Mohammed Azhar Osman Khairuddin, Nik Faisal, Datuk Che Abdullah @ Rashidi Che Omar, Shahrol Azral and Ismee in May 2021.

However, it later removed six names from the suit and retained Najib as the defendant.

Additionally, Najib has brought the former named SRC International directors as third-party respondents.

SRC as a plaintiff in the writ of summons had alleged that Najib had abused his power and obtained personal benefits from SRC International’s funds as well as misappropriated the funds. Najib was SRC’s emeritus adviser from May 1, 2012, until March 4, 2019.

SRC International, which is now wholly owned by the Ministry of Finance Incorporated (MoF Inc), is seeking general damages, exemplary, additional interest, costs and other appropriate relief provided by the court.

SRC International is currently seeking a declaration from the court that Najib is liable to account for the company’s losses due to his breach of duties and trust.

The company is also seeking an order that Najib pay the US$1.18 billion in losses it suffered, and damages for breach of duties and trust; including an order that Najib compensate the sum of US$120 million which entered his bank account as well.