Zeti tells Najib’s trial: Bank Negara halted 1MDB’s ‘grand scheme’ by rejecting bid to borrow RM4.9b

KUALA LUMPUR, Aug 16 — Bank Negara Malaysia (BNM) had blocked government-owned 1Malaysia Development Berhad’s (1MDB) “grand scheme” by stopping the company’s 2014 bid to borrow money worth RM4.9 billion from overseas, due to reasons such as 1MDB’s increasing high debts, the High Court heard today.

Former BNM governor Tan Sri Zeti Akhtar Aziz said this while testifying as the 46th prosecution witness in former prime minister Datuk Seri Najib Razak’s trial over RM2.28 billion of 1MDB funds.

Zeti said BNM’s 2014 rejection of 1MDB’s bid to add on to its debts took place, even before BNM discovered in 2015 that 1MDB had actually sent out US$700 million in 2009 to the wrong company — now known as Low Taek Jho’s Good Star Limited — instead of for an approved “investment”. The US$700 million was part of a US$1 billion that 1MDB sent out for a purported investment in 2009, which Zeti has said was later found to be non-existent.

“In 2014, 1MDB actually tried to remit or take on foreign debt again and had to make an application for that to the central bank, the date of it is June 3, 2014. This was well before we received information from the foreign authorities and so on, Bank Negara rejected this application by 1MDB and therefore it put a stop to this grand scheme that they had developed,” she said.

Zeti was referring to 1MDB’s June 3, 2014 application to borrow the equivalent of RM4.9 billion from offshore sources, and listed three reasons why BNM rejected this application, including 1MDB’s growing debts.

The other reasons were that 1MDB was unable to reply to BNM about 1MDB’s existing borrowing and its use, and information regarding 1MDB’s purported investment in 2009.

Following 1MDB’s June 3, 2014 application, BNM requested more information and then rejected it on July 11, 2014.

1MDB then wrote an appeal to BNM to reconsider giving approval for the bid to borrow RM4.9 billion worth of money from offshore sources, but BNM on August 28, 2014, rejected this appeal.

Former prime minister Datuk Seri Najib Razak was seen at the court compound for the 1MDB case at Kuala Lumpur High Court, August 16, 2023. — Picture by Sayuti Zainudin

Asked by Najib’s lead defence lawyer Tan Sri Muhammad Shafee Abdullah if 1MDB had further appealed to the then finance minister Najib, Zeti said she was not sure and said BNM would not know if there was such an appeal if the Finance Ministry did not inform BNM.

Agreeing that Najib was both the prime minister then and also heading the Finance Ministry, Zeti confirmed that Najib did not make any attempt to contact BNM and asked it to reconsider 1MDB’s application to borrow RM4.9 billion from offshore sources.

At another point, Zeti mentioned two reasons for BNM’s rejection of 1MDB’s RM4.9 billion loan bid, stating that 1MDB already had a “high level of debt that presents a high risk to the country” and that “they already had massive debts that they kept at offshore sources”.

“And for that basis we did not approve. So this is an application to borrow from offshore sources, and one of the components of this borrowing was to raise a sukuk from offshore sources. So when we rejected it, they told us okay, we will go to the Securities Commission to get approval to issue these bonds and that doesn’t require Bank Negara approval. So they in fact told us they will source these monies from bond issuance,” she said.

But Zeti said she did not know what transpired regarding 1MDB stating it would seek to raise the funds instead through bonds, as she did not follow up on that matter.

Earlier today, Zeti said BNM only discovered in 2015 that 1MDB had in 2009 sent US$700 million to Good Star, as 1MDB had gave false information in 2009 and did not provide the required information to BNM despite continued efforts to obtain such updates.

Tomorrow, judge Datuk Collin Lawrence Sequerah is expected to hear Najib’s application to recuse and remove him from continuing to hear the 1MDB trial.

In the August 14 application by Najib, he is seeking for Sequerah’s removal in order to be acquitted from the 1MDB trial, or to alternatively have the trial be heard afresh from the start or be continued before a different High Court judge.

The trial had went on for the whole day today, as Sequerah resisted efforts by Shafee this morning to seek for proceedings to end earlier, with Shafee indicating that he is the lead counsel that has to supervise another case this afternoon and that he needed time to explain to Najib in order to get the latter to sign an affidavit for the recusal application.

The judge had this morning firmly asked for the trial to go on after having said that Shafee would have a team who could assist him to handle the other case: “I’m not trying to be difficult, you have your job to do, I have my job to do. What do we do in this situation? We both have responsibilities, I have responsibilities to taxpayers and the public, I cannot keep adjourning. We go on.”

The judge allowed the 1MDB trial to end earlier at around 4pm today, to enable Shafee to explain to Najib and to have the latter complete and sign the affidavit required for the recusal application, before Najib is brought back by prison authorities to Kajang Prison.

The trial began on August 28, 2019.