Malaysia

No due diligence done on IPIC deal, ex-1MBD CEO tells court

Former 1MDB CEO Shahrol Azral Ibrahim Halmi reserved his comment when asked if the board was run by a ‘bunch of idiots’.

KUALA LUMPUR: The High Court was told today that no due diligence was done by 1MDB before entering into a joint venture worth US$6 million with a company purportedly linked to an Abu Dhabi sovereign wealth fund, International Petroleum Investment Company (IPIC).

Former 1MDB CEO Shahrol Azral Ibrahim Halmi said no formal due diligence was done with regard to Aabar BVI Ltd, which the 1MDB board of directors took as a subsidiary of IPIC.

Aabar Investment PJS was the real subsidiary of IPIC, while Aabar BVI Ltd was a company incorporated by fugitive businessman Low Taek Jho, or Jho Low, and his associates in the British Virgin Islands, and which was wound up and dissolved in June 2015.

The ninth prosecution witness said he had not taken the liberty to verify if the two “Aabars” were the same and had only taken “the representation of the company from Jho Low”.

Shahrol was being cross-examined by lead defence counsel Muhammad Shafee Abdullah in former prime minister Najib Razak’s RM2.3 billion 1MDB graft trial.

Shafee: But you were going into a JV of US$6 million with this company?

Shahrol: During that time, we (1MDB board of directors) had no reason to doubt it. With hindsight, I agree it would be prudent to have done so.

Shafee: You agree with me, the Goldman Sachs (1MDB financial adviser) team led by Tim Leissner was supposed to be taking due diligence on both Aabars?

Shahrol: If anything was amiss, we would expect Goldman Sachs to tell us as the paid financial adviser.

Last year, US officials had barred Leissner from the securities industry after he pleaded guilty to bribery and money laundering conspiracy charges related to 1MDB. He is scheduled to face sentencing in a federal court in Brooklyn, New York, soon

Shahrol agreed with a suggestion by Shafee that since 1MDB had failed to carry out the due diligence because of their good faith in Jho Low’s representation of the company, they would have expected Goldman Sachs to do so.

Further questioned by Shafee, he said he was not shocked when IPIC denied having any connection with Aabar BVI Ltd in 2016.

“It was in 2015 when I heard all the revelations about 1MDB from the media. Don’t get me wrong, but emotionally, I was kind of numb already after hearing reports swirling about how they (1MDB) spent the money, so I was not surprised and just left it to the investigators,” he said.

Shafee then went on to details such as the differences in the letterheads and signatures in the documents presented by Aabar BVI Ltd to 1MDB, to which Shahrol replied that neither he nor the 1MDB management had realised it at that time.

Shafee: So nobody in the 1MDB management brought up this issue (the differences) to you?

Shahrol: No.

Shafee: When the entire management in 1MDB did not see the differences, you could not expect the prime minister and finance minister at that time (Najib) to notice it.

Shahrol: No comment.

It was stated in the Public Accounts Committee (PAC) report that 1MDB had paid over RM4.24 billion to Aabar BVI Ltd in 2012 for a security deposit.

Throughout the proceeding today, Shafee, who referred to Aabar Investments PJS as “big Aabar” and Aabar BVI Ltd as “small Aabar”, said the 1MDB management had once again fallen into “cobra pits” in its investment dealing.

Shafee: Do you notice that we are moving in many cobra pits … 1MDB must be run by a bunch of idiots to walk through these pits.

Shahrol: I’d like to reserve my comment on that.

After the lunch break, another counsel, Wan Aizuddin Wan Mohammed, referred the witness to shareholders’ minutes signed by Najib as a representative of Minister of Finance Incorporated (MoF Inc), which included the appendix of the terms and conditions of a land deal on the development of Kuala Lumpur International Financial District (now known as TRX) between Aabar BVI Ltd and 1MDB.

Shahrol said he did not know if Najib had seen the minutes together with the appendix and that he had not taken the step of briefing him before executing the document.

Wan Aizuddin: Do you know whether this (shareholders’ minutes together with the appendix) was shown to Najib or not?

Shahrol: I have no direct knowledge.

Wan Aizuddin: Looking at the content, do you agree on the face of the document, the impression is that the joint venture was between 1MDB and the real Aabar?

Shahrol: Yes.

Wan Aizuddin: Is it safe to say that for the uninitiated, when you see 1MDB and Aabar Investments PJS Limited (Aabar BVI Ltd), a person not warned of the peculiarity may take this for the (real thing)?

Shahrol: Yes.

Najib, 67, faces four charges of using his position to obtain bribes totalling RM2.3 billion from 1MDB funds and 21 charges of money laundering involving the same amount.

The trial before judge Collin Lawrence Sequerah continues tomorrow.

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