KUALA LUMPUR: The real purpose of the establishment of troubled state fund 1Malaysia Development Berhad (1MDB) by Datuk Seri Najib Razak was to help Umno obtain funds.
This was revealed by 1MDB former chief executive officer (CEO) Mohd Hazem Abdul Rahman during the trial of the former Prime Minister, who was also the party's then president, over the misappropriation of RM2.28 billion from 1MDB.
Hazem told the High Court today that this was relayed to him by fugitive businessman Low Taek Jho or Jho Low.
He said Jho Low had in a meeting told him that 1MDB was set up to help Umno obtain funds through businesses involving 1MDB's strategic investment.
However, he said Low did not lay out the details of how 1MDB was helping Umno.
Hazem, who first joined 1MDB in 2012 as chief operating officer (COO), said his first encounter with Low was through Najib's former principal private secretary, the late Datuk Azlin Alias, who was also a close friend of his (Hazem).
The meeting took place not long after he sent in his resume for the COO position in 1MDB.
"In the meeting, Jho Low told me that the actual reason 1MDB was set up was to help Umno through businesses which involved 1MDB strategic investment. But he did not talk about it in detail," he said.
Hazem said in the meeting, Low also explained 1MDB's background, including his involvement in the early establishment of the Terengganu Investment Authority (TIA), until it was taken over by the Finance Ministry and later became 1MDB.
The 10th prosecution witness said Low had informed him that the company was under Najib's control and that Najib had the ultimate power on any decisions made in the company.
"I figured that I needed to get clearance from Jho Low first if I work at 1MDB. Azlin had also confirmed this. So this was the actual purpose of the meeting," Hazem said.
He said Low was an important person placed at 1MDB by Najib as a special advisor in charge of investment and fund raising in the company.
He said Low had also told him that the funds issued through 1MDB's investments abroad were for Umno's interests and it could not be questioned.
"Jho Low also told me that the members of the board of directors knew who he was and understood that the purposes of 1MDB activities were for Najib, and that he (Low) played a role as Najib's proxy," he said.
He said after Low's proxies held a fundraiser abroad using a legitimate 1MDB project in Malaysia, the senior management at 1MDB would not know where the monies were channelled to.
"When we asked about the bonds and loans obtained abroad to pay 1MDB debts to finance the costs of the project inside the country, Low would tell us that the money in Umno could not be touched.
"Each time we asked Jho Low about the funds, he insisted that it was Umno's funds," he said.
Meanwhile, Hazem said what worried him the most when he held the position of COO and managing director at 1MDB in 2013 was Najib's intervention in making important decisions in the company.
He said although the board of directors would decide to change any proposal which would not bring profit to the company, it would still proceed when Najib intervened.
"This is because under Article 117 of 1MDB's Memorandum and Articles of Association Clause 117, Najib had absolute power in decision making.
"This would make it difficult for the management to continue generating profits for the growth of the company and it would probably affect the company's performance," he said.
Although he had suspicions that 1MDB funds were being misappropriated, Hazem said he expected that the funds that were used for Umno would be returned in a certain period of time which was agreed upon by the board and shareholders of 1MDB.
However, in Sept 2013, he was starting to worry about the amount of funds involved in financing the project.
"I informed Azmy Tahir (1MDB's former chief financial officer) about how worried I was and my intention to step down.
"At that time, I felt that 1MDB had fallen into what I thought was the biggest trap in Malaysian corporate history," he said.
Hazem will continue his testimony before judge Collin Lawrence Sequerah tomorrow.
Najib, 67, is facing 25 counts of abuse of power and money laundering involving RM2.28 billion of 1MDB funds which were deposited into his accounts between 2011 and 2014.