Crime & Courts

Finance Ministry kept in dark: Najib's trial reveals 1MDB's covert US$3.5 bil bond deal

KUALA LUMPUR: The government was unaware of the issuance of US$3.5 billion in bonds by 1Malaysia Development Bhd (1MDB), the High Court heard today.

Malaysian Anti-Corruption Commission (MACC) senior officer Nur Aida Arifin said Datuk Seri Najib Razak as the then finance minister never brought this up to the cabinet, even though the loan obligations by a Finance Ministry Incorporated company would have implications for national finances.

She said the bonds, each amounting to US$1.75 billion, were raised by Goldman Sachs to enable 1MDB to acquire shares in two independent power producers (IPPs), namely Tanjong Energy Holdings Sdn Bhd and Mastika Lagenda Sdn Bhd.

"The Finance Ministry also has no knowledge of this (the issuance of two bonds).

"Two resolutions – 1MDB Minutes by Representatives of Holding Company Relating to Proceedings of Subsidiary Company and the Special Rights Redeemable Preference Shareholders Resolution signed by Najib– were attached to the Directors' Circular Resolution (DCR) which must be signed by all members of the board of directors (BOD).

"The BOD only needs to comply with that mandate, in line with the top-down approach in 1MDB.

"This clearly shows that all decisions were obtained through the DCR without being brought up and discussed in detail during the 1MDB BOD meeting.

"The issuance of bonds managed by Goldman Sachs was made with a very high value and an excessively large surplus for reasons that are unclear and not specified.

"This surplus was eventually transferred to a dubious entity, its transactions were layered, and subsequently transferred to Najib's personal account," she said.

Nur Aida said this when testifying as the 49th prosecution witness in Najib's corruption trial for allegedly misappropriating millions of 1MDB funds.

Nur Aida who was the investigating officer of the case also testified that RM90,899,927.28 believed to have originated from 1MDB Energy (Langat) Ltd was deposited into the former prime minister's account between Oct 30, 2012, and Nov 20, 2012.

She said the funds originating from the issuance of bonds totalling US$1.75 billion, were funnelled from a shell company controlled by fugitive businessman Low Taek Jho or Jho Low into Najib's account at AmPrivate Banking.

She said her investigation revealed that the purchase price for the acquisition of IPP Genting Sanyen Power Sdn Bhd was RM2.75 billion and was financed by two sources – a local term loan facility of RM700 million and the issuance of 10-year structured loan notes totalling US$1.75 billion.

"The total amount of loans obtained from both of these funds is approximately RM6.16 billion, with an excess of about RM3 billion.

"This excess was almost entirely eliminated with the payment of a refundable security deposit to Aabar Investment PJS Ltd amounting to US$790 million (approximately RM2.4 billion).

"This security deposit was eventually forfeited after International Petroleum Investment Company (IPIC) did not confirm Aabar Investment PJS Ltd as its subsidiary and declared that it would not be responsible for it," she said.

It was revealed during the trial that Aabar Investment PJS Ltd was a bogus entity set up by Low in the Seychelles.

The legitimate entity which was supposed to get the funds was called Aabar Investment PJS, without the "Limited" or "Ltd" suffix.

Nur Aida said the security deposit, created through the Collaboration Agreement for Credit Enhancement, was never disclosed and discussed with the 1MDB BOD for approval.

She said it (security deposit) was deliberately made at the last minute, covertly, and in a very rushed manner.

"It is to ensure that the funds amounting to US$576,943,490 and US$790,354,855 from the issuance of the two bonds can be misappropriated, and subsequently, a portion of it is deposited into Najib's account," she added.

Najib, 70, is facing 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 continues.

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