KUALA LUMPUR: 1Malaysia Development Bhd (1MDB) happily gave away US$1 billion to its joint venture partner, which had made grandiose claims of owning billions of dollars worth of assets, by relying mainly on Google search to verify its background.
This was revealed in the High Court today by none other than the sovereign wealth fund former chief executive Datuk Shahrol Azral Ibrahim Halmi.
The 49-year old admitted that apart from the internet search, he also relied heavily on representations made by PetroSaudi International Ltd (PSI) itself before entering into a joint venture agreement (jva) with its holding company called PetroSaudi Holdings (Cayman) to form 1MDB PetroSaudi Ltd.
Under the jva, which was signed on Sept 28, 2009, 1MDB ended up pumping in US$1 billion for a 40 per cent stake in the company while PetroSaudi Holdings Cayman injected its so-called assets worth US$2.7 billion for a 60 per cent stake,
During cross-examination today, Shahrol was asked to explain what kind of checks were done by the 1MDB management on the veracity of claims about the billions of dollars worth of assets which its partners claimed it had.
He was grilled on the issue by lawyer Tan Sri Muhammad Shafee Abdullah, who is representing Datuk Seri Najib Razak, in the trial where the former prime minister is accused of ripping off the fund to the tune of RM2.28 billion.
Shahrol explained that the valuation of assets which PetroSaudi Holdings claimed to have was done by Edward Morse, a valuer appointed by the company itself.
1MDB, he said, paid US$100,000 in fees to the valuer.
Shahrol testified that there was a heated discussion among the 1MDB directors when a paper of the valuation report was tabled.
The board members, he said, were unhappy about the valuation report.
Asked why this was not indicated in the minutes of the board meeting, Shahrol acknowledged that this happened in 1MDB.
At one point an exasperated Shafee asked Shahrol why he had failed to take adequate measures to safeguard 1MDB's interest.
Shafee: What did you do after the US$1 billion was sent to the joint venture company.
Shahrol: I discussed with Jho Low about the assets issue. He was advising PetroSaudi.
Shafee: Jho Low was advising PetroSaudi and also 1MDB?
Shafee: Can't you see the conflict of interest here?
Shahrol: At that time it was clear in my mind that he wanted to create a win-win situation for both countries on behalf of Najib. At that time I took it that he was a trusted adviser of Najib
Shafee: Did you tell the board about Jho Low also acting as PSI adviser?
Shahrol: I did mention it.
Shafee: Show me this in the minutes
Shahrol: It is not recorded
Shafee: Don't you think it is important enough to be recorded?
Shahrol: It is similar to a lot of patterns that many things are not minuted to protect Najib. This was how Najib wanted things done.
Najib, 66, is charged with misappropriating RM2.28 billion of 1MDB funds, money laundering and abuse of power.
Cross-examination before High Court judge Collin Lawrence Sequerah will continue on Tuesday.