This article first appeared in The Edge Malaysia Weekly on April 18, 2022 - April 24, 2022

AFTER less than a year of being on the board of directors of 1Malaysia Development Bhd (1MDB), Tan Sri Mohd Bakke Salleh did not want to stay on,  so discomfited — even disgusted — was he by the corporate malfeasance and dubious manoeuvring at the state-owned strategic investment company. His regret at having accepted the offer to sit on the board was underscored in his observation that, “In hindsight, I should not even accept to be on the board of 1MDB.”

Last week — testifying before High Court Justice Mohamed Zaini Mazlan as the 13th prosecution witness in former prime minister Datuk Seri Najib Razak and former 1MDB CEO Arul Kanda Kandasamy’s ongoing trial over the alleged tampering of a 1MDB audit report — he explained that his unease essentially boiled down to two points: 1MDB’s management was paying no heed to the board of directors, headed by him, as they appeared to be taking instructions from “outside and above the board”, and his suspicions that Najib was somehow in the loop of 1MDB’s shadowy deals with a Saudi partner that not only did not benefit 1MDB, but that left it saddled with debt.

To Bakke, the “hurried fashion” in which 1MDB was “bulldozed” into a joint venture (JV) with Saudi Arabia’s PetroSaudi International Ltd (PSI) in 2009 went against good corporate practice, never mind that management was willing to relax certain criteria, even though 1MDB was investing a substantial US$1 billion as its share of equity in the JV company, 1MDB-PetroSaudi Ltd, against its Saudi partner’s assets that were purportedly worth US$1.5 billion.

The rushed JV — prompted by a phone call from Najib to settle the JV — and the subsequent remittance of US$700 million to Good Star Ltd, a company affiliated with fugitive financier Low Taek Jho (Jho Low) in contravention of the board’s orders, led him to resign in protest.

Cross-examined by Najib’s lawyer, senior counsel Tan Sri Muhammad Shafee Abdullah, on matters mainly revolving around the JV agreement between 1MDB and PSI in 2009, Bakke testified that the 1MDB Board was only informed of the proposed JV at a board meeting on Sept 18, 2009, during which the board set four conditions for the deal to take place:

(i)     Conduct due diligence on PSI;

(ii)     A professional, independent valuation of PSI’s US$1.5 billion assets to be injected into the JVCo;

(iii)     Form a board of directors of the JVCo consisting of three members from 1MDB and three members from PSI; and

(iv)     The amount of US$1billion to be invested must be credited into the account of the JVCo.

Ultimately, none of the instructions were heeded. Previously, Bakke had testified that just before the start of a board meeting on Sept 26, 2009, Jho Low had passed his phone to Bakke as Najib was on the line. Najib instructed Bakke to “firm up” on a decision as he said that the JV deal had been ongoing for some time, and that it was a government-to-government initiative and that he wanted to witness the signing ceremony of the deal with PSI’s co-founder Prince Turki Abdullah by the end of September.

After the JV agreement was inked, PSI informed 1MDB that its US$1.5 billion asset injection into the JVCo entailed a US$700 million advance for 1MDB, which meant 1MDB owed PSI. Per instructions from then 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi, 1MDB diverted US$700 million from the US$1 billion JV equity investment into Good Star Ltd’s account, on the grounds that PSI had claimed that Good Star was its affiliate.

Bakke, along with board member Tan Sri Azlan Mohd Zainol, resigned in protest over the remittance of the funds. Bakke left on Oct 19, 2009, and Azlan, about three months later on Jan 11, 2010.

Bakke testified that at the Sept 26 meeting, the board had anticipated an update on and explanations of the deal, including the due diligence and valuation findings, but management had not provided any additional information.

Pressured by Najib’s phone call and the fast-approaching signing ceremony set for Sept 28 — a mere two days after the board meeting — the board gave its “conditional approval” of the JV.

“We realised the importance of meeting the target date for the agreement to be signed (on Sept 28). But, we also realised that we cannot rush through the investment with such a huge capital,” Bakke said, adding that the board agreed to work with PSI in principle, but that the set of requirements had to be fulfilled. However, nothing was done, even by  the time he stepped down from the board.

During his cross, Shafee pointed out the discrepancy between Najib’s remark during the phone call that the JV deal had been ongoing for “quite some time” and Bakke’s testimony that the board only became aware of the deal on Sept 18. He asked if Bakke had corrected Najib.

“I took it as he was very much in the know, that is how I would interpret it. To go back and tell him we only came to know a week earlier didn’t cross my mind because the information was coming from the PM ... With the benefit of hindsight, we can say anything. It is so hypothetical,” said Bakke.

But he agreed with Shafee that the management could have been deliberating on the deal prior to presenting it to the board.

Shafee also tried to establish that in the phone call, Najib had presented his “wish list” to witness the signing ceremony but had not instructed the board to pass a resolution. Bakke, however, stood his ground.

Shafee: He did not direct the board to pass the resolution? Is it a yes or no?

Bakke: I disagree. I’m not just going to say a yes or no before I can commit any response to you ...

Shafee: Did the former PM direct you to get the board to pass a resolution to commit 1MDB to the signing ceremony on Sept 28?

Bakke: Not in the way you put it, but what does firm up (on a) decision mean? ... Firm up a decision means the board will have to decide whether to enter a JV or not, that is how I interpret it. And then, I’m looking forward to signing the agreement … that means two days later the agreement has to be signed.

Although Bakke had briefed the board members present about

Najib’s instructions, the phone conversation was not recorded in the meeting’s minutes, the rationale being that the call happened before the meeting.

“Members of the board [decided that for] anything linked to the [former] PM, let’s not put it in minutes or records and [as the] phone call came before the meeting, that was the consensus.”

The current chairman of Petroliam Nasional Bhd, Bakke said that in hindsight, the call should have been reflected in the minutes. He then quipped: “But now with the benefit of hindsight when you look back and trace everything, I could stretch the argument even further (that) I should not even accept to be on the board of 1MDB.”

The comment provided a brief moment of levity during the strained cross-examination, even taking the senior counsel by slight surprise as Shafee replied, “(that is) too much water under the bridge”.

Suspicion, suspicion

Following the board’s conditional approval, Bakke was also asked if he had ever spoken to Najib about it as well the conditions that had been set.

Bakke replied in the negative as he had his suspicions over the “hurried” manner in which the deal was pushed through and the former premier’s involvement in the matter.

Shafee pointed out that in 2009, Bakke was FGV Holdings Bhd (then Felda Global Ventures Holdings Bhd) group president and CEO, and would have had the opportunity to meet with Najib every two weeks, during which time the JV matter could have been brought up.

Bakke replied that there was no need for this as “(the board) had gone ahead and firmed up the decision on the investment”.

He also testified that he did not seek a meeting with Najib when he resigned in October, mainly because of his suspicions that Najib was “very much in the loop and involved in the scheme of things” with PSI.

“One [thing] that confirmed our suspicion, which made us feel disgusted, was the way the US$1 billion was remitted,” he pointed out.

Zeroing in on the phone call with Najib, he said: “We were not pleased with what happened. My own conclusion is that if I did not attend the phone call of the (then) prime minister, the board wouldn’t have rushed through the deal. This is why my suspicions came. The manner in which instructions came. If only the prime minister had not spoken to me and got Jho Low to give me the phone, we would have looked at this as a proper proposal and done it properly.”

He was also asked if he was suspicious that the former premier was “stealing the money”. Bakke responded no but was concerned over how prepared 1MDB was to “loosen or relax certain conditions”.

He said his suspicions were reinforced when they got a “rude shock” during a board meeting on Oct 3, where management informed them that the US$1 billion was split into two tranches:

US$700 million to Good Star and US$300 million to JVCo.

“We were angry because that is not what we instructed management to do,” he said.

‘Instructions from above and outside the board’

Asked if senior management had conspired against the board, Bakke replied that it received “instructions from above and outside the board”.

And what were his conclusions based on? “It was based on the arrogance of the management in trying to bulldoze their way through and not taking into consideration the views and instructions of the board.”

Although it was only “a feeling” he had at the time, Bakke said it was confirmed six years later by 1MDB’s former CEO Shahrol.

Shafee: Only after six years, you began trusting Shahrol?

Bakke: I met him and asked him how all this happened. He was taking orders from the then prime minister and Jho Low. Not that I trusted him. I’m just sharing with you what he told me. I don’t trust him even until today.

During re-examination by lead prosecutor Datuk Seri Gopal Sri Ram, Bakke reiterated that Shahrol was answering to a “higher power”.

Sri Ram: The basis of your suspicion was the speed of the way it was done. Shahrol being a renegade. In your mind he was answering to a higher power?

Bakke: Correct.

Bakke’s testimony reflects that Jho Low did attend the Sept 26 meeting. The fugitive financier’s presence at the meeting is one of the key pieces of information removed from the 1MDB audit report before it was presented to the Public Accounts Committee in 2016.

The former chairman had also kept records of the original meeting minutes with Jho Low’s name and said he showed them to authorities from the Malaysian Anti-Corruption Commission and the National Audit Department investigating the matter.

The trial continues on May 20.

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