This article first appeared in The Edge Malaysia Weekly on April 11, 2022 - April 17, 2022

AN experienced corporate player, Tan Sri Ismee Ismail served on the board of 1Malaysia Development Bhd (1MDB) for several years, even though he often felt uncomfortable and ill at ease with the many glaring irregularities in some lop-sided deals undertaken by the state-owned strategic investment company.

Even in the early days of 1MDB, when it had just morphed from being the Terengganu Investment Authority (TIA), the bond raising exercise by the latter was wrought with controversy, having been pushed through despite the explicit orders of the then state ruler Sultan Mizan Zainal Abidin that the deal be terminated.

Ismee, a member of TIA’s steering committee, later became a board director and remained one when TIA became 1MDB.

A star prosecution witness in former prime minister Datuk Seri Najib Razak’s 1MDB-Tanore trial, Ismee testified last week that he had stayed on as a director in 2009 because he had “a high degree of trust in the leadership” specifically “the prime minister’s trust and loyalty”.

Perceived as a Najib loyalist, Ismee gave the impression that the regard he held for the former prime minister was the reason he shrugged off the US$7.5 billion in bond raising exercises by 1MDB and other lopsided deals it had entered into to its huge detriment.

Take, for instance, the glaring irregularities in 1MDB’s joint venture (JV) with PetroSaudi International Ltd (PSI), which turned out to be a sham that cost the Malaysian government US$1.53 billion as proceeds of the JV were siphoned off by fugitive financier Low Taek Jho, also known as Jho Low, who engineered the moves with the help of co-conspirators in Malaysia, Abu Dhabi and Goldman Sachs Inc.

It should be noted that Ismee, 58, was at the time also serving as group managing director and CEO of Lembaga Tabung Haji. He had previously testified that Najib had appointed him to be a board member of 1MDB.

According to the New Straits Times, Ismee had also served on boards of several government-linked companies and key business institutions in Malaysia, including as chairman of Syarikat Takaful Malaysia from 2009 to 2015, chairman of TV AlHijrah and board member at Johor Corp, KFC Holdings Malaysia Bhd, BIMB Holdings Bhd, Bank Islam Malaysia Bhd, Pelikan International Corp Bhd and Felda Global Ventures Bhd.

Testifying before High Court judge Collin Lawrence Sequerah last week, Ismee said he thought the JV with PSI would be beneficial for the country’s relations with Saudi Arabia, even though the former chairman of 1MDB’s board of directors Tan Sri Mohd Bakke Salleh had expressed considerable anger over the irregularities in the deal.

“[In] my capacity, [my opinion was that] this was a good initiative to further exchange relationships with the Saudis because I was in Tabung Haji. It was a good initiative to enhance relations between Malaysia and Saudi Arabia. I didn’t know there would be fraud.

“Therefore, I believe I had a high degree of trust in the leadership,” he said, referring to Najib.

In 2009, Najib and Low moved for 1MDB to enter into a 40:60 JV agreement with Saudi Arabia’s PSI in what was ostensibly to be a government-to-government initiative.

The JV company (JVCo), named 1MDB-PetroSaudi Ltd, involved 1MDB undertaking an equity investment of US$1 billion while PSI would inject US$1.5 billion worth of assets. Shortly before that, 1MDB — or, rather, its predecessor TIA — had raised RM5 billion through the Islamic Medium Term Notes (IMTN) that helped fund its portion of the JV.

After the JV agreement was signed, however, PSI said its US$1.5 billion asset injection into the JVCo entailed a US$700 million advance for 1MDB, which meant 1MDB owed PSI.

Through the instructions of former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi, 1MDB had diverted US$700 million from the US$1 billion JV equity investment into an account belonging to Good Star Ltd, on grounds that PSI said Good Star was its affiliate.

Last November, Ismee testified that the board had raised many red flags in the board of directors’ (BOD) comments section on the proposed JV.

He said the board stated in the same section that it was not consulted on the change of plans to remit the US$700 million to PSI via Good Star.

“The BOD understanding was for the full US$1 billion to be wired to a joint bank account under the name JVCo. And the JVCo board of directors made the decision to remit the US$700 million to PSI.”

Ismee said at a meeting on Oct 3, 2009, that the entire board had not agreed with the transfer of US$700 million to PSI via Good Star without prior permission.

“Tan Sri Bakke was furious, as the JV agreement was not the same as [the one] approved by the board previously and that there were several additional items included in the agreement that seemed suspicious,” said Ismee.

In another 1MDB-linked trial known as the 1MDB audit tampering trial, Bakke had also testified that, after the meeting on Oct 3, he asked the management to leave the room and subsequently told the board of directors that they should all resign. Bakke resigned shortly after the meeting.

Before Bakke resigned, Tan Sri Che Lodin Wok Kamaruddin, Ismee and Tan Sri Azlan Mohd Zainol had also served on the board.

Ismee and Lodin stayed on, with the latter taking over from Bakke as chairman of the board.

Ismee served on the board of directors of 1MDB until 2016, by which time billions of ringgit had already been funnelled out of the company, the bulk of which had been transferred to Low-controlled bank accounts as well as Najib’s personal AmBank accounts, bank records show.

Throughout Ismee’s time on the stand as a witness, he agreed to suggestions put to him by both the prosecution and Najib’s defence team even though some contradicted each other.

For instance, he agreed that Najib and the board were “conned” into entering the JV when Najib’s lead counsel Tan Sri Muhammad Shafee Abdullah suggested that the former prime minister had been duped, as the management of 1MDB had crafted detailed proposals to con both him and the board.

Shafee: In your wildest imagination, do you think Najib, the then PM would be involved in directing on how to con 1MDB? Can you imagine?

Ismee: I don’t think any PM would have time for that.

Ismee testified last year that Najib had pushed for the fundraising exercise over the objections of Sultan Mizan and the board, even though TIA was then under the purview of the sultan and Terengganu state government. Following the sultan’s dissatisfaction with the running of the fund, the federal government took control of the entity and renamed it 1MDB.

When cross examined by Najib’s team, however, Ismee said he might have been wrong to assert in his witness statement that Najib had wanted the bond issuance to be executed.

Najib’s other lawyer, Datuk Hariharan Tara Singh, showed him a letter that stated that Najib had agreed to postpone the fundraising exercise pending due diligence.

Hariharan: In [the] light of what I’ve just shown you, Najib agreed to withhold [the bond issuance]. Could I be correct to say that his reaction was that he didn’t want this bond [issuance] to be continued? It appeared that Najib was not pushing for the IMTN.

Ismee: Yes ... Maybe my anggapan (assumption) was wrong.

Ismee also agreed that Najib’s fingerprints were “not” seen in 1MDB’s mismanagement of an estimated US$2.3 billion in promissory notes, which were subsequently invested in Bridge Global Absolute Return Fund SPC but eventually turned out to be worthless.

He also said 1MDB’s board of directors was never briefed by the 1MDB management on the purported investment in Bridge Global.

Shafee: You know the reason why I asked you this is because it goes to the heart of our defence. Did you see somewhere the fingerprints of my client? With what was being done with the way the management [of 1MDB] purposely mishandled these funds, do you see the fingerprints of my client?

Ismee: With what you have shown, no.

Upon re-examination by prosecutor Datuk Seri Gopal Sri Ram, however, Ismee was taken through the money trail emanating from the bond issuance to how Najib had received US$20 million via his personal accounts in two tranches of US$10 million each, one tranche received via his personal AmBank account with number ending “694” on Feb 24, 2011, and the second tranche on June 14, 2011, which emanated directly from TIA’s bond issuance. The US$20 million amounted to an equivalent of RM60 million.

Sri Ram: Part of the US$700 million went into Najib’s account; so, to the suggestion which was put to you that he did not receive any benefit from this IMTN, would you now like to review your answer?

Ismee: These documents were not shown to me during the cross-examination. From what I see here, I can see the flow of money which went into the accused’s [Najib] account.

Sri Ram also asked Ismee whether Najib had also benefited from “Phase 4” of the 1MDB-Tanore case, which revolved around a 1MDB Deutsche Bank loan, RM50 million of which ended up in a bank account with the number ending “880” belonging to Najib. Deutsche Bank’s US$1.225 billion loan was made up of a US$250 million bridging loan and a facility loan of US$975 million.

Ismee was shown charts of the money that went through several entities and then trickled into Najib’s accounts.

Sri Ram: Having looked at these charts, would you like to review your answer that the accused (Najib) did not benefit from these?

Ismee: From the chart, I can see that the funds went into the account.

Sri Ram: Funds from 1MDB?

Ismee: Yes, correct, from Deutsche Bank.

Ismee told the court that he had wanted to step down from the board in 2015, as he did not want any further part in making decisions for the company.

He said he submitted his resignation letter to Datuk Amhari Efendi Nazaruddin, who was Najib’s special officer then and who had asked him to stay on. Eventually, in 2016, the board and management resigned after 1MDB appointed a new board and management.

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