KUALA LUMPUR (April 12): Former 1Malaysia Development Bhd (1MDB) chairman Tan Sri Mohd Bakke Salleh agreed to suggestions that 1MDB management was taking “instructions from above the board”, namely from former prime minister Datuk Seri Najib Abdul Razak, when it entered into a sham joint venture (JV) with a Saudi company in 2009 that led to the immediate siphoning of US$700 million to Good Star Ltd, a company linked to businessman Low Taek Jho.
Bakke, who was testifying at the 1MDB audit tampering trial, told the court on Tuesday (April 12) that the management of 1MDB had shown “arrogance” in not listening to the board’s instructions regarding a JV which was to be entered into between the company and PetroSaudi Ltd.
In 2009, Najib and financier Low moved for 1MDB to enter into a 40:60 JV agreement with Saudi Arabia’s PetroSaudi International Ltd (PSI), in what was mooted as 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.
However, after the JV agreement was signed, 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 chief executive officer Datuk Shahrol Azral Ibrahim Halmi, 1MDB diverted US$700 million from the US$1 billion JV equity investment into an account belonging to Good Star, on the grounds that PSI had said that Good Star was its affiliate.
The money had then been siphoned off by Jho Low to pay bribes and kickbacks to many overseas and local officials including Najib.
Bakke said previously that he had wanted to resign because of the way 1MDB management had remitted the US$700 million to Good Star, a totally unrelated entity.
Bakke testified that prior to this JV being agreed upon, the board had laid out four conditions for the management to fulfil before 1MDB could sign on the dotted line with PetroSaudi. However, the management led by Shahrol had not adhered to the conditions.
“The conclusion drawn from this was that they (management) were taking instructions from above the board and outside the board,” he said under cross-examination from lawyer Tan Sri Muhammad Shafee Abdullah, who asked him if he had an opinion that 1MDB management was conspiring against the board.
He also said it meant that 1MDB management was taking instructions from Jho Low based on the manner the US$1 billion investment was executed arrogantly.
Shafee asked Bakke what his conclusion was 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,” Bakke replied, adding his suspicions were confirmed when he met Shahrol some six years later as the latter confirmed to Bakke that the management was only taking instructions from Jho Low and Najib.
“At that time it was a feeling (about Najib and Jho Low) I had, but this was confirmed by Shahrol six years later,” Bakke said.
Shafee replied: “Only after six years you began trusting Shahrol?”
“I met him and asked him how all this happened, he was taking orders from the prime minister and Jho Low. Not that I trusted him. I’m just sharing to you what he told me. I don’t trust him even until today,” Bakke said.
Upon re-examination by lead prosecutor Datuk Seri Gopal Sri Ram, Bakke admitted that the speed at which things were done with the JV and Shahrol not following instructions of the board were proof that he 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 resigned on Oct 19, 2009 as 1MDB chairman as he was angered by the whole deal.
Questioned by Arul Kanda’s lawyer Jasmine Cheong, Bakke agreed that during his tenure as chairman of both 1MDB and its predecessor Terengganu Investment Authority, Arul Kanda was not involved with the company and that he had also never met with Arul Kanda at the time.
Bakke was then released as a witness by High Court judge Mohamed Zaini Mazlan.
Najib and Arul Kanda have been charged under Section 23(1) of the MACC Act 2009. Najib is charged with abuse of power as a public officer (in his capacity as prime minister and finance minister) in having directed that the 1MDB audit report which was to be tabled to the Public Accounts Committee of Parliament in 2018 be altered. This was so that no action could be taken against him by Parliament. Arul Kanda is charged with abetting Najib.