This article first appeared in The Edge Financial Daily on September 26, 2019 - October 2, 2019
KUALA LUMPUR: Tan Sri Mohd Bakke Salleh and Tan Sri Azlan Zainol were the only 1Malaysia Development Bhd (1MDB) directors who scrutinised the irregularities surrounding the 1MDB-PetroSaudi International Ltd (PSI) joint venture (JV) in 2009, which eventually spiralled to burn a sum of US$1.53 billion in 1MDB’s pocket.
This was mentioned in the High Court yesterday by Datuk Shahrol Azral Ibrahim Halmi, who is the ninth prosecution witness in the 1MDB-Tanore trial to testify against former prime minister Datuk Seri Najib Razak.
In his testimony, Shahrol distanced himself from the irregularities which he signed off as then 1MDB chief executive officer — with the excuse that he relied on “legitimate law firms” like Wong & Partners, and “experts” such as Low Taek Jho (Jho Low) and his affiliate Casey Tang (then 1MDB executive director) on the eligiblity of the JV.
Mohd Bakke’s involvement in 1MDB ended when he resigned as chairman on Oct 19, 2009, while Azlan quit on Jan 11, 2010.
Recall that in 2009, Najib and financier Jho Low moved for 1MDB to enter into a 40:60 JV agreement with Saudi Arabia’s PSI supposedly as a government-to-government initiative.
The JV, 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.
“During the presentation of the JV by [then 1MDB executive director] Casey Tang on Sept 18, 2009, Tan Sri Mohd Bakke and Tan Sri Azlan did not seem confident in the investment proposal,” Shahrol testified.
“They had doubts whether it really involved a company belonging to the Saudi Arabia government … in fact, Tan Sri Mohd Bakke wanted PSI representatives to come and present the JV to the [1MDB] board of directors themselves.”
The presentation did not happen. According to Shahrol, Najib spoke to Mohd Bakke on the phone during the subsequent board meeting on Sept 26, 2009 asking the board to expedite the proposal’s approval.
However, after the JV agreement was signed, PSI said its US$1.5 billion asset injection into the JV entailed a US$700 million advance for 1MDB, which means 1MDB owed PSI.
Shahrol instructed 1MDB to divert US$700 million from the US$1 billion JV equity investment into an account belonging to Good Star Ltd, on the grounds that PSI said Good Star was its affiliate.
The incidents were informed by Shahrol in the 1MDB board of directors meeting on Oct 3, 2009.
Here, Mohd Bakke scolded the entire management, including Shahrol and Tang.
Among others, this was because of the fund diversion, as well as the fact that the assets injected by PSI underwent paper valuation only, thus raising the uncertainty of the valuation and quality of the assets.
“He (Mohd Bakke) instructed us (Shahrol and Tang) to try and recoup the US$700 million,” Shahrol added.
In the subsequent board meeting a week later on Oct 10, 1MDB shortlisted four valuation firms to undertake revaluation of the injected assets.
“However, Tan Sri Mohd Bakke was still not satisfied with all my explanations [on the follow-up]. Soon after, he resigned as a director of 1MDB on Oct 19,” Shahrol said.
The appointment of Wong & Partners — which has served Jho Low’s other companies previously — raises the question as to why a private law firm was appointed for a government-linked company.
Shahrol had testified that an external firm would work faster to facilitate the JV.
Under the workings of Jho Low and PSI, 1MDB got itself in a position where it had to fork out another US$830 million to the 1MDB-PSI JV — of which US$500 million went missing and US$330 million was transferred to Good Star.