Sunday 04 Jun 2023
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KUALA LUMPUR (May 9): Former 1Malaysia Development Bhd (1MDB) chairman Tan Sri Mohd Bakke Salleh said he had suspected that the 1MDB management bypassing the board and listening to instructions from a “higher level”, namely former prime minister Datuk Seri Najib Razak and fugitive financier Low Taek Jho (Jho Low), led to the immediate siphoning of US$700 million to Good Star Ltd, a company linked to Jho Low.

Bakke, testifying at the 1MDB-Tanore trial where Najib is charged with four counts of abuse of power in enriching himself with RM2.3 billion of 1MDB funds and 21 counts of money laundering of the same amount, was elaborating on the events that unfolded in 2009 where 1MDB entered into a sham joint venture (JV) with a Saudi company in that year which led to the siphoning of these funds by Jho Low.

In 2009, Najib and Jho 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 then 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, who is currently chairman of Petroliam Nasional Bhd, said on Monday (May 9) that he had “suspected” that the US$700 million transfer to Good Star came from Jho Low and Najib.

“I suspected that there were probably instructions given by a higher level to Shahrol, regarding the fund transfer of US$700 million, but I never questioned him throughout my tenure as a member of the board of directors. ‘By the higher level’ I meant probably Jho Low and Najib," he said. 

Bakke said that when his suspicions were proven to be true when the issue came to light in 2015 by media reports, he then asked Shahrol about the transfer, and Shahrol had told him that Najib had given him the mandate to confirm those funds.

“I met Shahrol after the embezzlement issue arose in early 2015. Shahrol told me he got the mandate from Najib to transfer those funds. However, Shahrol did not show me any documents in support of what he told me.

“Hence, I do not know and have not seen any documents approved or instructions given by Najib to Shahrol or to any individual in 1MDB with regards to the US$700 million transfer to PSI,” he said.

Bakke eventually resigned in October 2009. He testified that his reason for resigning was because Shahrol and the 1MDB management did not obey instructions the board had given them regarding several matters.

The matters Bakke listed are as follows:

  • The transfer of the US$1 billion in two tranches whereby US$700 million was transferred to PSI and US$300 million to the JVCo known as 1MDB-PetroSaudi’s account with J.P. Morgan, Switzerland — which contravenes the board’s instruction at a meeting dated Sept 26, 2009 to transfer the whole US$1 billion into the JVCo account at BSI Bank SA, Switzerland.
  • The plan to transfer the funds were never discussed with him or any member of the board by the management of 1MDB at any board meetings, apart from the meeting dated Oct 3, 2009 in which the transfers had already taken place.
  • Due diligence on PSI and Petrosaudi Holdings (Cayman) Ltd, which were the shareholders of the JVCo, was not done by the management of 1MDB.
  • A second independent valuation of the JVCo assets was not done by the management of 1MDB. On the contrary, the valuation was done based on the valuation of Edward L Morse, who was appointed by PSI. As a party who is interested in the investment in the JVCo, 1MDB should have independently appointed a valuer who could provide accurate and reliable information on the value of the JVCo’s assets.
  • The appointment of three individuals from 1MDB to the board of directors of the JVCo (where one of them has to be an expert in the oil industry) to ensure additional control of the JVCo’s management was also not done.

Najib asked Bakke to expedite the JV with PSI

Bakke said he had feelings of discomfort to embark on the JV and that 1MDB's board of directors was also uneasy about it. However, at a board meeting on Sept 26, 2009, which was held to obtain the approval of 1MDB’s board for the JV, Bakke said Najib had spoken to him and asked him to “quickly consider the proposal and firm up a decision on it”.

Before the meeting, Bakke said Jho Low had passed him the phone (belonging to Jho Low) to speak with Najib.

“Jho Low handed over his handphone to me and said 'PM on the line, want to speak to you'. I answered the call in the meeting room and I was certain that Najib himself was on the line. Najib said to me more or less, 'Bakke, the board should not be looking back to the past and questioning how the money was raised' — 'what is important is for the board to focus on the PetroSaudi proposal, where the discussions have been going on for quite some time' — 'I would like the board to quickly consider this proposal and firm up a decision on It' — 'this is an important project which is G-to-G in nature' — 'I’m looking forward to the signing ceremony for the project’. I told him 'I would inform the other board members and we will look into it',” Bakke testified.

Bakke said that he had instructed the board of Najib’s wishes at the meeting.

“After discussing with Najib, I informed all the BOD (board of directors) of 1MDB present at that time that the JV with PSI was at its highest level between both countries, that is a government-to-government [deal] and this had been dragging for some time. Najib instructed that the decision for the JV proposal with PSI be hastened and firmed up because there is a working visit from the Saudi royal family where the agreement will be executed by both countries,” he testified before Judge Datuk Collin Lawrence Sequerah.

Bakke will be cross-examined by Najib’s lawyers at a later date.

The Edge is covering the trial live here.

Users of The Edge Markets app may tap here to access the live report.

Edited BySurin Murugiah
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