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This article first appeared in The Edge Financial Daily on September 18, 2019

KUALA LUMPUR: Former 1Malaysia Development Bhd (1MDB) chief executive officer (CEO) Datuk Shahrol Azral Ibrahim Halmi (pic) was the one who suggested to Datuk Seri Najib Razak to take over the Terengganu Investment Authority (TIA) from Terengganu Menteri Besar Inc (MB Inc) to form 1MDB, the High Court heard yesterday.

Najib’s lead counsel Tan Sri Muhammad Shafee Abdullah said this when cross-examining the ex-premier’s former aide Datuk Amhari Efendi Nazaruddin in the 1MDB-Tanore trial.

Muhammad Shafee cited a letter dated June 25, 2009 written to Najib by Shahrol, then TIA CEO. The letter advised the former prime minister to buy TIA shares from Terengganu MB Inc.

Shahrol gave the advice after the Terengganu state government hesitated in issuing a RM5 billion sukuk.

The proposal for the federal government to take over the TIA was then brought to the cabinet. Muhammad Shafee presented a letter to Amhari, proving the cabinet then gave the approval for Minister of Finance Inc to buy TIA shares from Terengganu MB Inc.

“You can see that Shahrol Azral made the suggestion, perhaps out of desperation, because things were not moving as he had expected at the TIA in Terengganu,” said Muhammad Shafee.

The senior lawyer suggested to Amhari, the eighth witness in the trial, that Shahrol might have gotten frustrated with little progress in the issuance of the RM5 billion Islamic debt papers that would have been guaranteed by the federal government, and that Shahrol viewed that having the ministry of finance (MoF) taking over the state-owned investment fund would have helped resolve the matter.

The lawyer also suggested that Shahrol may have also believed the MoF could waive the federal government’s guarantee, a condition required for the RM5 billion sukuk. The condition attached was that the TIA must be wholly owned by Terengganu MB Inc.

“Not only that it was Shahrol who suggested for the federal government to take over the TIA, [but] Shahrol was [also] the first to come up with the MDB name minus the 1. MDB was in fact Shahrol’s suggestion.

“So [judging] from this letter, it didn’t look like the [then] prime minister or minister of finance, Datuk Seri Najib, decided [on the acquisition],” Muhammad Shafee told the court.

Earlier, Muhammad Shafee claimed the fallout in the TIA started when the Terengganu state government sent an acrimonious letter dated May 22, 2009 to Najib, alleging the RM5 billion sukuk raised through the TIA was issued without any representation of Terengganu MB Inc, the major shareholder of the TIA.

As such, Terengganu MB Inc sent the letter to Najib in an attempt to suspend the Islamic bond issuance, when in fact the debt papers had been issued or at least partially issued, Muhammad Shafee claimed.

During cross-examination earlier, Muhammad Shafee said the TIA was formed after a suggestion by then Yang di-Pertuan Agong Sultan Mizan Zainal Abidin, to ensure the state continues receiving some form of revenue should its oil wells dry up.

Muhammad Shafee showed Amhari the minutes of the cabinet meeting dated Dec 12, 2008, in which the members discussed a proposal to form the sovereign wealth fund with RM10 billion as announced by Sultan Mizan, who met former prime minister Tun Abdullah Ahmad Badawi before the cabinet meeting.

Part of the funding would have come from the issuance of bonds, and the rest from Terengganu’s future oil revenue.

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