KUALA LUMPUR (Aug 16): Former Bank Negara Malaysia (BNM) governor Tan Sri Dr Zeti Akhtar Aziz said the central bank stopped heavily indebted 1Malaysia Development Bhd (1MDB) from a “grand scheme” in 2014 to borrow even more money — to the tune of RM4.9 billion — from foreign offshore sources.
This was especially since 1MDB was still unable to provide any information in 2014 on what funds were invested overseas, because "there were none".
Zeti, who was testifying as the prosecution's 46th witness in former prime minister Datuk Seri Najib Razak’s 1MDB-Tanore trial, told the court on Wednesday (Aug 16) that there had been increasing suspicion over 1MDB and the dubious nature of its transactions. At the same time, the central bank had to consider that the state-owned entity may have to keep money overseas to repay its foreign debt.
Najib’s lawyer Tan Sri Muhammad Shafee Abdullah had asked Zeti about the attempt by 1MDB to get BNM's approval to raise an additional RM4.9 billion in 2014 by issuing more bonds. Zeti explained that based on increasing information from the foreign network of regulators, 1MDB wanted to use the amount raised to pay off existing debt, even though it was not able to explain how it became so indebted.
"I would like to say that while these details were being addressed in 2015, even in 2014, they (1MDB) tried to take on foreign debt again, and had to make an application on June 3, 2014. This was well before the [information] from foreign authorities.
"BNM rejected this application, and therefore it put a stop to the grand scheme they [had] developed," she said.
Zeti said 1MDB had appealed to the central bank to reconsider its decision but, she explained, BNM rejected the application as 1MDB had incurred a high level of debt since 2009, which was a big problem for the country.
The government had guaranteed the US$1 billion raised by 1MDB in 2009, which it used to acquire a 40% stake in a joint venture (JV) with PetroSaudi International Ltd. The US$1 billion was to be remitted overseas to PetroSaudi, but the sum was split into tranches of US$700 million (which ended up with Good Star Ltd, an outfit linked to fugitive financier Low Taek Jho or Jho Low), and US$300 million (which ended up with an outfit for the intended JV).
Having failed at getting BNM's approval in 2014, Zeti said that 1MDB then tried to approach the Securities Commission Malaysia to help with its fundraising needs. However, Zeti said she did not know the details.
Najib is on trial on four counts of abuse of power and 21 counts of money laundering involving RM2.28 billion of 1MDB funds.
The trial before judge Datuk Collin Lawrence Sequerah continues on Thursday.
The Edge is covering the trial live here.
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