KUALA LUMPUR (March 11): A liquidator for SRC BVI, a subsidiary of SRC International Sdn Bhd, told the High Court on Monday that a sum of US$1.18 billion or the bulk of the Retirement Fund Inc (KWAP) loans of RM4 billion was not used for the intended purpose of investing in the energy and resource sectors.
Angela Barkhouse, a Briton, who is the second witness in the SRC International civil suit trial to recover the sum from former prime minister Datuk Seri Najib Razak, said when Bank Negara Malaysia (BNM) allowed the loans from KWAP to SRC International in 2011 and 2012, the central bank set out conditions on Nov 3, 2011 that RM1.8 billion of the first loan of RM2 billion should only be used to acquire PT ABM Investama and Bumi Resources Tbk PT in Indonesia, and Gobi Coal and Energy Ltd and Erdens-Tavan Tolgoi in Mongolia.
Barkhouse, who was testifying online in the proceedings from the Cayman Islands, said on April 6, 2012, BNM required that the second KWAP loan of RM2 billion should be used for investment in the energy and natural resources industries, excluding oil and gas.
“Some funds were invested in PT ABM Investama and Gobi Coal and Energy Ltd. However, the majority of the KWAP loans was [not used] to acquire the four entities listed in the first BNM permission,” she said when testifying to SRC International counsel Kwan Will Sen.
Barkhouse further said that for the misappropriated amount of US$1.18 billion, a sum of US$864.4 million was transferred to Cistenique Investment Fund BV (US$357.5 million) between April 17, 2012 and April 3, 2014, in addition to Enterprise Emerging Market Funds BV (US$481 million) between Dec 23, 2011 and July 2 2012, and Pacific Rim Global Growth Ltd (US$12.19 million) on Dec 20, 2013.
The remainder, she added, went to Muraset Ltd (US$15 million) on Dec 27, 2011, and Gobi Resources Coal Ltd (US$4.5 million) on Feb 2, 2012.
“None of the payments made to Cistenique, Enterprise Emerging Funds, or Pacific Rim were made in furtherance of investment in the energy and resources sector. They were in fact vehicles used to obfuscate the movement of funds misappropriated from SRC International.
“[The transfers] purported to hold legitimate investment portfolios and to be independent investment funds. Their true purpose was to operate as conduits, designed to allow money to be funnelled to third parties, while providing a plausible but false representation that misappropriated funds had been invested,” Barkhouse added.
The witness said SRC International did not use the monies that it sent to SRC BVI in legitimate investment portfolios, and instead transferred the funds to third parties almost immediately following receipt, upon instructions.
“For example, in the case of Cistenique and Enterprise, my review of records obtained from the former liquidator of these entities shows that a complex system of related-party loan agreements and promissory note issuances had been created by the operators and facilitators to generate a paper trail to cover up the reality that they were conducting money laundering,” she said.
The witness said none of the funds transferred out of SRC International to SRC BVI's account appear to have been used to ensure “the long-term supply of energy and natural resources (other than gas and oil) for Malaysia”, which was the purpose for which SRC International was established.
Muraset owned by Jho Low
Barkhouse added that Muraset received funds from SRC BVI, as payment for three million shares in Gobi Coal Energy Ltd (GCE) in Mongolia, where GCE is a BVI incorporated company that held rights to two large open cut mines in Mongolia.
She said Aabar-SRC, a joint venture company between Aabar based in the United Arab Emirates and SRC International was formed in 2011 and incorporated in 2011 had acquired 14 million shares in GCE.
“While this appears to be a transaction made in accordance with investment into the energy and resources sector, the acquisition of these shares was conducted in a less than straightforward manner.
“This follows SRC BVI transferring US$15 million to Muraset. A transfer of BCE shares subsequently took place, in same day transactions on Jan 9, 2012. On Feb 2, 2012, SRC BVI paid the balance of US$4.5 million to GCE.
“There seems little commercial sense in the transfers to Muraset or GCE, a company which is linked to Jho Low. No basis for this payment has been identified and indicates that this was a mechanism to divert funds belonging to SRC International,” Barkhouse added.
She further explained that Aabar-SRC acquired GCE shares in advance of the initial public offering (IPO) that was to take place.
Barkhouse said GCE’s financial statements indicated the mines had never produced coal on a commercial basis or generated any revenue from mining operations.
Aabar-SRC acquired its shares in GCE in advance of a planned IPO in 2012. The funds from the pre-IPO were to be used to complete initial construction work on the mine and put in place infrastructure to further increase the value of the coal at IPO.
“I note that in the pre-IPO document for GCE, the lack of infrastructure was noted and GCE stated they planned to build a temporary road to the Chinese border for US$35 million. It is not clear why, in the ten years since the investment was made, this road has apparently not been completed,” she added.
Barkhouse is testifying as SRC International’s witness in the US$1.18 billion action against Najib for fraud, breach of fiduciary duties and breach of trust, conspiracy, tort of misfeasance in public office, conversion, dishonest assistance and knowing receipt of assets belonging to SRC International.
SRC International has already obtained judgment in default against former SRC International managing director and former CEO Nik Faisal Ariff Kamil in Nov 2021 who was named as a defendant.
Najib has pulled in several former SRC International directors, namely Datuk Suboh Md Yassin, Datuk Shahrol Azral Ibrahim Halmi, Tan Sri Ismee Ismail, Datuk Mohammed Azhar Osman Khairuddin and Nik Faisal Ariff Kamil, as third party respondents.
Initially they were named as defendants in the suit.
Other payments out of SRC BVI
Barkhouse also testified that besides a sum of US$864.4 million, a sum of US$250 million was transferred from SRC International to SRC BVI’s Julius Baer bank account.
She said the US$250 million were subscribed to three segregated portfolios namely Asia Momentum Fund (SPC) Ltd incorporated in Cayman Islands.
“A sum of US$50 million were transferred to Asia Momentum A segregated fund on Dec 5, 2011, another US$120 million to Asia Momentum Fund B on Nov 25, 2011, and a sum of RM79.7 million in Asia Momentum Fund C,” Barkhouse said, adding part of the Asia Momentum A and B account made its way to PT ABM Investama Tbk, an Indonesian coal mine and contracting services.
“None of the investments appear to ensure 'the long-term supply of energy and natural resources (other than gas and oil) for Malaysia', which was the purpose for which SRC International was established.
“The only exception may have been the stake in PT ABM Investama Tbk. However, this investment also does not fit with the stated purpose of SRC International by being non-renewable energy,” she added.
Barkhouse said there was a third layer of payments in the money laundering exercise after the money was transferred from SRC International to SRC BVI and the various entities named, where a portion.
“Out of US$300 million from the US$357.5 million received by Cistenique, a sum of US$150 million was received by Prime Choice Company on April 18, 2012, a company majority owned by Prince Faisal bin Turki bin Bander bin Abdulaziz Al Saud (Prince Faisal) and the remainder US$150 million transferred on June 18, 2012 to Triangle Commodities, a company in Saudi Arabia that is majority owned by Prince Faisal and Prince Saud bin Abdulaziz bin Majed bin Abdulaziz Al Saud.”
Other funds, she said, made their way to Blackstone Asia Real Estate (US$35.5 million and Affinity Equity International Partners (US$14.9 million).
She added that out of the US$14.9 million channel to Affinity Equity, a sum of US10.75 million made its way to Platinum Global Luxury Services Ltd (BVI) and Blackrock Commodities (Global) Ltd BVI (US$1.75million)
Barkhouse said Platinum Global and Blackrock are companies owned by Eric Tan Kim Loong, an associate of Jho Low.
“I have identified no links between Blackrock and Platinum and the energy and resources sector and, based on my review of financial information received to this date, it appears that these were shell companies that conducted no legitimate business, other than to launder funds misappropriated from 1MDB and SRC International,” she added.
The hearing before High Court judge Datuk Ahmad Fairuz Zainol Abidin continues.