Wednesday 25 Dec 2024
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KUALA LUMPUR (May 9): The management of SRC International Sdn Bhd (SRC), specifically the company’s former chief executive officer Nik Faisal Ariff Kamil, had not complied with the directions of the board to repatriate RM3.6 billion which it had transferred to an overseas bank for a purported investment, the High Court was told here on Thursday.

Former director of SRC, Datuk Che Abdullah @ Rashidi Che Omar, 75, who is testifying in former prime minister Datuk Seri Najib Razak’s SRC US$1.18 billion (RM5.64 billion) civil suit, said that the board had requested Nik Faisal and the management to repatriate the funds, which had been borrowed from Retirement Fund Inc (KWAP); however, Nik Faisal did not comply with this direction, and this left Che Abdullah with no choice but to resign from his position as a director of SRC.

During cross examination, Najib’s lawyer Muhammad Farhan Shafee had asked Che Abdullah about Nik Faisal, who is currently on the run from the authorities for his role in the SRC debacle.

Muhammad Farhan: With the benefit of hindsight, would you say that Nik Faisal didn’t comply [with directions] to repatriate the funds, or rather that he was dragging his feet?

Che Abdullah: Certainly [he was]. I gave him one year to repatriate the funds, and after that [time was up], I resigned from the board.

In answering questions from Farhan, Che Abdullah said that at that time, the board was focused on repatriating the funds back, and the board felt that they could bring back the funds internally without informing SRC’s shareholder. SRC’s shareholder was Najib, who was then minister of finance, as well as the advisor emeritus of SRC.

Muhammad Farhan: As for repatriating the funds, you didn’t check with the main shareholder or inform him?

Che Abdullah: Bringing back the funds was our concern. We wanted to bring back the funds; that was our main concern.

Muhammad Farhan: You kept (the repatriation) internal?

Che Abdullah: We believed we could repatriate the funds internally.

Muhammad Farhan: I suggest that is a bad belief, as no movement happened and no money was recovered.

Che Abdullah: I agree with you.

Muhammad Farhan: With the benefit of hindsight, of course.

Former prime minister Datuk Seri Najib Razak seen at the Kuala Lumpur Courts Complex on Thursday, May 9, 2024 for his SRC civil suit.

To another question, Che Abdullah told the court that no due diligence was conducted on the first tranche (worth RM1.8 billion) of the RM3.6 billion, before it was transferred offshore for purported investment activities.

“My understanding is that the due diligence must be performed before you proceed with the investment. After investment, you can only monitor. The money was already transferred out, [so] what due diligence can be done?” asked Che Abdullah in reply.

On Nov 3, 2011, Bank Negara Malaysia (BNM) had granted permission to SRC to transfer the RM1.8 billion from the first tranche of funds to SRC British Virgin Islands (SRC BVI), a shell company under SRC, on condition that the sum was to be used to acquire specific overseas companies as identified in the energy and resources sector; that the RM1.8 billion was to be deposited with a licensed local bank; and that the sum was only to be transferred to SRC BVI after investment negotiations with these overseas companies were concluded. 

This was not complied with by the SRC management and Nik Faisal. No due diligence was carried out on these overseas companies prior to the purported investment activities being carried out. The purported investment activities were a departure from the nature of business and the objectives of SRC, and the money was transferred out to an overseas account before any investment negotiations were concluded.

Najib had allegedly disregarded the (conditions of the) first permission by BNM through resolutions he had passed in SRC, as he was a shareholder through the Ministry of Finance Inc (MOF Inc).

The second tranche of funds was transferred on April 6, 2012, and BNM had again granted permission for SRC to transfer the second RM1.8 billion from the second tranche of funds to SRC BVI. BNM had set another set of conditions such as: the sum was to be used for the energy and natural resources industry, but excluding oil and gas; SRC BVI was to deposit the funds in a foreign currency account with BSI Bank and Julius Baer; (and that) the sums were to only be transferred out from the bank after negotiations on these investments had been concluded. 

However, money to the tune of US$864.5 million was transferred to SRC BVI even before the board of SRC had had the chance to pass the resolution on the utilisation of the funds, and before BNM’s second permission had been granted.

It is from this money that SRC claims that US$120 million had entered Najib’s personal bank account.

Besides Najib, SRC is also suing Nik Faisal. SRC alleges that Najib, who was its advisor emeritus from May 1, 2012, until March 4, 2019, had abused his power and obtained personal benefits from the company’s funds, as well as misappropriated the funds.

SRC wants a declaration from the court that Najib is liable for the company’s losses due to his breach of duties and trust, and for Najib to pay the US$1.18 billion in losses it had suffered, together with damages for breaches of duties and trust. SRC also wants an order for Najib to compensate the company for the US$120 million that allegedly went into his bank account.

The SRC lawsuit had initially included Che Abdullah, together with other SRC directors at that time — former 1MDB director Tan Sri Ismee Ismail, and former SRC directors Datuk Mohammed Azhar Osman Khairuddin and Datuk Suboh Md Yassin — as defendants in the case, but later dropped them.

Najib, however, brought them back as third parties in the suit. A defendant can seek to do so, in order to claim contribution, indemnity, or any remedy which is claimed by the plaintiff.

In the meantime, SRC has obtained a judgement in default against Nik Faisal, who was named as Najib’s proxy, in the civil suit.

Najib, meanwhile, has been in jail since Aug 23, 2022. He was sentenced to serve a 12-year jail sentence and fined RM210 million after being convicted of misappropriating RM42 million of SRC’s funds. However, his jail sentence was recently reduced to six years, while the fine was cut to RM50 million by the Pardons Board.

Edited ByAniza Damis
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