KUALA LUMPUR (Sept 25): Former prime minister Datuk Seri Najib Razak said on Wednesday that it was “quite perposterous” to suggest that he had power over SRC International Sdn Bhd’s board of directors.
Najib, who is taking the stand in SRC’s US$1.18 billion (RM5.58 billion) civil suit against him, had rejected testimonies of former director Datuk Suboh Md Yassin and former chairman Tan Sri Ismee Ismail which suggested that he had the power to “hire and fire” any directors of SRC.
Reading off his sworn witness statement, Najib said the power to appoint or remove any director is usually in the hands of the shareholders of a company.
Najib, who was the sole shareholder of SRC in his capacity as the finance minister at the time, said he had never used it to fire any director of SRC despite all the “hullabaloo” around the power.
“As I understand corporate governance principles, this does not detract from the directors' statutory and legal duties to act in the best interest of the company,” he said.
SRC directors blindly listened to Nik Faisal, says Najib
The powers over SRC vested in the hands of the PM was “quite normal” when it comes to government-linked companies (GLCs), Najib said.
“This does not mean that the GLCs blindly adhere to what is orally represented to them as being directions of the PM or minister of finance or any other person.”
Najib then said that the board of directors should have known that they were the fiduciaries entrusted by him and the government to decide on matters for the best interest of the company.
Continuing to read off his statement before judge Datuk Ahmad Fairuz Zainol Abidin, Najib said it was “a clear dereliction of duty” if the board was blindly listening to the company’s former chief executive officer Nik Faisal Ariff Kamil — who is currently at large — without verifying with him or the Ministry of Finance.
Articles in SRC’s constitution not a form of control, says Najib
Najib also shrugged off concerns over Articles 67 and 116 of SRC’s company constitution which spelled out that certain matters could not be implemented by the board of directors without the express approval of the prime minister.
“When singled out and viewed in a vacuum, Articles 67 and 116 may appear overarching,” Najib continued. “That is a blinkered view of how GLCs operate.”
He cited memorandum and articles of association of other GLCs such as Permodalan Nasional Bhd (PNB) and Khazanah Nasional Bhd which state that only the prime minister can appoint the chairman of the board who would be compelled to act according to the directions of the prime minister.
“The rationale for such power to be vested in the prime minister simply is to enable the prime minister to ensure that the chairman’s leadership of the company is at all times aligned with the government’s policies and interests,” he continued, “this practice has always been in place even with previous prime ministers and the same rationale had applied to the appointment of directors in PNB and Khazanah.”
He said provisions in the constitution of those GLCs are even more “encompassing” than that of SRC’s Articles 67 and 116. “These powers cannot equate to any form of overarching control over the company,” he stressed.
Further, Najib said the prime minister cannot appoint directors without prior approval of the board and cannot remove any directors without prior resolution by SRC.
SRC filed the RM4 billion suit against Najib and Nik Faisal in May 2021. Initially, the suit also named former company board members Tan Sri Ismee Ismail, Datuk Suboh Md Yassin, Datuk Mohammed Azhar Osman Khairuddin, Datok Shahrol Azral Ibrahim Halmi and Datuk Che Abdullah @ Rashidi Che Omar as defendants.
They were dropped later, only for Najib to bring them back again as third parties. A defendant can initiate this against a third party who is not part of the main suit, in order to claim any contribution, indemnity or remedy which is claimed by the plaintiff.
SRC claims that out of the total KWAP loan of RM4 billion, a sum of RM3.6 billion was immediately transferred out when the funds came into SRC, of which a sum of US$120 million eventually ended up in Najib’s bank account.