KUALA LUMPUR (Oct 29): 1Malaysia Development Bhd (1MDB) spent over RM300 million in the last five years, between Aug 30, 2019 and Aug 30, 2024, mainly on legal fees in its efforts to recover its assets, the High Court heard on Tuesday.

This was revealed by Afidah Azwa Abdul Aziz, 49, who is part of the Ministry of Finance's Strategic Investments Division and the current director of 1MDB. She is testifying in 1MDB’s US$6.59 billion lawsuit against its former CEO Arul Kanda Kandasamy and board chairman Tan Sri Irwan Serigar Abdullah, who was also the former treasury secretary general.

The exact sum, RM313.81 million, was logged as operational expenses, Afidah told the court when questioned by Arul Kanda's lawyer Sanjay Mohan.

Sanjay: Does 1MDB still have any businesses or operations that it still has this many expenses?

Afidah: No, this was for legal costs.

Sanjay: Over RM300 million for legal fees? Is that right?

Afidah: 1MDB is in the process of recovering its assets.

Sanjay: So, the operational expenses to recover the assets is RM300 million?

Afidah: Yes.

She also said that during the period, 1MDB spent RM24.66 billion on the interest and repayment of the bonds it issued as well as the loans it took.

Of the RM24.66 billion paid, the bulk of it was used to pay off the principal and interest on three bonds — the US$1.75 billion 1MDB Energy (Langat) Ltd (1MELL) and US$1.75 billion 1MDB Energy Ltd (1MEL) bonds, which matured in 2022, and a US$3 billion 1MDB Global Investment Ltd (1MDB GIL) bond that matured in 2023.

Part of the money was also used for the coupon payments on an Islamic Medium Term Note (IMTN) or sukuk that will mature on May 27, 2039.

She said the money came from the 1MDB Assets Recovery Trust Account, which is the account where money from 1MDB’s various settlements with Goldman Sachs, Abu Dhabi's International Petroleum Investment Co (IPIC), KPMG and Deloitte were channelled to.

As at Aug 31, 2024, the account had received RM27.166 billion from the government's recovery of SRC and 1MDB's assets, Afidah said.

The defence lawyers — Sanjay, together with Irwan's lawyer Mavin Thillainathan — then observed that there was a surplus of a little over RM3 billion from what 1MDB had spent, compared to what had been recovered so far.

In response, Afidah said what 1MDB lost is more than the amount recovered to date.

Mavin then asked her about Arul Kanda's role in the debt accrued by 1MDB, saying most of the debts it had were accrued before Arul Kanda and Irwan joined the company.

Mavin: If both of them came in and investigated the past transactions, would it have made a difference on the sum and interests that need to be paid back?

Afidah: Yes, maybe.

Mavin: I put to you that [your answer] doesn’t make sense. The bonds and loans were done by 1MDB; we cannot change the sum that needs to be paid back. Until 2040, 1MDB has to pay [back the sums owed]. It doesn’t change the fact that the money should be paid. Agree or not?

Afidah: Whether investigations were done or not, 1MDB has to take money from MoF Inc and pay back the interests [on 1MDB's debts].

Afidah also testified that 1MDB still had an overdue debt of RM26.29 billion, including RM9.312 billion for the coupon payments of the IMTN that will mature on May 27, 2039.

The balance of RM16.981 billion is to repay the shareholder's advance from MoF Inc that was given to 1MDB to help it repay its debts, she said in the trial before Raja Ahmad Mohzanuddin Shah Raja Mohzan.

Earlier this month, Finance Minister II Datuk Seri Amir Hamzah Azizan announced that a total of RM27.17 billion linked to 1MDB had been recovered and placed in the Assets Recovery Trust Account as of end-September. He said the funds were used to pay off 1MDB debt and that the account has an outstanding balance of RM3.04 billion that will be used to pay off more debts. See: Amir Hamzah: RM27.17 bil linked to 1MDB recovered as of end-September

According to the Auditor General’s Report released on Oct 14, the federal government had provided a total of RM39.74 billion in guarantees to repay 1MDB’s debts between 2019 and 2023. These grants were used for principal repayments (RM29.62 billion) and other expenses, including bond interest and coupon payments (RM10.11 billion). See: Nearly RM40b in federal grants channelled to 1MDB, says Auditor General

1MDB filed the suit in May 2021 and claimed that both Arul Kanda and Mohd Irwan were liable for breach of duties and breach of trust, resulting in the company suffering losses amounting to US$1.83 billion in relation to its investment in 1MDB-Petrosaudi Ltd, which was converted into stakes in Brazen Sky Ltd and then converted into an investment in Bridge Global Fund.

It also alleged that Arul Kanda and Mohd Irwan had conspired to misappropriate US$3.5 billion of 1MDB money and channelled it to Aabar Investments PJS Ltd — a shell company pretending to be a subsidiary of IPIC — and paid another US$1.265 billion to IPIC in May 2017.

1MDB also claimed that Mohd Irwan had conspired with Arul Kanda to cause the fund to implement an employment extension agreement that resulted in it paying RM2.91 million to Arul Kanda, regardless of 1MDB's interests, causing it to suffer losses and damage.

Among others, 1MDB is seeking RM30.91 billion from the duo as a result of the purported breaches and the return of the RM2.91 million from Mohd Irwan in relation to the employment extension agreement.