KUALA LUMPUR (Jan 13): Former 1Malaysia Development Bhd (1MDB) president Arul Kanda Kandasamy told the High Court on Monday that there was no merit to the allegations made by his former company, that he had failed to inquire, investigate or ascertain, and recover the investments the company had lost.
Testifying in his defence to 1MDB’s US$6.59 billion suit against him and former Treasury secretary-general and former 1MDB board of advisors chairman Tan Sri Mohd Irwan Serigar Abdullah, before judge Datuk Raja Ahmad Mohzanuddin Raja Mohzan, Arul Kanda also disagreed that he had acted against 1MDB’s interests.
Arul Kanda further denied that he had failed to investigate or ascertain the wrongdoings of 1MDB officers and take appropriate action against the wrongdoers, as identified in the Public Accounts Committee (PAC) report and also the United States Department of Justice’s forfeiture action.
Replying to questions from his counsel Sanjay Mohan, Arul Kanda said he had no knowledge of any fraud and wrongdoing when he joined 1MDB on Jan 5, 2015.
“1MDB accepted that I was not involved in any of the alleged fraudulent transactions. My role within 1MDB was focused on reducing the outstanding debt, and not investigating past transactions which were left to the authorities to investigate,” he said.
In addition, Arul Kanda said that within 1MDB, there were many senior level former management who were directly responsible for various operational, administrative, financial, reporting, legal, and other activities for the companies.
“These individuals had been carrying out their roles and working on various transactions well before I joined 1MDB, and continued to do so after I joined. Again, at that time, I had no reason to suspect these individuals of any wrongdoing, and hence I was justified in asking them for information and relying on information they shared with me and explanations they provided on various matters.
“In 2015 and 2016, various investigations were conducted by the Malaysian authorities, none of which suggested that there was any wrongdoing. However, the PAC in its report on April 7, 2016, makes it clear that the authorities were to carry out the necessary further investigations,” he said.
Arul Kanda said the allegations made by 1MDB against him were made with the benefit of hindsight and additional information was not made available to him when he was employed.
Recruited by Ashvin Valiram
He also told the court that he graduated with a law degree from the London School of Economics, and possesses a master’s in law from University College London, and called to the England and Wales Bar.
Despite this, he said he worked as an investment banker in London and then in the Middle East, and he developed a specialisation in financial restructuring of heavily indebted companies.
“I would work with company management, lenders, and other advisers, to see how the debts of companies which are in financial distress can be restructured and reduced, through a combination of operational, business, and financial restructuring,” he said, adding that he was a member of the restructuring committee for the Dubai World financial restructuring, comprising US$14.6 billion of debt.
Arul Kanda said he felt that after nearly 20 years of spending his life away from Malaysia, he felt a need to return home and be with his family, and this he decided after meeting up with former 1MDB director Ashvin Valiram.
“Ashvin informed me of his concerns that 1MDB had a large debt load which was veering into distress, and projects which were stalled. Accordingly, he suggested that given my background, I should consider a role in the financial restructuring of 1MDB,” Arul Kanda said, adding that in December 2014, he had an interview with 1MDB board of directors’ chairman Tan Sri Lodin Wok Kamaruddin, and got the post.
Cross-examined by 1MDB
During cross-examination by 1MDB’s lead counsel Datuk Lim Chee Wee, Arul Kanda was asked whether he had made any attempt to retrieve the US$700 million that was transferred out to Good Star Ltd, in the purported bad deal by 1MDB with PetroSaudi International (PSI) in 2009.
The former 1MDB president said he also found out that fugitive businessman Low Taek Jho (Jho Low), who was the beneficiary of Good Star, was named in the Auditor General’s report in 2009.
Lim: As the president and director [at the material time], you were aware of the fund flow of the Good Star?
Arul Kanda: Well, yes, the awareness came in 2016; prior to that, no.
Lim: Have you, with your knowledge, instructed lawyers to pursue the recovery of the US$700 million?
Arul Kanda: It’s a bit speculative, but yes, I agree, if I had done that at that time, yes, it may be possible that we would have recovered this fund.
As mentioned, Arul Kanda was 1MDB president in January 2015, and the transaction involving PSI was in 2009.
This was for 1MDB’s purported joint venture with PSI, for investment in the energy sector in Turkmenistan, where it was agreed to form a joint venture company called 1MDB-PetroSaudi Ltd with a US$1 billion investment.
However, as shown in court documents, instead of the money being transferred to the joint venture company, the US$700 million made its way to Good Star, which was controlled by Jho Low, and the remaining US$330 million made its way to PetroSaudi Holdings (Cayman) Ltd.
The money from 1MDB was raised from the RM5 billion Islamic Medium Term Notes (IMTN) from AmBank that was issued to the company, whose predecessor was the Terengganu Investment Authority.
Prior to this, 1MDB investigator Richard Templeman had said that Arul Kanda had nothing to do with 1MDB deals prior to 2015. Lim in his opening statement, wanted the court to identify whether Arul Kanda and Irwan had a role through their actions in causing 1MDB to suffer losses.
1MDB filed the suit against Arul Kanda and Irwan in May 2021, alleging that they are liable for breaches of duties and 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.
1MDB also alleged that Arul Kanda and Irwan had committed breach of trust and conspiracy by misappropriating US$3.5 billion of 1MDB money and paying it to Aabar Investments PJS Ltd — a shell company pretending to be a subsidiary of the International Petroleum Investment Company (IPIC) — and subsequently paying another US$1.265 billion to IPIC in May 2017.
1MDB also claimed that 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.
Besides this suit by 1MDB, Arul Kanda had filed a counter claim seeking a return of the payment and bonus that was entitled to him when he was removed from 1MDB in 2018, after Pakatan Harapan won the May 2018 general election.
Lavinia Kumaraendran appeared for Irwan in the proceedings.
The trial before Raja Ahmad Mohzanuddin continues on Tuesday.