KUALA LUMPUR (Sept 25): Despite his assertions that no prime minister in the world micromanages, Datuk Seri Najib Razak ought to have some oversight over SRC International Sdn Bhd, the High Court was told on Thursday.

Summing up SRC's civil case against the imprisoned former prime minister, SRC's counsel, Datuk Lim Chee Wee, impressed upon the court that SRC was not a "run-of-the-mill" company, but rather, was established in line with Najib's own goals for the nation — of diversifying energy sources.

Therefore, the counsel said that Najib's defence in the trial that he can't micromanage the company, and that the company's board was to comb through deals and spot red-flags, was not tenable. Lim added that Najib ought to have some oversight over the company. 

"The general contention that [Najib], as prime minister, was too busy to concern himself with due diligence and details is untenable. SRC was never a run-of-the-mill project.

"It involved RM4 billion of civil servants’ pension funds being channelled into a 'fledgling company [with] no proven track record', in pursuit of energy security for the rakyat and in line with [Najib’s] own aspirations under the 10th Malaysia Plan.

"Indeed, SRC was even conceptualised as an entity akin to Petronas. Ultimately, there was no energy security achieved," Lim told the court on Thursday.

SRC, a Finance Ministry-linked company, was established in 2011 to seek alternative energy sources, in line with national policy. However, the funds sought were all squandered.  

In 2010, 1Malaysia Development Bhd (1MDB) had requested a RM3 billion grant to set up a special purpose vehicle, SRC. However, it was granted only RM20 million, which led them to turn to Retirement Fund Incorporated (KWAP) for funding.

The current legal action, filed in 2021, concerns a RM4 billion loan from KWAP, which was given to SRC in two tranches in the second half of 2011 and the first half of 2012.

On Thursday, Lim argued that it was never SRC's case that Najib personally undertake feasibility studies or technical assessments of the company's ventures.

However, he stressed that as the "approving authority" of the Retirement Fund Incorporated (KWAP) and Government Guarantees, Najib, at the bare minimum, had to see to it that several areas were above board.

These include questions on whether the magnitude of the loan to “a fledgling company with no track record” was justified; whether upcoming investments were viable or even existed; and if a civil servant's retirement fund was a suitable financier for SRC, despite the Economic Planning Unit's (EPU) recommendation to consider other forms of financing from commercial banks, joint ventures, or bond issuances.

Lim said that Najib sought none of these due diligences, which could only point to two conclusions.

"[That Najib] was reckless in approving and personally pressing for a RM2 billion KWAP loan on an expedited basis in addition to a Government Guarantee without even knowing what these monies were to be utilised for; or

"What is more likely [is that Najib] knew that there was insufficient due diligence committed, but did not care to order for it to be done, as this would only make his eventual misappropriation of funds more cumbersome," Lim said.

Najib, 72, is currently serving his prison sentence after the apex court upheld his guilty conviction for criminal breach of trust, money laundering, and abuse of power of SRC funds amounting to RM42 million which was received between Dec 26, 2014 and Feb 10, 2015.

Besides the criminal case, SRC has also initiated civil cases against Najib. In this particular suit, the company is suing Najib on claims that, amongst others, US$120 million of company funds went into the ex-PM's personal account.

The company is seeking a declaration from the court that Najib is liable to account for the company's losses of US$1.18 billion due to breach of duties and trust.

It is also asking for an order for Najib to compensate US$120 million and for former SRC chief executive officer Nik Faisal Ariff Kamil to pay US$2 million to SRC International, as well as damages.

Initially, the suit had 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 as third parties. It is Najib's case that these directors had failed in their fiduciary duty when they had failed to thwart any misappropriation of funds.

Addressing this on Thursday, Lim said that Najib cannot "hide" behind the board or use its members as a scapegoat.

"The SRC Board cannot serve as [Najib's] scapegoat for matters falling outside their jurisdiction. The issuance of Government Guarantees, personal directions to KWAP for procurement of the loan, and the approval of short-term loans, were all under [Najib's] purview and approving authority".

Lim highlighted that the approval and disbursement of the first KWAP loan and the accompanying Government Guarantee predates the formation of the SRC board on Aug 23, 2011.

Lim stressed that Najib had "demonstrated a consistent propensity to bypass due diligence by any body, thereby creating the very conditions which enabled the SRC fraud to take root and ultimately come to the fore".

In their submissions, the third parties have, in gist, contended that SRC did not work like a regular company, as it was a very "top to bottom" approach where instructions came from the apex decision-maker.

They have also contended that Najib's claim against the third parties was not detailed specifically and therefore, cannot stand.

The ex-directors also claim that Najib, being at the time the prime minister and the minister of finance, had had access to various government agencies and departments to provide the necessary data and information which were not available to them. Therefore, there was no cause for suspicion that Najib's decision was in the best interest of the nation.

Proceedings before trial judge Datuk Ahmad Fairuz Zainol Abidin continues on Friday.

Read also:
Najib on SRC: 'I have certain regrets', but claims had no knowledge of what was taking place 
Najib still mum on documentary evidence of funds in accounts