KUALA LUMPUR (Sept 26): Former 1Malaysia Development Bhd (1MDB) chief financial officer (CFO) Azmi Tahir has denied knowing that US$3.5 billion in payments made between 2012 and 2014 were illegally diverted to fake Aabar entities, saying he believed at the time the transactions were legitimate.

Testifying in the US$6.59 billion suit filed by 1MDB against the company's former chairman Tan Sri Dr Mohd Irwan Serigar Abdullah and former president Arul Kanda Kandasamy, Azmi said that he had no knowledge that the funds were diverted to companies registered in the British Virgin Islands and Seychelles.

“I deny having any knowledge that any sum was illegally and/or unlawfully diverted to Aabar BVI and/or Aabar Seychelles, at the material time,” Azmi said in his witness statement at the High Court on Friday.

“I had undertaken my duties and responsibilities as CFO in good faith, and to the best of my abilities.”

Azmi explained that the payments arose from 1MDB’s acquisitions of independent power producers (IPPs), which were financed by two US$1.75 billion bonds arranged by Goldman Sachs and guaranteed by Abu Dhabi’s International Petroleum Investment Company (IPIC).

He said that when he joined 1MDB in June 2012, the acquisition of Tanjong Energy Holdings Sdn Bhd had already been completed using the first bond. Soon after, 1MDB acquired Genting Sanyen Sdn Bhd through Mastika Lagenda Sdn Bhd, financed by the second bond.

“I was only briefed by Jasmine [former 1MDB general counsel Jasmine Loo] and Vincent (former 1MDB chief investment officer Vincent Beng Huat Koh) who took charge of the first transaction. I was informed that the acquisition was completed utilising a US$1.75 billion bond arranged by Goldman Sachs and guaranteed by IPIC,” he said.

For the second bond, he said then-CEO Datuk Shahrol Azral Ibrahim Halmi had instructed Loo to lead the exercise while he was involved in incorporating the special-purpose vehicle 1MDB Energy (Langat) Ltd and opening its bank account.

According to Azmi, “agreements for the collateral deposit payments in 2012 to Aabar PJS/BVI arising from the first and second bond issuance were decided and executed before my employment in 1MDB. I was not in any way involved in the preparation of those documents, which were all prepared by Jasmine.”

Azmi confirmed that three major transfers were subsequently made to Aabar Investments PJS Ltd:

“In each case, the account details of the recipient were the same,” Azmi noted, adding that his involvement was limited to executing instructions already approved by the CEO and the board.

He also pointed out that Deloitte, 1MDB’s auditors at the time, independently verified the payments with Aabar.

“As such, I did not and would not have any reason to be suspicious of the legitimacy of the Aabar entity at the material time,” he said.

Azmi told the court that it was only years later, through the 2018 MACC investigations and subsequent trial of former prime minister Datuk Seri Najib Razak, that he realised the payments had been misappropriated.

“There were material misrepresentations and/or manipulations and/or non-disclosures on the part of Aabar PJS and IPIC where 1MDB as a company was defrauded and deceived into making payments to the fake Aabar to the personal benefit of certain individuals including the directors of Aabar,” he said.

He added that fugitive businessman Low Taek Jho (Jho Low), with the assistance of Loo and Geh, had created the impression that Aabar BVI and Aabar Seychelles were legitimate subsidiaries of IPIC.

“I had no knowledge that Aabar PJS and Aabar BVI were two different entities,” Azmi said. “I deny recklessly and negligently failing to verify the veracity, validity, legitimacy and status of Aabar BVI and/or Aabar Seychelles.”

Azmi maintained that all actions he took were based on approvals by the board of directors (BOD) or instructions from Shahrol.

“I did not personally benefit from the transactions and had merely executed documents as instructed by the CEO and/or approved by the BOD,” he said.

He further explained that he often acted in reliance on information provided by Loo and Geh.

“To the best of my memory, Terrence and Jasmine showed me the option agreements and had informed me of the amounts to be paid as per the calculations under the agreements. Accepting their representation in good faith, since I had no reason to doubt them at the material time, I co-signed the option termination payment," he said.

Azmi also dismissed suggestions that he had suppressed information from the board.

“Any information provided by me to the BOD were based on information made available to me at the time. I had no knowledge or control of any inaccuracies in information provided by persons within 1MDB, BSI Bank and the counterparties,” he said.

Ultimately, said Azmi, he had always acted in line with his professional responsibilities.

“Yes, I agree that as CFO, I was responsible to ensure payments were made to the correct entities. The US$3.5 billion payment had been approved and/or authorised by the BOD and/or CEO. Payments were made in accordance with the executed agreements and/or confirmed by 1MDB’s general counsel,” he said.

He concluded: “I deny all the allegations of wrongdoing and/or negligence on my part. I reiterate that as CFO and director of 1MDB’s subsidiaries, I undertook my duties and responsibilities in good faith and to the best of my abilities. I never personally benefitted from any of 1MDB’s transactions.”

During cross-examination of the witness, Irwan’s lawyer Lavinia Kumaraendran had referred to Jho Low when questioning Azmi about the Brazen Sky deal, particularly about his knowledge of US$3.5 billion in 1MDB funds being transferred out without approval of the board.

Brazen Sky Ltd, incorporated in the British Virgin Islands in July 2012, was created to hold assets originating from 1MDB’s earlier joint venture with PetroSaudi International. That 2009 joint venture was first converted into Murabaha notes, and later — following a restructuring — into promissory notes valued at US$2.318 billion.

These promissory notes represented obligations by the issuer to pay 1MDB the stated value in future, and were placed under a segregated portfolio fund managed by Bridge Partners Investment Management.

While questioning Azmi, Lavina asked about a meeting in December 2013 with auditor KPMG after they refused to sign off on the 2013 accounts citing inadequate explanations and documents provided in relation to 1MDB’s huge overseas investment of US$2.3 billion in an unknown fund, Bridge Global SPC, that was made through Brazen Sky Ltd — a special purpose vehicle of 1MDB.

She had asked him about Jho Low’s involvement and how despite him being an unauthorised person, he had given Azmi talking points before the meeting via email and that he had executed the Brazen Sky US$3.5 billion on the instructions of Jho Low.

However, lawyers acting for Azmi, Wan Aizuddin Wan Mohammed and Rahmat Hazlan, objected to her asking about Jho Low’s involvement.

They both cited Lavinia’s bundle of pleadings where the lawyer had redacted Jho Low’s name from these instances.

“According to her pleadings, she had removed his name, so it’s not right that she ask the witness about Jho Low’s involvement,” Rahmat said.

However, Judge Datuk Raja Ahmad Mohzanuddin Shah Raja Mohzan agreed with Rahmat and Wan Aizuddin in this matter.

“We have to stick to the [what is stated in the] bundle of pleadings. His name had been taken out,” he said.

“You can ask if he [Azmi] had taken any instructions from ‘unauthorised persons’, but you can’t ask about Jho Low specifically,” he said.