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1MDB signed US$1 billion deal with PSI’s Cayman doppelganger instead of board’s approved firm, says ex-CEO

October 17, 2019

* Najib’s phone call not to be recorded in minutes of meeting  

Former 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi is pictured at the Kuala Lumpur Courts Complex October 16, 2019. — Picture by Hari Anggara

KUALA LUMPUR, Oct 16 — 1Malaysia Development Berhad (1MDB) had signed a joint venture deal in 2009 with a company based in the Cayman Islands instead of the 1MDB board’s approved partner named PetroSaudi International (PSI) Ltd, the High Court heard today.

Datuk Shahrol Azral Ibrahim Halmi, who was 1MDB CEO, confirmed that the 1MDB board had passed a resolution for the company to enter into a joint venture with PetroSaudi International Ltd.

But 1MDB eventually signed a deal dated September 28, 2009 to inject US$1 billion of its funds into a joint venture with a company with the similar name of PetroSaudi Holdings (Cayman) Ltd.

Shahrol, who was testifying as the ninth prosecution witness in Datuk Seri Najib Razak’s corruption trial over 1MDB, had signed the deal on behalf of 1MDB.

Najib’s lawyer Tan Sri Muhammad Shafee Abdullah quizzed Shahrol on whether he realised that this September deal went against the 1MDB board’s resolution, and also on why he had signed the agreement with PetroSaudi Holdings (Cayman) Ltd when it was a different company.

Because at that time, Casey explained to me that PetroSaudi Cayman is a wholly-owned subsidiary of PSI Ltd and therefore it was alright to sign, I depended on his advice,” Shahrol said, referring to the company’s executive director of investment and finance Casey Tang who was handling the entire joint venture deal.

Shahrol acknowledged that he knew both PetroSaudi Holdings (Cayman) and PSI Ltd were different entities.

Asked why he did not check with 1MDB’s board or the company’s lawyers, Shahrol noted that Tang was then already working with 1MDB’s law firm Wong and Partners on the deal, adding that he had assumed that Tang had already “crossed the t’s and dotted the i’s” when saying it was okay to sign.

Shafee continued pressing Shahrol on this matter, asking: “You are signing away US$1 billion in 2009. This is a staggering figure even today. US$1 billion, you are signing with a different company, PSI itself we don’t know what kind of company, now you are signing with an unknown company. How did we come to that?”

Again there was a legal team looking into this, and Casey was someone who was experienced with international deals and he didn’t indicate that this was something that shouldn’t have been done,” Shahrol replied.

When asked how he had explained the signing with the differently-named company to the 1MDB board, Shahrol said he had given the same explanation: “Because Casey is the most experienced person in 1MDB at that time, he was in charge of ensuring everything is in order. He was working with Wong and Partners as well as company secretary, and he indicated that there was nothing wrong with this.”

Shahrol said he did not get a written legal opinion from 1MDB’s lawyers from Wong and Partners on the signing of the deal with the Cayman-based firm, but agreed he would have done so on hindsight.

Earlier this morning, Shahrol had said businessman Low Taek Jho was the one who had informed him about PetroSaudi International’s proposal for a joint venture with 1MDB, and that Low was the one who had suggested that Tang be appointed to get the deal done.

Shahrol said he had appointed Tang to be in charge of “basically delivering the deal”, which meant that the official had to coordinate between 1MDB’s investment team and all external parties including PSI and 1MDB’s lawyers.

Shahrol maintained today that he believed Low to have been representing the interests of Najib, who as finance minister had the power to sign off on documents on behalf of 1MDB’s sole shareholder Minister of Finance (MOF) Incorporated.

Shahrol had today also spoke of the tight one-month deadline that 1MDB was under to complete the joint venture deal, also speaking of his belief that this was a “government-to-government” deal that was agreed to between the leaders of the Malaysian and Saudi government that had to be executed.

The joint-venture agreement — signed by Shahrol as 1MDB CEO and by PSI CEO Tarek Obaid for PetroSaudi Holdings (Cayman) — was dated September 28, 2009just two days after the 1MDB board was asked in a board meeting to decide whether to do the deal.

Why Najib did not sign the deal

Shahrol confirmed that the original intention was for the deal to be signed by Najib as 1MDB’s board of advisers chairman and by Saudi prince Prince Turki bin Abdullah as PSI chairman and with Saudi ruler King Abdullah to witness this, but said this did not happen due to “levelling purposes” where the deal had to be inked by those of equal seniority in the two companies.

Shahrol said this did not happen as 1MDB was told it would not be appropriate for Najib to sign with Prince Turki as the counterpart, noting: “He (Najib) should be signing at King Abdullah level, so what happened was we settled on CEO-to-CEO level.”

Shahrol said he did not know why Prince Turki decided not to sign the deal personally, confirming that he had never met the PSI chairman.

Shafee then asked if Shahrol had suspected that something was wrong when the deal that was supposed to be a government-to-government deal and purportedly viewed by King Abdullah as a “friend helping a friend” eventually was only signed by the CEOs of the companies.

Not so much an indication that something was not right, it’s just odd, I won’t ascribe anything sinister to it yet, but now that we have been shown the money flows, you are right,” Shahrol said, agreeing that this could have been suspicious but that he did not know of it then.

At the start of the trial, the prosecution had said it would prove that US$700 million from this US$1 billion deal had been diverted into the company Good Star Ltd owned by Low, and had also said it would prove US$20 million from the US$700 million allegedly ended up with Najib.

The trial before High Court judge Collin Lawrence Sequerah resumes tomorrow morning at 9.30am.

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