What we've learned from Najib's SRC trial so far

KINIGUIDE | NAJIB TRIAL | The graft hearing against former prime minister Najib Abdul Razak has gone on for 16 days, and is progressively getting more technical. 

In this instalment of KiniGuide, Malaysiakini will attempt to answer some common questions about how the prosecution is trying to piece its case together.

What is this trial about?

This trial involves seven charges. Najib is accused of obtaining RM42 million in gratification by abusing his position as prime minister and finance minister in securing a government guarantee for RM4 billion in loans from KWAP to SRC International Sdn Bhd.

He also faces three criminal breach of trust and three money laundering charges.

What is SRC International?

SRC International was set up in January 2011 as a subsidiary of 1MDB, a company wholly-owned by the Minister of Finance Inc.

According to the Auditor-General's Report on 1MDB, 'SRC' stands for 'strategic resource company'. The stated purpose of the company was to invest in the metal and energy industries, which are of national interest.

The ownership of SRC International was transferred from 1MDB to MOF Inc on Feb 15, 2012. There are no details on the company's business activities in recent years.

What is Najib's role in SRC International?

Najib was the chairperson of 1MDB's advisory board at the time. 

According to Article 117(c) of 1MDB's Memorandum and Articles of Association, the prime minister's approval was necessary for "any financial commitments (including investments)" [Editor’s note: Parentheses maintained].

The respective constitutions for 1MDB and SRC International also state that the prime minister was also solely responsible for the appointment and dismissal of company directors. 

His approval was also needed for the amendment of the respective company constitutions.

How was SRC International financed?

The court heard that SRC International had a paid-up capital of RM2. 

The company first sought an RM3 billion grant from the Economic Planning Unit (EPU) with a three-page proposal. That proposal was shot down.

Instead, the EPU extended an RM20 million grant for seed funding. SRC International then turned to KWAP for an RM3.95 billion loan.

Then-KWAP assistant vice-president (Fixed Income Department) Amirul Imran Ahmat (photo) told the court he recommended a loan of no more than RM1 billion to limit the fund's exposure.

Eventually, KWAP's investment panel agreed to loan SRC International RM2 billion after receiving a government guarantee to service the loan in case of a default.

AmBank Remittance Centre's Rentas Unit manager Wedani Senen testified that money was transferred in August 2011.

SRC International eventually sought another RM2 billion loan from KWAP. Jalan Raja Chulan AmBank branch manager R Uma Devi testified that the money was wired on March 28, 2012.

Note that the second tranche was transferred after MOF Inc took over the ownership of SRC International.

Why did SRC International need RM4b?

According to testimonies, the first RM2 billion loan was for "working capital" and "general investment," while the second RM2 billion loan was for "working capital" and investments in natural resources.

Amirul said the second loan proposal, dated March 27, 2012, had stated that SRC International needed the money for "general investment activities."

This was amended to "investment activities in natural resources," following a letter dated May 18, 2012 by the Finance Ministry, which cited a cabinet meeting decision on Feb 18 that year.

According to the Auditor-General's Report on 1MDB, SRC International had invested in three companies abroad.

The government has not announced the returns on these investments. SRC International has become insolvent, and taxpayers are now repaying KWAP.

Did the court establish that Najib received RM42m?

Yes. Uma Devi (photo) testified that RM37 million was transferred to Najib's AmBank account (ending in 880) in two transactions dated Dec 26, 2014 and Feb 10, 2015.

The witness also testified that Najib's AmBank account (ending in 906) received RM5 million, or RM42 million in all. This testimony went unchallenged.

All three transactions originated from Ihsan Perdana Sdn Bhd – SRC International's so-called corporate social responsibility arm.

From the testimonies, Ihsan Perdana received RM20 million directly from SRC International on Dec 12, 2014, and also RM50 million from Gandingan Mentari Sdn Bhd between December 2014 and February 2015.

Gandingan Mentari is one of SRC International's subsidiaries.

What does the trial tell us about Gandingan Mentari and Ihsan Perdana?

Not much. Uma Devi testified that Gandingan Mentari opened an account at the Jalan Raja Chulan AmBank branch on July 23, 2014. Najib opened several accounts with the same branch. 

Uma Devi also revealed that Gandingan Mentari was described as a "high-risk" account.

Ihsan Perdana had an Affin Bank account. Norhayati Mohd Yunus, the manager of The Curve Affin Bank branch, testified that money from this account was used to transfer the RM42 million to Najib’s accounts (ending with the numbers 906 and 880). This testimony went unchallenged.

The authorised signatories for the Ihsan Perdana account are managing director Shamsul Anwar Sulaiman and Abdul Aziz Ismail. Shamsul Anwar was formerly the Sungai Siput Umno deputy leader and a member of the Umno Youth exco.

What about the transactions to Najib’s other accounts?

The focus of the trial has been the RM42 million to Najib’s AmBank account (ending in 906). 

However, the trial did hear about millions of ringgit being transferred from Putra Perdana Sdn Bhd and Permai Binaraya Sdn Bhd to Najib's other AmBank’s accounts (ending in 880 and 898).

This article will only detail testimonies regarding the RM42 million, the government guarantee, KWAP’s RM4 billion loans, abuse of power, criminal breach of trust and money laundering as outlined in the charge sheet.

Has the prosecution shown evidence of abuse of power?

Some of the testimonies suggested that Najib used his powers to influence KWAP and to convince the cabinet to issue a government guarantee, but it is up to the court to decide if this constitutes abuse.

Has the prosecution shown evidence of money laundering and gratification?

No. The prosecution does not appear to have reached that stage.

What did Najib spend on?

Testimonies from bankers confirmed that Najib signed cheques amounting to RM10,776,514 for 15 individuals or entities between Jan 21, 2015 and Feb 26, 2015. The money came from the accounts ending 906 and 898.

Bankers also confirmed that the RM3,282,734.16 from the account ending in 906 was used to settle two platinum credit card bills. However, the owner of these credit cards has not been established.

The trial resumes at 9am tomorrow (May 14). Malaysiakini will be providing live updates throughout.

HIDIR REDUAN and HARIZ MOHD contributed to this KiniGuide.