Ex-1MDB CEO: Regardless of IPIC's bond guarantee, govt ultimately liable

1MDB TRIAL | Although UAE's International Petroleum Investment Co (IPIC) had guaranteed 1MDB's bonds worth US$1.75 billion in 2012, Malaysia was the ultimate guarantor, the Kuala Lumpur High Court heard today.

During cross-examination by ex-premier Najib Abdul Razak's defence counsel Wan Aizuddin Wan Mohammed, former 1MDB CEO Shahrol Azral Ibrahim Halmi testified that 1MDB and IPIC entered into an inter-guarantor agreement in May 2012.

The document was signed by IPIC's then managing director Khadem al-Qubaisi and Shahrol. Khadem is currently jailed in Abu Dhabi for 1MDB related issues.

Initially, Shahrol disagreed with Wan Aizuddin's suggestion that 1MDB shouldered the ultimate liability if the company defaulted on the bond regardless of the inter-guarantor agreement.

"I disagree. The (bond) subscribers will go after IPIC first. (There are) two stages.

"Subscribers who bought the notes can get their money from IPIC first. IPIC would then deal with 1MDB," he said.

Shahrol said the mechanisms in that agreement was explained to him by wanted businessperson Jho Low, whom he believed was acting as Najib's agent.

"Jho (Low) explained to me that any subscriber who looks at the agreement and the creditworthiness of both 1MDB and IPIC, they will go after IPIC first," he testified.

Shahrol, the ninth prosecution witness, believed that the agreement was part of a government-to-government understanding between Malaysia and UAE.

The US$1.75 billion in bonds were part of the financing secured by 1MDB to acquire Tanjong Energy Holdings Bhd, a power generation company controlled by tycoon Ananda Krishnan.

Shahrol agreed with Wan Aizuddin's suggestion that Najib, as finance minister, and the sole shareholder of 1MDB, did not provide written approval for the inter-guarantor agreement.

However, the former 1MDB CEO argued that he had the necessary authority to do so.

'Who is this Jho Low?'

Meanwhile, Shahrol also testified that he, at that time, still had faith and was not suspicious of Jho Low, despite complaints from the Palace in 2009 that the businessperson was misusing the then Yang di-Pertuan Agong's name.

Shahrol said that he still followed directions from Jho Low concerning the various 1MDB transactions because the businessperson had informed him beforehand that the incident with the palace would have emerged.

During cross-examination, Wan Aizuddin referred to one of the meetings that Shahrol attended in 2009, where a Palace official questioned Jho Low's involvement in Terengganu Investment Authority (TIA), the precursor to 1MDB.

Wan Aizuddin: Even at that time, if you really believed that Jho Low acted in the best interest of the business (1MDB), would this particular incident not raise suspicions in you regarding his (Jho Low) character?

Shahrol: No, I was informed by Jho (Low) that this would happen (and therefore did not trigger further investigation).

Wan Aizuddin: I find this unbelievable as you, in this meeting with parties from the Istana Negara and they say "who is this Jho Low", they worry about misuse of the Agong's name, and yet you choose to believe Jho Low over these people.

Shahrol: Yes.

Wan Aizuddin: This again shows that evidence that you believe Jho Low acting in good faith is incorrect but instead, you were complicit in a scheme to defraud 1MDB.

Shahrol: I disagree.

The incident involved a June 30, 2009 meeting, where Istana Negara representatives dismissed Jho Low’s claim that he was an adviser to the then Agong, Terengganu's Sultan Mizan Zainal Abidin.

The Istana Negara officials questioned who was Jho Low and the role he played in TIA and raised concerns that certain quarters may have misused the Agong's name.

Proceedings will continue before Justice Collin Lawrence Sequerah around 9.30am tomorrow morning.

Najib is on trial over four charges of abusing his position to obtain gratification and 21 counts of money laundering in relation to RM2.28 billion in 1MDB funds. - Mkini