1MDB-PSI joint venture inherited RM2.93bil debt, court told

KUALA LUMPUR: The doomed joint venture (JV) between 1Malaysia Development Bhd (1MDB) and PetroSaudi International Ltd (PSI) incurred a US$700mil (RM2.93bil) debt, the High Court heard.

The debt was inherited by the JV company 1MDB-PetroSaudi Ltd (1MDB-PSI), which was formed when the JV was signed, while it was fully owned by PSI.

Former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi said the debt referred to the loan agreement signed by 1MDB-PSI on Sept 25,2009.

“The US$700mil (RM2.93bil) loan agreement was between 1MDB-PSI, which gave out the loan, while PetroSaudi Holdings (Cayman) Ltd borrowed the money.

“Both the agreements (for both sides) were signed by PSI's CEO Tarek Obaid, ” the witness said.

Shahrol was testifying under a cross-examination by lead counsel Tan Sri Muhammad Shafee Abdullah in the 1MDB trial here on Monday (Oct 21).

The ninth witness also admitted that he did not know about the loan agreement and had never seen the Sept 25,2009 document during his tenure at 1MDB.

When pressed why he did not query about the loan to 1MDB executive director Casey Tang, Shahrol said he did not question it, as it was under Tang’s responsibility.

Shafee: The JVC (1MDB-PSI) was suddenly in debt (of US$700mil) from the loan agreement, and you did not ask about it?

Shahrol: As this whole thing was managed by Casey, I assumed Casey, with his superior experience, would ensure everything was in order.

The witness also admitted that 1MDB’s board of directors did not know about the loan agreement, prior to the JV agreement being signed.

Shafee: The board never knew about this agreement on Sept 25,2009, prior to the JV agreement?

Shahrol: Correct.

Shafee: If this loan agreement had been presented to the board, they would not have agreed to the terms?

Shahrol: I agree with that.

Najib, 66, faces 25 charges in total - four for abuse of power that allegedly brought him financial benefit to the tune of RM2.3bil; and 21 for money laundering involving the same amount of money.

He faces imprisonment of up to 20 years and a fine of up to five times the sum or value of the gratification if found guilty.

The hearing before Justice Collin Lawrence Sequerah continues on Thursday (Oct 24).