1MDB board of directors not informed of decision to split US$1bil funding, court told

KUALA LUMPUR: The board of directors (BOD) of 1Malaysia Development Bhd (1MDB) was not informed of the decision to split a US$1bil funding meant for 1MDB-Petrosaudi International (PSI) joint venture (JV) into US$300mil and US$700mil, the High Court heard.

The bigger portion of US$700mil eventually went to Good Star Ltd, a company that was initially represented as a PSI subsidiary but later revealed to be owned by fugitive financier Low Taek Jho, or better known as Jho Low.

Former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi, 49, testified that a consent from the board was not obtained before the split due to time constraints and the urgency to “get things done”.

The ninth witness said based on a Director's Circular Resolution (DCR), the board had previously authorised a lump sum (of US$1bil) to be paid only to the JV company and in return, the company would receive one billion shares.

He said this during the cross-examination by lead defense counsel Tan Sri Muhammad Shafee Abdullah at the 1MDB trial here on Tuesday (Oct 29).

Shahrol, however, could not tell who proposed the idea to split the fund, adding that he agreed to the split based on the assumption that nothing was wrong with the transaction.

“Given the fact that Low was in close contact with Datuk Seri Najib Razak, and at that time, my frame of mind was ‘this is something that needs to be done and everything is in order’.

“Ultimately, (former 1MDB executive director) Casey Tang convinced me that it was all right and we will inform the BOD afterwards," he said.

The court heard earlier that the US$1bil split came about after Tang brought a document signed by PSI CEO Tarek Obaid to amend some of the clauses in the JV agreement.

Shahrol said some of the amendments included changing of the JV bank account from Banca Della Svizerra Italiana (BSI) Bank to JP Morgan and the US$700mil made payable to PSI.

To suggestions by Shafee, Shahrol disagreed that he had knowledge about the fund split.

He also disagreed that the decision to split the US$1bil payment for the JV company into US$700mil and US$300mil was reckless.

"It was just a matter of how the payment was made to the JV company. Casey convinced me and in good faith, I accepted that and it was not reckless, the decision was made based on what I knew and believed at that time," he added.

On another matter, the witness said he was not interested to read the 1MDB report by the United States Department of Justice (DoJ) because it had accused him of being complicit in the US$700mil transfer of 1MDB funds into Good Star in 2009.

"I scanned through the document but so far they have incomplete information. The DOJ didn't even bother to ask me (about 1MDB). It is best for me to leave it to the Malaysian authorities to investigate and report," he said.

In the report, the DOJ dubbed Shahrol as "1MDB Official Number 2" while Tang was "1MDB Official Number 1".

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.

The hearing before Justice Collin Lawrence Sequerah resumes on Wednesday (Oct 30).