Ex-CEO now believes 1MDB's US$2.318b promissory notes are worth nothing
Former 1MDB chief executive officer Shahrol Azral Ibrahim Halmi now believed the US$2.318 billion (RM9.92 billion) in promissory notes the company received as redemption for its investment were worth nothing.
He told the Kuala Lumpur High Court this while under cross-examination by lead defence counsel Muhammad Shafee Abdullah in former prime minister Najib Abdul Razak's RM2.28 billion 1MDB graft trial.
Former 1MDB chief executive officer Shahrol Azral Ibrahim Halmi now believed the US$2.318 billion (RM9.92 billion) in promissory notes the company received as redemption for its investment were worth nothing.
He told the Kuala Lumpur High Court this while under cross-examination by lead defence counsel Muhammad Shafee Abdullah in former prime minister Najib Abdul Razak's RM2.28 billion 1MDB graft trial.
Shafee: This is yet more paperwork. It is US$2.318 billion in total. All this was adduced in six promissory notes. All paperwork, no proof they are funds. In hindsight, you believe they are worth nothing?
Shahrol: Yes.
Shafee: You believed at the time these promissory notes were real and had value?
Shahrol: Yes
Shafee: Did somebody value these notes?
Shahrol: At that time, I did not go into it. I just took it on good faith from (1MDB general counsel) Jasmine Loo and (1MDB finance director) Terence Geh. I did not ask about valuation.
Shafee: Then during the investigation, you realised they are only worth the paper?
Shahrol: Yes.
Loo and Geh are believed to be associates of businessperson Low Taek Jho, a key figure in the 1MDB scandal.
Shafee was referring to the promissory notes that 1MDB used to purchase "fund units" which were purportedly worth an equivalent of US$2.318 billion.
The US Department of Justice (DOJ), in its investigation, concluded the "fund units" were "relatively worthless".
The money had originated from 1MDB's joint venture with PetroSaudi International, during which a substantial part was allegedly misappropriated, and thus, began a series of financial acrobatics to purportedly cover up the losses.
According to the DOJ, 1MDB had invested US$1.83 billion in its joint venture with PetroSaudi, but US$1.03 billion was siphoned to Good Star Ltd for the benefit of Low and his associates between 2009 and 2011.
The joint venture shares were later converted to Islamic debt notes which the DOJ said were "valued at approximately US$2.22 billion, even though at least US$1.03 billion had been diverted from 1MDB's stated investment in the joint venture".
In 2012, 1MDB exchanged the Islamic debt notes for a 49 percent stake in PetroSaudi Oil Services Ltd which was purportedly equivalent to US$2.22 billion even though it had net assets of only US$93.6 million at the time.
This stake was later redeemed in the form of promissory notes and then "invested" into "fund units" in Bridge Global Absolute Return Fund SPC, an obscure fund registered in the Cayman Islands and managed by Bridge Partners.
Former 1MDB CEO Arul Kanda Kandasamy - one of Shahrol's successors - in a 2018 interview with Malaysiakini repeatedly insisted that the "fund units" had value and 1MDB could get its money back.
The DOJ, in its investigation, claimed 1MDB had taken out a loan to cover up the "relatively worthless" fund units.
Meanwhile in the midst of trial today, Shafee remarked that Shahrol seemed to be a very meticulous individual, especially when it comes to documentation.
Shahrol initially replied that it was a skill learned from going through reams upon reams of documents shown to him by investigators during interrogation into the 1MDB matter in 2018.
Shafee: You seem by nature to be meticulous with documents.
Shahrol: My wife would not say so.
After laughter from those in court, the mood turned serious again when Shafee grilled Shahrol on whether this alleged non-meticulousness extended to when the witness was 1MDB CEO in charge of billions of dollars.
Shafee: Even when billions of dollars were under your care?
Shahrol: I would not say so.
Towards the end of proceedings this afternoon, Shafee informed Judge Collin Lawrence Sequerah (below) that Najib’s defence team needs another three weeks to cross-examine Shahrol.
Shafee said this is because the crux of the defence’s case involves Shahrol, among others.
When Sequerah asked the prosecution how many more witnesses they have to call, DPP Ahmad Akram Gharib said they have another 55 witnesses, with around 20 of them formal witnesses.
A formal witness is one whose testimony is merely procedural to confirm documentation among other things during trial.
Najib’s RM2.28 billion 1MDB trial is still in the prosecution stage, with the defence still cross-examining seventh prosecution witness Shahrol.
“After Shahrol (wraps up his testimony), the next witness is Hazem, the successor to Shahrol,” Akram said in reference to Mohd Hazem Abd Rahman, who took over as 1MDB CEO after Shahrol.
Proceedings before Sequerah will resume around 9.30am tomorrow.
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