Arul Kanda's 1MDB contract extended at Irwan's request, court told

Summary

• Arul Kanda’s 1MDB contract extension granted at Irwan Serigar’s request, the KL High Court is told.

• This was despite the company no longer being keen on the CEO’s services.

1MDB’s former chief executive officer Arul Kanda Kandasamy’s contract extension in 2018 was granted at the company’s former chairperson, Irwan Serigar Abdullah’s request, the Kuala Lumpur High Court heard today.

Irwan’s request was made despite Kamal Ali, who was a member of the 1MDB board of directors, being of the view that Arul’s services were no longer needed at that point in time.

Kamal, in his witness statement, said he held this opinion as Arul had already been placed on garden leave then, despite his extension, as per instructions from the Minister of Finance (Incorporated) (MOF Inc).

He further said that at the material time, despite his disagreement, Irwan had insisted that Arul be paid an ex gratia payment of RM5 million, which was approved at the stakeholder level.

“It was not minuted accordingly… (However) Irwan was the one who tabled (matters about the payment) verbally to the board at that point in time.

“The company is not profitable. In any case, we did not do a performance appraisal to warrant such a bonus to Arul,” he said.

Kamal was one of three individuals admitted as third parties by Irwan in the suit filed by 1MDB against Arul and him.

Seeking indemnity

Irwan had made the application on May 30 last year, where he sought indemnity or contribution in the event he is found liable in the suit.

He had named Kamal, 1MDB’s former chief financial officer, Azmi Tahir and another board member, Norazman Ayob, as respondents in his application.

“On or around April 2015, Irwan contacted me to ask me to be on the board based on my experience as a banker.

“I did query (him) as to my appointment, to which he further clarified to me that it was not so much on investment or business decisions, but it was leaning towards restructuring and rationalisation.

“I asserted to Irwan that I am willing to accept the appointment if it is solely for a rationalisation exercise or good governance, and not to condone or conceal any wrongdoing within 1MDB itself.”

The need for rationalisation at that time was due to the company’s net loss, which amounted to RM329.61 million as reported in the financial report for the period ended May 31, 2016.

At the same time, he said, 1MDB had total borrowings amounting to around RM31.8 billion at the material time, and liabilities amounted to RM39.9 billion.

“1MDB was in a precarious financial position (with) only a net cash balance of RM2.295 million at that material time.”

Role not specified

However, during cross-examination by Irwan’s lawyer, Lavinia Kumaraendran, Kamal agreed that his role, of being confined to only undertaking the rationalisation plan, was not specified in his letter of appointment from MOF Inc or any other document.

As 1MDB is a wholly owned government company, Kamal agreed that the ultimate approving authority is in the hands of the MOF Inc.

He also agreed with Lavinia’s suggestion that the Budiman Special Committee and Team Negaraku, established in 2015 and 2017, respectively, were set up to facilitate the rationalisation plan implementation, as most of the 1MDB assets were transferred to MOF Inc.

Lawyer Razlan Hadri Zulkifli appeared for Kamal in today’s proceedings before judge Raja Shah Ahmad Mohzanuddin Shah Raja Mohzan. The trial will continue on Aug 25.

1MDB had filed the lawsuit against Arul and Irwan in May 2021, accusing the duo of breach of trust and conspiracy that resulted in US$1.83 billion (RM7.75 billion) losses in relation to the company’s investments in 1MDB-Petrosaudi Ltd.

1MDB also claimed they misappropriated US$3.5 billion in company funds paid to Aabar Investment and US$1.265 billion paid to International Petroleum Investment Company on May 9, 2017.

The company claimed that Irwan had colluded with Arul to extend the latter’s employment agreement, which saw a substantial RM2,905,200 paid to Arul.

1MDB is also seeking US$6.59 billion in damages from both defendants for these violations and an additional RM2.9 million from Irwan in relation to Arul’s contract extension.

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