1MDB was ‘run by a bunch of idiots’, says lawyer

Shahrol Azral testifies that he and other senior management did not do due diligence on the deal with Aabar BVI, believing it was a subsidiary of IPIC


DATUK Seri Mohd Najib Abdul Razak’s (picture) lead defence counsel Tan Sri Muhammad Shafee Abdullah said 1Malaysia Development Bhd (1MDB) was “run by a bunch of idiots” in referring to some US$577 million (RM2.43 billion) paid to a fake Aabar Investments PJS Ltd (Aabar BVI) company as a security deposit for a corporate guarantee.

Former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi testified that he and other senior management did not do due diligence on the deal with Aabar BVI, the fraud entity, but believed it was the subsidiary of International Petroleum International Co (IPIC) as its then MD Khadem Al-Qubaisi and then Aabar Investments PJS CEO Mohamed Badawy Al-Husseiny were listed as its executives.

“I was confident in the deal as Khadem and Mohamed Badawy were also on board, I did not check on the company as I was confident it was the real Aabar,” Shahrol Azral said at the Kuala Lumpur (KL) High Court yesterday.

It was later found out that the fund was channelled to the fake Aabar BVI company and not IPIC’s unit.

The real Aabar is Aabar Investment PJS, while Aabar BVI, which was registered in the British Virgin Islands by Low Taek Jho or Jho Low, was a sham and believed to be the vehicle that embezzled 1MDB’s funds.

Muhammad Shafee said the 1MDB management had repeatedly fallen into “cobra pits” and suggested that the company was “run by a bunch of idiots”.

1MDB hatched out a plan to invest in two independent power producers, Tanjong Energy Holding Sdn Bhd and Genting Sanyen (M) Sdn Bhd, in May 2010 to improve the country’s power sector and ease the government’s subsidy burden.

1MDB’s unit — 1MDB Energy Sdn Bhd — signed a RM6.17 billion bridging loan to finance the Tanjong Energy acquisition and issued a US$1.75 billion bond with Goldman Sachs Group Inc as a book runner and arranger.

Shahrol Azral, the ninth prosecution witness in Najib’s 1MDB trial, said Goldman Sachs’ senior banker Tim Leissner should have done due diligence on the deal.

Shahrol Azral: “We expected Goldman Sachs to have done due diligence, being a paid agent.”

Muhammad Shafee: “If Leissner had done due diligence, this might not have happened.” Shahrol Azral: “I would put that if he had checked, we would not have done this deal.”

Najib, who was convicted in SRC International Sdn Bhd’s trial, faces 25 charges in 1MDB’s trial, four counts of abuse of power to obtain gratifications totalling RM2.3 billion linked to 1MDB and 21 counts of money laundering involving the same proceeds.

Goldman Sachs recently agreed to a US$3.9 billion settlement for all the criminal and regulatory proceedings in Malaysia concerning 1MDB.

The investment banking firm said the Malaysian government agreed to withdraw the pending criminal charges and that no further charges would be brought against the company, its subsidiaries, or any of their directors, officers and employees related to 1MDB, excluding former employees Leissner and Roger Ng.

In December 2018, Malaysia filed criminal charges against three Goldman Sachs subsidiaries — Goldman Sachs International, Goldman Sachs (Asia) LLC and Goldman Sachs (Singapore) Pte Ltd — and their key employees Leissner and Ng, as well as 1MDB’s Jasmine Loo Ai Swan and Jho Low, for perpetrating a scheme to defraud the government and purchasers of three bonds with a face value of US$6.5 billion.