Najib blocked audit on 1MDB to hide embezzlement of funds, says ex-CEO

Former prime minister Najib Razak faces 25 charges of money laundering and abuse of power.

KUALA LUMPUR: The High Court in Najib Razak’s money laundering and abuse of power trial heard today that the former prime minister refused to allow the audit department to conduct due diligence on 1MDB in 2009 as it would have exposed a misappropriation of money from the sovereign investment fund.

Former 1MDB CEO Shahrol Azral Ibrahim said the fund had invested US$1 billion by September that year in a joint-venture with PetroSaudi International Ltd (PSI).

“Of that amount, US$700 million was transferred to an account belonging to Good Star Ltd, which was purportedly a subsidiary of PSI,” Shahrol said during examination by ad hoc prosecutor Gopal Sri Ram.

The prosecution is contending that Good Star belonged to fugitive financier Low Taek Jho, whom it says worked with Najib to siphon off the funds.

Shahrol, the ninth prosecution witness, said Najib had full control of the government-linked company as 1MDB was by then under the Minister of Finance Incorporated. He was also the chairman of its board of advisers.

“The audit exercise would have revealed the misappropriation of the funds. However, the exercise was not carried out,” he said.

By September 2009, he said, the sovereign fund which was originally known as Terengganu Investment Authority (TIA) had changed ownership to 1MDB.

Shahrol said he learnt from Low, better known as Jho Low, that an audit and due diligence could pose a political risk to Najib.

“Moreover, 1MDB had appointed Ernst & Young, an external auditor, to conduct the exercise,” he said.

Shahrol said he wrote a letter to the department on Jho Low’s instructions saying that due diligence was not necessary, according to Najib’s wishes.

“I believed that Najib and Jho Low had discussed the matter before I sent the letter to the department,” he added.

“Now I know that 1MDB took over TIA with the blessing of Najib, to cover the fraud in the issuance of a RM5 billion bond in May 2009.”

Two days ago, Shahrol who was also CEO of TIA, said the money was raised through the issuance of a bond to develop Pulau Bidong in Terengganu.

He told the court that part of the RM5 billion was used for the joint-venture with PSI.

He said TIA only received RM4.396 billion from the RM5 billion bonds sale as AmBank was paid “over a few hundred million” in fees as the bonds arranger.

“We used US$1 billion – about RM3.4 billion at the time – for the joint-venture, and the balance of about RM1 billion was used to pay interest to bond holders,” he said.

Najib is facing 25 charges of money laundering and abuse of power over alleged 1MDB funds in his AmBank accounts.

He is accused of abusing his position to obtain RM2.28 billion in bribes in February 2011 and December 2014.

He is also said to have transferred RM2.28 billion in illegal funds to his bank accounts and to have subsequently used the money.

The hearing continues before judge Collin Lawrence Sequerah.