Loan guarantee approved before SRC board ever met, court told

Former prime minister Najib Razak at the High Court in Kuala Lumpur today.

KUALA LUMPUR: The High Court in Najib Razak’s corruption trial heard today that the Cabinet approved a government guarantee for SRC International to obtain a RM2 billion loan from pensioners fund Retirement Fund Incorporated (KWAP) six days before the company’s board held its inaugural meeting.

The Cabinet, chaired by Najib who was prime minister at the time, approved the guarantee on Aug 17, 2011, while the five-member SRC International board of directors met for the first time on Aug 23.

Najib appointed Ismee Ismail as board chairman while Nik Faisal Ariff Kamil was made CEO and managing director. Other members were Suboh Yassin, Che Abdullah @ Rashidi Che Omar and Shahrol Azral Ibrahim Halmi.

The prosecution is arguing that business, including applications for loans, is normally conducted after the board has met. In the case of SRC International, however, everything was done by Nik Faisal with the approval of Najib.

During cross-examination by Attorney-General Tommy Thomas today, Najib who is in the witness box after being called to answer to seven criminal charges in relation to RM42 million in SRC International funds moved to his bank accounts, maintained that decisions were made by the board and that he had only approved them.

Thomas, who is also the public prosecutor, reminded Najib that Nik Faisal had applied to the former prime minister in early June 2011 to secure a RM3.95 billion loan.

He also produced documents showing that Najib had appointed the SRC International directors in a letter dated Aug 1, 2011.

“How could the board ask for advice from you when it was not in existence then?” he said.

Najib replied that it must have been from Shahrol, who was CEO of 1MDB at the time.

SRC International was a subsidiary of 1MDB, a government-linked company under the Ministry of Finance Incorporated (MoF Inc). SRC International was later included under MoF Inc from Feb 14, 2012 onwards.

Najib said he had instructed Treasury officials to expedite a working paper for the Cabinet’s consideration to provide the guarantee for KWAP to approve the loan to SRC International.

He said he did not know if SRC International had put in an application to secure the loan from KWAP.

“SRC International had no track record, but it had to start somewhere to realise the government’s energy policy,” he added.

He also denied any conflict of interest in chairing the Cabinet meeting on the government guarantee, saying he had no personal or financial interest in the matter.

However, Thomas maintained that Najib should have recused himself as he was the “driving force” behind KWAP and SRC International.

“SRC International met for the first time on Aug 23, but the Cabinet approved the guarantee on Aug 17,” he added. “What have you got to say?”

“I am confident I was not in conflict of interest,” Najib replied.

He also denied Thomas’ suggestion that the guarantee was given because the loan was seen as a personal application by Najib as finance minister and SRC International emeritus adviser.

He likewise denied the suggestion that the SRC International board was his tool and had merely followed his orders.

He did, however, acknowledge that the guarantee was rushed as SRC International was set up due to strategic importance.

“The Economic Planning Unit supported SRC International’s investment opportunity and as such, the matter had to be expedited,” he said.

Najib is accused of abusing his power as prime minister by giving government guarantees on SRC International’s RM4 billion loan from KWAP.

He is also charged with three counts of money laundering and three counts of criminal breach of trust in the transfer of RM42 million to his accounts from the former 1MDB unit.

The hearing continues before judge Mohd Nazlan Mohd Ghazali.