KUALA LUMPUR, May 6 — SRC International Sdn Bhd was not allowed to use the RM4 billion borrowed from civil servants’ pension fund KWAP for corporate social responsibility programmes as it would breach the loan agreements, the High Court heard today.

Former KWAP employee Amirul Imran Ahmat, 39, testified that the two loans of RM2 billion each that were given out to SRC International in 2011 and 2012 were only for specific purposes stated in the loan or facility agreements.

“Based on the two Facility Agreements and Supplemental Facility Agreement, the money borrowed from KWAP cannot be used for the purpose of ‘corporate social responsibility’ as social, charity and political works were not stated in the two Facility Agreement and supplemental agreement for the sum of RM4 billion,” Amirul Imran said, referring to the three agreements relating to the two loans totalling RM4 billion.

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Amirul Imran is the 29th prosecution witness in Datuk Seri Najib Razak’s trial over RM42 million of funds belonging to former 1MDB subsidiary SRC International.

According to Amirul Imran’s testimony in court, KWAP’s first RM2 billion loan to SRC International in 2011 was when it was a 1MDB subsidiary, while the second RM2 billion loan in 2012 was after the company’s ownership was transferred to the Finance Ministry’s Minister of Finance (MOF) Incorporated.

Amirul Imran today testified that the first loan agreement dated August 26, 2011 stated that the RM2 billion loan was only for the purposes of “working capital” and “general investment”.

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“Therefore, the money from the first loan can be used by SRC for the purpose of domestic investment whether in fund management or in asset management company,” he said.

“Proceeds from the investment can be used for any other purposes such as ‘corporate social responsiblity’ activities if there is any resolution from SRC board of directors that permits it, with the condition that SRC does not have any outstanding payments to KWAP.

“However, the investment proceeds from the first loan was not recorded or stated clearly,” he added.

As for the second loan agreement dated March 27, 2012, it was again for SRC International’s general investment activities and working capital.

But Amirul Imran said that the purpose of the second RM2 billion loan was later amended, following the Finance Ministry’s May 18, 2012 letter which stated that it was only for working capital and investment activities over natural resources, and not general investment.

“This letter is based on the Cabinet Meeting on February 8, 2012,” he said of the Finance Ministry’s letter.

The supplemental loan agreement dated August 9, 2012 was then signed to amend the second loan’s purpose by removing “general investment” and specifying it as only for natural resources-linked investments and working capital, he said.

This meant that funds from the second RM2 billion could not be invested into fund management or asset management companies whether within Malaysia or abroad to generate profits, he said.

He also testified that if the loans worth RM4 billion were used for purposes not stated in the loan agreements, this would result in a breach of the agreements’ terms and trigger an “event of default”.

“If this happens and was known by KWAP, KWAP can terminate the loan agreement and make demands for the repayment of the entire remaining loan amount, in addition to the interest imposed on the borrower,” he said.

Amirul Imran was assistant vice-president of KWAP’s fixed income department during the time when the two loans totalling RM4 billion were given to SRC International, and was then involved in getting supporting documents from SRC International and drafting documents linked to the loans for KWAP’s investment panel to approve.

Amirul Imran had last week explained that working capital can be used for all operation costs including payment of salaries and rental, while funds marked for general investments can be used for all investment activities determined by SRC International.

Today is the 13th day of Najib’s trial on seven charges of criminal breach of trust, abuse of position and money-laundering of SRC International’s RM42 million of funds.

During the trial, witnesses had testified that money flowed from SRC International into the company’s subsidiary Gandingan Mentari Sdn Bhd, while the latter was also shown to have transferred money to SRC International’s purported corporate social responsibility partner Ihsan Perdana Sdn Bhd.

Witnesses had also confirmed to the court that Ihsan Perdana had transferred out a total of RM42 million into two of Najib’s personal accounts at AmBank.

One of these AmBank accounts belonging to Najib was used to issue 14 cheques amounting to about RM7.2 million to various recipients, including to political parties, renovation works such as water tank installations at Najib’s residences, and a welfare home for orphans.