Najib instructed KWAP to speed up RM2b loan approval for SRC International, trial told

Vice-president of KWAP's legal and secretarial department, Azlida Mazni Arshad, is pictured at the Duta Court in Kuala Lumpur May 9, 2019. — Picture by Hari Anggara
Vice-president of KWAP's legal and secretarial department, Azlida Mazni Arshad, is pictured at the Duta Court in Kuala Lumpur May 9, 2019. — Picture by Hari Anggara

KUALA LUMPUR, May 9 — Retirement Fund Incorporated (KWAP) received instructions from former prime minister Datuk Seri Najib Razak in 2011 to hasten the approval for the first RM2 billion loan to SRC International Sdn Bhd, the High Court was told today.

The prosecution’s 35th witness, KWAP Legal and Secretarial Department vice president Azlida Mazni Arshad, testified that SRC International had initially applied in June 2011 for a RM3.95 billion loan from KWAP.

Azlida Mazni said the KWAP’s Fixed Income Department however drafted and submitted an Investment Panel Paper that suggested that the civil servants’ pension fund give a loan limited to only RM1 billion to SRC International.

The KWAP investment panel then deferred its decision on the proposed loan of RM1 billion to SRC International, with a second investment paper subsequently drafted with a new proposed amount of RM2 billion.

During a special unscheduled meeting by KWAP investment panel that convened on July 19, 2011 at the early stage of SRC International’s first loan application process, the special investment paper on the proposed RM2 billion loan was presented and discussed.

“The meeting chaired by KWAP board chairman Tan Sri Wan Abdul Aziz Wan Abdullah, was attended by KWAP’s Investment Panel to consider SRC International’s RM2 billion loan for the purpose of working capital and general investments.

“I verify that CEO (KWAP CEO Datuk Azian Mohd Nor) had informed in the meeting that the prime minister has informed KWAP’s chairman to expedite the approval process of this loan and the total loan of RM2 billion was already sufficient,” she said, referring to page two of the minutes of the July 19, 2011 meeting.

Najib was the prime minister from 2009 to 2018, and was also finance minister from September 2008 to 2018.

Azlida Mazni said she had attended the July 19, 2011 meeting in the capacity of a secretary to record the minutes of the meeting.

According to her, the KWAP Investment Panel had in the same July 2011 meeting raised several concerns after the Special Investment Paper for the proposed RM2 billion loan to SRC International was tabled for consideration.

Datuk Seri Najib Razak at the Kuala Lumpur Court Complex May 9, 2019. — Picture by Hari Anggara
Datuk Seri Najib Razak at the Kuala Lumpur Court Complex May 9, 2019. — Picture by Hari Anggara

Some of the concerns raised was that the panel disagreed with a RM2 billion loan for SRC International as it was a company with a paid-up capital of only RM2, with the panel also questioning SRC International’s management capability in the latter’s planned investment in natural resources which required a high level of expertise.

SRC International was at that time a subsidiary owned by 1Malaysia Development Berhad (1MDB), based on her testimony.

However, she said the panel ultimately decided to approve the RM2 billion loan directly to 1MDB as KWAP supports the government’s strategic initiative, but with either one of two options as the condition for the loan.

The two options were for the loan to be either backed by a government guarantee, or for KWAP to loan RM2 billion directly to the Malaysian Government for the latter to give the same amount as a loan to 1MDB.

She said SRC’s acting CEO Nik Faisal Ariff Kamil then sent a fresh application letter dated August 12, 2011 and addressed to KWAP’s CEO to request that the RM2 billion loan be given directly to SRC International, as it was a wholly-owned subsidiary of 1MDB and backed by government guarantee.

“Since the next monthly panel meeting was still distant from the application letter’s date and because it was also mentioned in the previous meeting for the approval process to be expedited, the Fixed Income Department then prepared Investment Panel Circular Paper No.19/2011 for the consideration of the panel members,” she said.

This paper — which was the third proposal for a loan to SRC International — also proposed a RM2 billion loan amount.

Following this paper, the six members of KWAP investment panel unanimously approved a RM2 billion loan in 2011 to SRC International.

KWAP received a government guarantee for the loan of RM2 billion to SRC International.

KWAP also approved in 2012 a second RM2 billion loan to SRC International, which was also backed by a government guarantee.

Today marks the 16th day of the former prime minister’s trial on seven charges of criminal breach of trust, abuse of power and money-laundering RM42 million funds belonging to SRC International.

Trial resumes before High Court judge Mohd Nazlan Mohd Ghazali next Tuesday, May 14.