1MDB continued giving Jho Low’s firm Good Star money after US$1b zero return deal

Former 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi arrives at the Kuala Lumpur Courts Complex September 26, 2019. ― Picture by Firdaus Latif
Former 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi arrives at the Kuala Lumpur Courts Complex September 26, 2019. ― Picture by Firdaus Latif

KUALA LUMPUR, Sept 26 — 1Malaysia Development Berhad (1MDB) had transferred millions of US dollars to Good Star Limited without knowing it was owned by Low Taek Jho, even after it did not receive any financial returns from an earlier US$1 billion “investment” that partly went to the firm, the High Court heard today.

Datuk Shahrol Azral Ibrahim Halmi, the former CEO of 1MDB, spoke of how money had flowed from 1MDB to Good Star as part of investment efforts involving 1MDB’s purported joint venture partner PetroSaudi International Limited (PSI).

Shahrol had previously said 1MDB had pumped in US$1 billion — which it had borrowed — for the joint venture on September 30, 2009 after signing the partnership deal just two days prior with a similar-sounding firm named PetroSaudi Holdings (Cayman) Ltd, but today confirmed 1MDB had received “nothing” and not even “a penny” back from this investment.

Instead of putting the US$1 billion into the joint venture company 1MDB PetroSaudi Limited’s bank account, Shahrol had also previously described how 1MDB had on September 30, 2009 instead followed PSI’s law firm’s instructions in transferring the money in two separate sums of US$300 million to the JV firm’s Swiss-based JP Morgan account and US$700 million to Good Star’s RBS Coutts account number 11116073.

Shahrol yesterday said that 1MDB never had any business dealings with Good Star throughout his time as 1MDB CEO from 2009 to March 2013, but said Low had around the time of the US$700 million transfer claimed that Good Star was a company owned by PSI.

Datuk Seri Najib Razak arrives at the Kuala Lumpur High Court September 26, 2019.— Picture by Firdaus Latif
Datuk Seri Najib Razak arrives at the Kuala Lumpur High Court September 26, 2019.— Picture by Firdaus Latif

The 1MDB scandal and Low’s Good Star links

Shahrol today said 1MDB became a controversial topic in news reports in 2015.

“If I remember correctly, they were focused on the first US$700 million that was transferred by me at that time as CEO to Good Star Limited, and that Jho was the ultimate beneficiary of that company,” Shahrol said when asked about the news reports.

Following the news reports, Shahrol said he had asked Low for explanations about Good Star, which the media had reported was owned by Low instead of PSI.

“Jho Low told me that Good Star is owned by PSI. He promised to get PSI to write to me a letter to confirm what he had said. That’s why this letter was addressed to me and not to 1MDB,” Shahrol said.

Shahrol confirmed that PSI CEO Tarek Obaid had on May 22, 2015 sent him a letter regarding Good Star.

“This letter was in response to my request to Jho to confirm that Good Star was indeed an affiliate or subsidiary of PSI,” he said, adding that he had then handed over the letter to the new 1MDB CEO then Arul Kanda Kandasamy.

Lead prosecutor Datuk Seri Gopal Sri Ram today showed Shahrol a document regarding Good Star’s ownership, asking: “This is a document which shows the beneficial owner of Good Star Limited and it says it is Low Taek Jho. Did you know this fact when you dealt with Good Star?”

Shahrol replied “No”.

The prosecution had on Day One of Najib’s 1MDB trial said that it will prove Good Star is a company owned and controlled by Low, and had also said it will show that US$20 million of the US$700 million sent to Good Star eventually ended up allegedly with Najib.

Datuk Seri Gopal Sri Ram arrives at the Kuala Lumpur Courts Complex September 18, 2019. — Picture by Yusof Mat Isa
Datuk Seri Gopal Sri Ram arrives at the Kuala Lumpur Courts Complex September 18, 2019. — Picture by Yusof Mat Isa

How Good Star received more money

As the joint venture company was inactive from October 2009 to February 2010, 1MDB in March 2010 converted its US$1 billion stake in the joint venture company into an Islamic financing loan via Murabahah notes to the joint venture company with a face value of US$1.2 billion, allowing 1MDB to record a paper profit of US$200 million and to get expected further proceeds via 8.25 per cent per annum interest rates on the Murabahah notes.

Despite not having sufficient funds for its own projects such as the Tun Razak Exchange and Bandar Malaysia, 1MDB gave the option of offering up to US$1.5 billion in additional loans to PSI.

In September 2010, 1MDB took a RM2.5 billion loan from AmBank and Standard Chartered, using money it had borrowed from the banks to then give out a loan of US$500 million to PSI, Shahrol confirmed.

The US$500 million was transferred from 1MDB to PSI’s Swiss bank account JP Morgan on September 14, 2010, an amount which the prosecution had on Day One of the trial said “has gone missing”.

Shahrol confirmed today that PSI’s Tarek Obaid had bypassed the 1MDB board of directors by writing a February 18, 2011 letter directly to Najib to ask for an additional loan of US$750 million.

Shahrol said that Low had then prepared a written minutes of a purported meeting between Shahrol as 1MDB CEO and Najib as 1MDB board of advisers’ chairman on March 30, 2011, with Najib’s signature on the minutes where Najib gave his approval to the US$750 million loan to PSI if 1MDB obtains a RM3 billion loan from the Social Security Organisation (Socso). Shahrol said he had signed the minutes, despite the purported meeting with Najib never taking place.

After seeking Low’s help to negotiate with PSI for a lower loan amount as 1MDB still lacked funds for local development projects and could not afford to “invest” US$750 million abroad, PSI eventually agreed in May 2011 to only request for a US$330 million loan from 1MDB.

PSI on May 12, 2011 sent a drawdown notice to instruct 1MDB to send the US$330 million to RBS Coutts account 11116073.2000. (The bank account was Good Star’s account).

Four days later, Najib, who was finance minister then, approved as 1MDB shareholder through Minister of Finance (MoF) Incorporated by giving his nod for 1MDB to make the further “investment” of RM1 billion (roughly equivalent to US$330 million) into the joint venture company.

“As I remember, Patrick Mahony sent an email with payment instruction into the same account owned by PSI subsidiary which is Good Star Ltd, since the same name was used before this and there was no problem. That’s why I was not suspicious and did not query about the beneficiary account,” Shahrol said today, when describing how a PSI official had asked 1MDB to send the US$330 million to Good Star that was presented as a PSI affiliate.

Shahrol today said that 1MDB then transferred the US$330 million in four batches to Good Star due to varying foreign exchange rates, namely US$30 million (May 20, 2011), US$65 million (May 23, 2011), US$110 million (May 27, 2011) and US$125 million (October 25, 2011).

Having initially decided to reduce the transfers to US$205 million by May 27, 2011 due to 1MDB lacking sufficient funds to give the full US$330 million loan, Low’s relay of PSI’s disappointment and dissatisfaction with purported complaints and alleged discussions with Saudi royals eventually led to 1MDB giving in and transferring the final US$125 million in October 2011.

Najib’s ongoing 1MDB trial involves 25 criminal charges — four counts of abusing his position for his own financial benefit totalling almost RM2.3 billion allegedly originating from 1MDB and the resulting 21 counts of money-laundering.

Today is day 14 of the trial, and Shahrol who is the ninth prosecution witness will resume his testimony next Monday.

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