KUALA LUMPUR, Oct 17 — Businessman Low Taek Jho claimed Datuk Seri Najib Razak had wanted 1Malaysia Development Berhad's (1MDB) company constitution to expressly state that the prime minister would be its final arbiter on major matters such as investments, the High Court heard today.
Datuk Shahrol Azral Ibrahim Halmi, formerly the CEO of 1MDB, said 1MDB's company constitution was amended on August 11, 2009 with the consultation of the company's lawyers.
Shahrol said the 1MDB memorandum and articles of association (M&A) or the company constitution was changed on that day with the insertion of Article 117, which required 1MDB to obtain the prime minister's written approval for decisions touching on the company's senior management and financial affairs.
Article 117 states that the prime minister’s prior written approval is required for any amendments to 1MDB’s M&A; any appointment and removal of any 1MDB director or senior management; any financial commitment including investments, restructuring or any other matter likely to affect the federal government’s guarantee for the company or to affect national interest, national security or government policy.
Shahrol explained that the introduction of Article 117 involved the replacement of words in a similar existing clause in the company constitution, by swapping out the “federal government” with “prime minister” for prior written approvals in such key decisions.
“It's more administrative because the amendments replacing the 'federal government of Malaysia' with 'prime minister' came from Jho, that this is what Datuk Seri Najib wanted, to make it unambiguous,” Shahrol said today, affirming his previous testimony that Low had claimed Najib wanted no ambiguity that 1MDB's source of power is the prime minister alone.
Questioned by Najib's lawyer Tan Sri Muhammad Shafee Abdullah, Shahrol admitted that he never verified with Najib if this was what he wanted.
Shahrol had previously testified that this Article 117 insertion into 1MDB's company constitution meant that Najib is the "ultimate power" or the highest decision-maker in 1MDB especially for big investments, funds and national policies, and had also said that Najib as 1MDB board of advisers' chairman could not push the blame for the company's missing funds to the board of advisers.
Today, Shahrol confirmed that the 1MDB board of directors did not discuss the Article 117 amendment in its meeting on August 20, 2009, which was also the first meeting after the amendment.
When asked why the board did not discuss the Article 117 clause, Shahrol said he did not recall the exact reason.
“But I think that the board had considered that to be natural instructions from Datuk Seri Najib and we just went ahead,” he said.
Shafee then suggested the reason why the 1MDB board did not discuss the Article 117 amendment was allegedly due to this being a common provision for companies owned by the Minister of Finance (MOF) Incorporated.
Shahrol said he could not comment on this.
1MDB is wholly owned by the Finance Ministry via MOF Inc. (MOF Inc was the sole shareholder of 1MDB.)
Asked by Shafee, Shahrol said he would not be able to comment if 1MDB is a public company or a private company.
Shafee then went through the laws and company constitution for public bodies such as oil and gas company Petronas, suggesting that his client Najib did not have a “monopoly” in introducing provisions that gives the prime ministers wide-ranging powers.
Shafee cited Petronas’ memorandum and articles of association, including a clause which Shafee said meant the granting of “overwhelming powers” where the prime minister could overrule the entire Petronas board.
The Article 109 clause referred by Shafee in the Petronas company constitution stated that the prime minister shall appoint Petronas board’s chairman and that the chairman is to exercise its proxy for the government in accordance with the prime minister’s directions.
Shahrol agreed that the Petroleum Development Act similarly gives overwhelming power to the prime minister to overrule the entire Petronas board, and agreed that what was shown to him in the law on Petronas was far more powerful than Article 117.
Shafee: The reason why I draw parallels is to tell you that this is one of the most strategic government companies, Petronas, they have this very overwhelming power provided to the prime minister to virtually control the company and the board and the advisory council. You agree 1MDB was intended to be another strategic company of the government.
Citing other examples which he said involved the giving out of more serious powers to the prime minister as compared to Article 117, Shafee then when on to say that he wanted to make a point that “it’s not a monopoly that was devised by Datuk Seri Najib.”
Shafee later also sought to suggest that Najib had only signed off on 1MDB documents due to the Minister of Finance (Incorporation) Act’s requirement for the finance minister to sign off on such documents and not due to personal motivations.
Shahrol did not venture to comment on the reasons for Najib’s act of signing off on such documents.
Shafee: So it’s not something personal that he wants to sign, but it is as a result of the position he holds as minister of finance?
Shahrol: Yes, I would say he signed it in his capacity in the statute, but I cannot comment on why he signed it. I would agree his signature on shareholder’s resolutions is because he is minister of finance.