Ex-CEO: 1MDB didn’t check if partner had Saudi royal ties, but Najib had ‘vouched’ for PSI

Former 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi (left) arrives at the Kuala Lumpur Courts Complex November 4, 2019. — Picture by Yusof Mat Isa
Former 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi (left) arrives at the Kuala Lumpur Courts Complex November 4, 2019. — Picture by Yusof Mat Isa

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KUALA LUMPUR, Nov 4 — 1Malaysia Development Berhad (1MDB) had not conducted due diligence checks to verify if its business partner PetroSaudi International Limited (PSI) truly had ties to the Saudi royal family or the Saudi government before entering into deals together, the High Court heard today.

1MDB former CEO Datuk Shahrol Azral Ibrahim Halmi said however that he had felt reassured at what he perceived as Datuk Seri Najib Razak’s “vouching” for the purported Saudi-linked company PSI.

Quizzed by Najib’s lawyer Tan Sri Muhammad Shafee Abdullah, Shahrol confirmed today that he had not determined if PSI was actually owned by or closely associated to Saudi Arabia and the Saudi royal family.

Shafee then asked if checks were done to verify if PSI CEO Tarek Obaid and PSI senior official Patrick Mahony had such Saudi ties as claimed by businessman Low Taek Jho.

Shafee: Did you determine if Tarek Obaid has got any connections with the Saudi royal family?

Shahrol: No.

Shafee: Did you determine if Tarek Obaid and Patrick Mahony has got any dealings with the Saudi government?

Shahrol: No.

Confirming that 1MDB did not do any due diligence checks on PSI’s background, Shahrol however said he was given supporting documents regarding PSI for him to use in 2010 during Parliament’s bipartisan watchdog Public Accounts Committee’s (PAC) investigations into 1MDB.

Shahrol said such documents included a letter from Malaysia’s ambassador to Saudi Arabia, adding the purpose of these documents were for him and 1MDB to “collaborate” PSI CEO Obaid and PSI chairman Prince Turki’s relationships with the Saudi royal family.

Pressed by Shafee, Shahrol agreed that the Malaysian embassy’s letter can only be used to provide initial information but cannot be the final source of information on who actually owns PSI, further agreeing that an independent company search would have been required but was not done.

Datuk Seri Najib Razak arrives at the Kuala Lumpur Courts Complex November 4, 2019. — Picture by Yusof Mat Isa
Datuk Seri Najib Razak arrives at the Kuala Lumpur Courts Complex November 4, 2019. — Picture by Yusof Mat Isa

Najib’s vouching?

Shahrol confirmed that he did not ask 1MDB’s lawyer then to carry out fact-finding on PSI’s backgrounds, agreeing that it would on “hindsight” have been prudent to do so but noted that it did not occur to him then to do that.

“At that time I didn’t think of that, it was only the fact that this was already vouched for by the shareholder, mentioned it a number of times that this was important, and I left it at that,” Shahrol said, referring to Najib as finance minister was the sole shareholder of 1MDB then via Minister of Finance Incorporated (MoF Inc).

Confirming that information regarding PSI being a credible company had came from Low, Shahrol agreed that it was possible that Najib’s source of information on the company also could have came from Low.

While agreeing that a prime minister generally could not be expected to carry out investigations and due diligence work, Shahrol highlighted Najib’s personal involvement including discussions during a holiday trip with PSI chairman Prince Turki that led to the company approaching 1MDB for a joint venture.

“In general yes, but in particular on this one, seeing how Datuk Seri Najib, at least in my perception, has personally invested a lot in this relationship, based on meeting up with Prince Turki and holidays...so I cannot say one way or the other whether especially the prime minister at that time would have the capacity to do the due diligence or not,” he said.

Under further questioning from Shafee who insisted that Najib could not be personally doing due diligence work, Shahrol agreed that 1MDB should have been the one doing due diligence on PSI.

When asked what Najib was alleged to have vouched for in relation to PSI, Shahrol said the seeming legitimacy of the company appeared to have been matched by Najib’s conduct.

“It’s hard for me to pinpoint where — at that time — my comfort that PSI is known to Datuk Seri Najib came from, but it’s consistent in all interactions I had with him, with Datuk Seri Najib since September 2009,” Shahrol said, referring to his October 16, 2009 meeting with Najib about the valuation of PSI’s assets for a joint venture with 1MDB, and a separate meeting between Najib and other 1MBD directors.

Shahrol said that he had also on one instance spoken personally with Najib about PSI, noting: “He was very consistent to me that the relationship is important to Datuk Seri Najib because of the strategic implications between Malaysia and Arab Saudi, so rightly or wrongly, that’s my impression.”

Shahrol agreed that he now knew PSI was used as a vehicle for fraud that Low as allegedly involved in, saying: “Well, now I know that PSI was a vehicle that was used to get money from 1MDB and from that point used to channel funds to various different recipients that we didn’t know about.”

After an initial US$1 billion investment by 1MDB in 2009 into a joint venture idea by PSI resulted in zero returns, PSI proposed in 2010 yet another joint venture with 1MDB to buy shares in a French oil and gas company GDF Suez.

Quizzed on the PSI proposals and Shafee’s suggestion that there was a “pattern of deception” by PSI, Shahrol said he did not realise or think of this previously, but agreed today that there is a possibility that PSI may have been “playing” 1MDB all along.

The prosecution’s case is that money that 1MDB paid out as “investments” according to PSI’s instructions had eventually made its way into Low’s company and also to Najib, among other entities.

 

Najib’s trial resumes before High Court judge Collin Lawrence Sequerah tomorrow morning, where Shahrol will continue to be cross-examined as the ninth prosecution witness testifying against Najib.

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