Ex-1MDB CEO said Jho Low pressured him into expediting US$500m PSI loan

Former 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi (left) arrives at the Kuala Lumpur Courts Complex November 5, 2019. — Picture by Ahmad Zamzahuri
Former 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi (left) arrives at the Kuala Lumpur Courts Complex November 5, 2019. — Picture by Ahmad Zamzahuri

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KUALA LUMPUR, Nov 5 — 1Malaysia Development Berhad (1MDB) former Chief Executive Datuk Shahrol Azral Ibrahim Halmi said fugitive financier Low Taek Jho had pressured the sovereign wealth fund to expedite the sending of US$500 million in loan to the purported Saudi-linked PetroSaudi International Limited (PSI), the High Court heard today.

Testifying against Datuk Seri Najib Razak in the latter’s 1MDB corruption trial, Shahrol said Low or Jho Low had previously asserted that the sovereign wealth fund should quickly provide a loan to PSI in order to capture more lucrative investments, among other incentives.

To recap, 1MDB had borrowed money from Ambank and Standard Chartered, which it then used to give out loans to PSI in the amounts of US$500 million in 2010 and another US$330 million in 2011.

Najib’s lawyer Tan Sri Muhammad Shafee Abdullah today quizzed Shahrol on why the disbursement of the first loan was done in a hurried manner.

Shafee cited a 1MDB letter to Ambank regarding the US$500 million loan, where Shahrol had signed off on the September 13, 2010 letter to say that 1MDB had conducted the necessary due diligence before disbursing the loan to PSI.

Shafee: I therefore suggest to you that you signed this letter because you want to facilitate the transmission of this sum of money as quickly as possible to PetroSaudi, in this case the joint venture with PetroSaudi.

Shahrol: Yes.

Shafee: Why were you in a hurry to send it?

Shahrol: Because if you remember earlier, originally the original date was supposed to be July 19 and it became August 19 and all through this there was pressure from Jho to get this done.

Shahrol was referring to the deadlines set by PSI, where the company had at first asked 1MDB to give its decision by July 19, 2010 on a joint venture opportunity to buy shares in French oil and gas company GDF Suez together.

PSI had later extended the deadline for 1MDB’s decision to August 19, 2010 when 1MDB asked for more time via Low, and had further extended by another 12 months when Shahrol told Low that 1MDB had no available cash to commit until it managed to borrow money from the banks.

Shafee however disputed the “pressure” that Shahrol felt in having to speed up the giving out of US$500 million to PSI, but Shahrol insisted that he had viewed it as involving government-to-government ties between Malaysia and Saudi Arabia.

Shafee: If I may say, you are the kingmaker, you are the lender, PSI is the borrower, how come they put pressure on the lender?

Shahrol: It is also at that time, I believe this was a strategic relationship. There were other countries, G2G at stake, so I felt at that time I needed to facilitate this as quickly as possible.

Shafee then suggested that Shahrol’s signing of the letter was proof that he was either involved in a “conspiracy” or “reckless in not protecting the interests of 1MDB”, to which Shahrol then disagreed.

Shahrol had also explained that he and then 1MDB Chief Investment Officer Nik Faisal Nik Ariff Kamil were satisfied with PSI’s purported financial position due to their previous dealings and was under the impression that the loan between both companies was a government to government deal.

“In this particular case, due to the context that the party is part of a G2G....just taking into consideration the difficulty for us to go and be overly aggressive with the due diligence,” he said, insisting that 1MDB did the best it could with the information they had at the time although acknowledge that was no documentary evidence to show that they had conducted a due diligence.

Earlier today, Shahrol confirmed that he felt it was “sensible” for 1MDB to borrow money in order to lend money to PSI, noting that the interest payments that PSI would have to pay was higher than what it cost 1MDB to borrow.

“We believe that basically our borrowing on this, the cost is lower than what we get from PSI,” he said, acknowledging however that 1MDB did not have any money-lending licence from Bank Negara Malaysia.

However, Shahrol later confirmed that PSI had only paid in cash for the first interest installment on the US$500 million loan, while PSI had not paid any of the subsequent interest on all the loans owed to 1MDB but were converted into other financing instruments and more debts.

Shahrol agreed that 1MDB had totally lost out and made serious losses in its business dealings with PSI, including on an initial US$1 billion investment, the US$500 million loan in 2010 and the US$330 million loan in 2011.

When Shafee asked if 1MDB should have foreseen these losses in “hindsight” given PSI’s behaviour in the business dealings, Shahrol pointed out that 1MDB’s actions then were based on totally different circumstances based on the information it had at that time and the perceived “strategic” nature of the business venture with PSI.

“At that time in 2010, had these transactions been viewed with suspicion, would we be able to avoid these losses? I agree, exactly these wording,” he said.

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