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KUALA LUMPUR, Sept 17 — Mohd Hazem Abd Rahman who was CEO of government-owned 1Malaysia Development Berhad (1MDB) for less than two years told the High Court today that he wanted to resign from the position many times because he did not have control or even information over the status of the heavily-indebted company’s overseas funds estimated at billions of ringgit.
He was testifying as the 10th prosecution witness in former prime minister Datuk Seri Najib Razak’s power abuse and money laundering trial over more than RM2 billion of 1MDB funds.
Mohd Hazem said that it was Low Taek Jho — whom he had described as Najib’s trusted right-hand man, advisor, proxy and middle man for 1MDB affairs allegedly delivering instructions agreed by Najib — who had control over 1MDB’s funds purportedly in existence abroad.
Mohd Hazem had throughout his testimony spoke of how 1MDB board of directors and senior management considered Low’s instructions to have originated from Najib and of how Najib had signed his approval to 1MDB’s financial decisions even before such matters were presented to the board of directors or to Mohd Hazem himself.
Mohd Hazem, who was CEO of 1MDB from March 2013 to early January 2015, highlighted that he had in fact as early as September 2013 told his colleague — 1MDB chief financial officer Azmi Tahir — in an email that he wanted to leave 1MDB as he felt then the company had fallen into the “biggest trap” in corporate history and that Low’s plans for 1MDB were unrealistic.
Mohd Hazem said he had frequently met with Najib’s principal private secretary Datuk Azlin Alias to voice his worries over 1MDB’s excessively heavy debts and how the company’s funds were being managed, as well as his desire to step down.
“I also voiced my intention to the late Datuk Azlin to resign and be replaced with someone who is capable of heading 1MDB in a situation of heavy debts,” he told the court today.
Mohd Hazem said Azlin had advised him to wait and resign only after 1MDB lists its energy unit 1MDB Energy on Bursa Malaysia, but noted that he had in October 2014 after his return from a Muslim pilgrimage trip seriously expressed to Low and Azlin of his intention to resign from the 1MDB CEO post.
“I did ask Datuk Azlin to tell Jho Low to find a candidate to replace me as all the officers that were working below me did not want to replace me as all the officers working under me do not want to replace me, as this position of CEO was very much exposed to political elements,” he added.
Mohd Hazem had previously spoken of the political influence that was imposed over his role as 1MDB CEO, claiming that his attempts to resist some of Low’s orders on seemingly dubious 1MDB investment decisions resulted in Azlin telling him to unquestioningly comply with Low’s instructions as they were equivalent to Najib’s instructions.
Upon his return to Malaysia on January 3, 2015 from a holiday trip, Mohd Hazem said Azlin had told him that there was a candidate for the post of Assistant CEO and requested that he stay on as 1MDB CEO until Edra Energy or all of 1MDB’s subsidiaries in the independent power plant business become successfully listed on Bursa Malaysia in mid-2015.
Mohd Hazem then said that Arul Kanda Kandasamy reported to work on the first working day of January 5, 2015 as the 1MDB president, which meant that he as CEO would report to Arul Kanda.
“At this time, I made the decision that this is the appropriate time to resign as CEO as the portfolio of the president position is the same as CEO,” Mohd Hazem said when describing his move to finally quit as 1MDB CEO.
The worries that led to Mohd Hazem’s resignation
Throughout his witness testimony in Najib’s trial this week including today, Mohd Hazem spoke about his doubts and suspicions over whether 1MDB’s funds that were purportedly located overseas actually existed or if they had been used up without the company’s knowledge, as the company’s senior officials had failed in repeated efforts to have the money brought back as cash to Malaysia.
For example, around September 2013, 1MDB desperately needed around RM1 billion at that time to complete a takeover of an independent power producer named Jimah Energy Ventures.
Mohd Hazem on Tuesday said he had then contacted Low to ask for permission to bring back 1MDB’s funds that were allegedly kept overseas for the Jimah purchase, but said that Low had said the funds could not be used by 1MDB as they were meant for Umno’s use.
Mohd Hazem said that the 1MDB board of directors was eventually forced to find a new way to fund the Jimah takeover as the agreement to buy the IPP had been finalised but payment had been delayed several times, noting that 1MDB finally resorted to borrowing from a local bank for the deal.
“I was disappointed and worried as 1MDB kept on borrowing money when too much funds had been borrowed and can be used for company’s operations, especially monies abroad,” he had said on Tuesday, referring to how 1MDB had borrowed huge sums of monies that were then kept overseas instead of used for company’s expenses and that this then perpetuated further borrowing by the company to fund its operations.
Today, Mohd Hazem said his worries had only continued to grow, stating: “Around early 2014, I was always worried as 1MDB had excessively too much debts and I started doubting 1MDB’s capacity to repay those debts,” he said, referring to a Maybank loan in 2012 for the purchase of Tanjong Power shares that 1MDB was due to pay in 2014.”
He said he had worried that Low too would disallow 1MDB’s overseas funds from being brought back to pay the 2014 Maybank loan, adding that 1MDB eventually took new debts to pay for many of the company’s expenses including its Tun Razak Exchange (TRX) project and the Jimah acquisition.
“At the same time, I did not know whether 1MDB’s funds abroad at that time were still in existence or had already been used for the needs of Umno as was told to me from early on,” he said. Previously, Mohd Hazem had testified that Low had allegedly told him in their first meeting in 2012 that 1MDB was allegedly established to help Umno generate funds.
Mohd Hazem said that he estimated 1MDB’s purported overseas funds to be around US$3.8 billion or equivalent to RM13 billion, which he said should have been sufficient to pay off the Maybank loan and also provide starting capital for any of 1MDB’s projects in Malaysia.
“I became increasingly worried and had many questions about the management of the funds abroad as I even as the CEO did not have access, only Jho Low and Jasmine Loo knew about this matter,” he said.
Later on, Mohd Hazem again stressed on his lack of control despite being part of 1MDB’s senior management: “I as the company CEO should have full power to control the outflow and inflow of funds from overseas into the country, as the control of company funds are with the company’s management. But I received orders from Jho Low to not disturb these overseas funds.”
Eventually Mohd Hazem quit due to his lack of control over 1MDB’s overseas funds when the company needed to use money.
Mohd Hazem had previously said that doubts over the validity and status of 1MDB’s purported overseas funds allegedly valued at US$2.3 billion had even led to audit firm KPMG refusing to close the company’s 2013 financial statements as further proof was lacking, and with KPMG’s replacement Deloitte subsequently also insisting on 1MDB bringing back the money to Malaysia. Mohd Hazem’s predecessor as CEO, Datuk Shahrol Azral Ibrahim Halmi previously told the court that he now knew the promissory notes for the US$2.3 billion purported investment abroad were worthless.
Najib’s trial before High Court judge Collin Lawrence Sequerah is expected to continue on October 5, with Najib’s lawyer Tan Sri Muhammad Shafee Abdullah expected to cross-examine Mohd Hazem.