KUALA LUMPUR, Sept 27 — The Malaysian government fast-tracked the issuance of a government guarantee for a new US$3 billion borrowing in 2013 by a 1Malaysia Development Berhad (1MDB) subsidiary without following proper procedure, and this guarantee was said to be what then prime minister Datuk Seri Najib Razak wanted, the High Court heard today.
This March 14, 2013 letter of support — which was signed by Najib as the finance minister then — effectively acted as a government guarantee for the US$3 billion debt, and which would mean the Malaysian government had to bear the debt if the 1MDB subsidiary was unable to make repayments.
The Finance Ministry’s former deputy secretary-general (policy) Datuk Siti Zauyah Mohd Desa said this while testifying as the 26th prosecution witness in Najib’s trial over the misappropriation of RM2.28 billion of 1Malaysia Development Berhad (1MDB) funds.
Today, Siti Zauyah — who had worked for 25 years at the Finance Ministry — said this was not a normal transaction.
“It’s the first of its kind, in the sense that, you know, everything needs to be done expediently, on the same day,” she said, agreeing that the process for the issuance of the letter of support was done “speedily”.
In response to lead prosecutor Datuk Seri Gopal Sri Ram, Siti Zauyah confirmed that the usual cautionary steps were not taken, and the relevant procedures were not followed due to the accelerated pace.
“Well, firstly, there was no due diligence being done for the projected cash flow. Because in the first place, we had to do the paper and table it to the Cabinet on the same day.
“The information that we got, it’s not enough. We had to work with whatever information was given to us. It was so limited. There was no thorough assessment on the investment. In fact, there was none. They didn’t give us anything for us to do due diligence,” she said.
“So there’s no assessment being done or due diligence on the projected cash flow. It’s the first of its kind, we didn’t have any projected cash flow, which is important for us to assess whether the investment can churn out the right kind of income to service the loan,” she added.
Sri Ram then asked whether it was open for Siti Zauyah to act in defiance of the instructions given to her by then Treasury secretary-general Tan Sri Mohd Irwan Serigar Abdullah on the matters regarding the letter of support, asking: “Can you defy his order? In other words, if he tells you to approve, can you say no?”
Siti Zauyah replied: “I can advise him, but it is really up to him whether to accept or not.”
Sri Ram then asked: “But when he told you, this is what the PM wants to get done, what impression did you get in your mind?”
Siti Zauyah answered: “It is an instruction.”
In the quick-paced process, the Finance Ministry prepared an internal memorandum on March 11, 2013 regarding the issue of the letter of support and had then obtained then prime minister Najib’s approval.
After getting Najib’s approval, Finance Ministry officials had on March 11, 2013 then prepared a memorandum to the Cabinet on behalf of the finance minister Najib to seek the Cabinet’s approval.
The Cabinet on March 13, 2013 made the decision to agree to the government’s issuance of the letter of support via the Finance Ministry for the 1MDB subsidiary’s US$3 billion debt, with Najib as the finance minister then signing off on the letter of support dated March 14, 2013. Just days later, the 1MDB subsidiary received the money it had raised from the US$3 billion debt.
This letter of support was crucial for the 1MDB subsidiary 1MDB Global Investment Limited (1MDB GIL) to be able to issue the US$3 billion bond.
The US$3 billion fundraising was purportedly for investments via a planned joint venture between 1MDB and Abu Dhabi firm Aabar Investments PJS, but it is now known that 1MDB had instead dealt with a fake company that had similar names to Aabar.
The 10-year US$3 billion bond was issued by 1MDB GIL on March 19, 2013, with a 4.4 per cent interest on the US$3 billion sum to be paid until 2023.
The prosecution had on the first day of Najib’s trial said it would show that 1MDB GIL had on March 19, 2013 only received US$2.721 billion of the US$3 billion funds it raised with the balance paid to arranger Goldman Sachs as fees, and that over US$1 billion of the US$2.721 billion was paid to the two funds Devonshire Funds Limited and Enterprise Emerging Markets Fund (EEMF) — now known to be linked to Low Taek Jho — on March 20 and March 21, 2013.
The prosecution had also said it would show that a total of US$890 million — including a US$430 million sum passing through Granton Property Holding — made its way within days from Devonshire and EEMF to Tanore Finance Corporation, and that it would also showed that Tanore had by early April 2013 transferred US$681 or over RM2 billion to Najib’s account.
Granton and Tanore are now known to be under Low’s associate Eric Tan’s control.