1MDB subsidiary’s US$2.7b became US$60,000 in just months but CEO kept mum, court hears

KUALA LUMPUR : The over US$2.7 billion deposited in a 1Malaysia Development Berhad (1MDB) subsidiary’s bank account in March 2013 dwindled to just US$60,000 within months, with the funds flowing to various companies including those now known to be controlled by fugitive Low Taek Jho and his associates, the High Court heard today (May 20).

Mohd Hazem Abd Rahman, the chief executive of 1MDB from March 2013 to early January 2015, confirmed in court that he did not inform the 1MDB board of the status of the funds in the bank account, including when its balance fell to just around US$60,000.

Mohd Hazem said this while testifying as the 10th prosecution witness during the trial of former prime minister Datuk Seri Najib Razak, who is facing 25 charges involving alleged power abuse and money laundering in relation to more than RM2 billion of 1MDB funds.

Najib’s lawyers today focused on 1MDB’s subsidiary 1MDB Global Investments Limited (1MDB GIL), which had raised US$3 billion in March 2013 for a joint venture between 1MDB and Aabar Investments PJS Limited (now said to be a fake company with similar names to an actual Abu Dhabi firm). Both 1MDB and Aabar were supposed to put in US$3 billion each into the joint venture company Abu Dhabi Investment Malaysia Company (Admic).

Former prime minister Datuk Seri Najib Razak is pictured at Kuala Lumpur High Court May 20, 2021. ― Picture by Hari Anggara
Former prime minister Datuk Seri Najib Razak is pictured at Kuala Lumpur High Court May 20, 2021. ― Picture by Hari Anggara

On March 19, 2013, 1MDB GIL received over US$2.7 billion from the US$3 billion funds it had raised by taking on debts through its issuance of a bond, as the remaining was paid to the bond’s arranger Goldman Sachs.

Yesterday, Mohd Hazem confirmed in court that 1MDB GIL’s bank account that initially had more than US$2.7 billion on March 19, 2013 only had a balance of about US$129.3 million on March 22, 2013, following outflow of funds that did not have the approval of 1MDB’s board or 1MDB GIL’s board of directors via board resolutions.

The outflows — that left 1MDB GIL with only about US$129 million in just a few days’ time — included hundreds of millions of US dollars transferred as purported “investments” in three fund companies (Devonshire Funds Limited, Enterprise Emerging Markets Fund (EEMF), Cistenique Investment Fund) — now linked to Low.

Under cross-examination today by Najib’s lawyer Wan Aizuddin Wan Mohammed and through reference to minutes of 1MDB board meetings in 2013 and early 2014, Mohd Hazem repeatedly confirmed that he had failed to notify the 1MDB board in multiple board meetings of the status and dwindling amount of the 1MDB GIL funds that were raised specifically for the Admic joint venture.

For example, Wan Aizuddin referred to the minutes of 1MDB’s board meeting on December 9, 2013 which Mohd Hazem had attended.

Mohd Hazem agreed today that the 1MDB board was “genuinely interested” in seeing progress in the 1MDB-Aabar joint venture Admic as they had asked for updates in the previous meeting and this meeting, further confirming that the December 2013 meeting’s records showed that he had told 1MDB directors that no investment had been made by Admic.

Mohd Hazem disagreed that what he told the 1MDB board gave the impression that the US$3 billion raised by 1MDB GIL had been invested into the joint venture Admic, but confirmed that he did not inform the board that the US$3 billion had not been transferred to Admic.

Citing 1MDB GIL’s bank account’s statement, Wan Aizuddin asked: “You would agree as of the board meeting on December 9, 2013, the balance in 1MDB GIL’s account was just a mere US$60,000?” Mohd Hazem confirmed this.

Wan Aizuddin: And this is astonishing, from US$3 billion or even from US$2.7 billion, it has come to US$60,000, and this was never mentioned to the board?

Mohd Hazem: No.

Mohd Hazem similarly confirmed that 1MDB’s then chief financial officer Azmi Tahir in the same board meeting also did never mentioned the amount of the balance in 1MDB GIL’s bank account or the whereabouts of the US$3 billion that was raised.

Previously Mohd Hazem had testified that none of the US$3 billion funds raised was channelled to the Admic joint venture which later became abortive, as both 1MDB and Aabar did not inject funds of US$3 billion each into the company as originally planned.

He previously testified that 1MDB GIL had to bear losses to make interest payments for the US$3 billion bond while no strategic investments were conducted, while the Malaysian government would ultimately have to bear the burden as it had issued a letter of support for the borrowings. 

Najib’s trial before High Court judge Collin Lawrence Sequerah is set to resume next Monday.


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