1MDB trial: Defence presses for ex-CEO Hazem, Shahrol and other executives to be jailed for alleged fraud, CBT involving misappropriation of US$975m loan

KUALA LUMPUR : The defence in Datuk Seri Najib Razak’s abuse of power and money laundering trial today (Aug 23) doubled down on their argument that former chief executive Mohd Hazem Abd Rahman and other executives in 1Malaysia Development Berhad (1MDB), should be on trial for allegedly committing fraud and criminal breach of trust (CBT).

Najib’s lawyer, Muhammad Tan Sri Shafee Abdullah once again pressed Hazem, this time alleging that the former 1MDB chief executive, his predecessor, Datuk Sharol Azral Ibrahim Halmi, Azmi Tahir and Terrence Geh had conspired with Low Taek Jho or Jho Low to misappropriate US$975 million loan from Deutsche Bank that was originally intended for 1MDB back in 2014.

A 1MDB subsidiary known as 1MDB Energy Holdings Limited had in 2014 borrowed a total of US$1.225 billion from Deutsche Bank via two loans (US$250 million in May 2014 and US$975 million in September 2014).

1MDB had taken up the loans totalling US$1.225 billion to buy back the options it had given to a real entity — Abu Dhabi’s Aabar PJS Investments — to take up shares in two 1MDB subsidiaries when 1MDB was raising US$3.5 billion in funds previously to buy independent power plants.

In today’s proceeding, Shafee had shown the court, through flowcharts on how the US$975 million loan from Deutsche Bank was “recycled” or laundered to a fake Aabar entity in Seychelles, then transferred numerous times to other entities such as Bridge Global Absolute Return Fund, Brazen Sky Limited, Lambasa Global Opportunity Fund and even 1MDB Global Investment Limited (1MDB-GIL).

Shafee argued that Hazem had played a part in this elaborate money-laundering scheme orchestrated by Low, by deceiving the 1MDB board directors that it was able to “redeem” part of its investment portfolio in the company’s special purpose vehicle, Brazen Sky but was in fact, proceeds from the US$975 million Deutsche Bank loan.

Former 1MDB chief executive officer Mohd Hazem Abdul Rahman arrives at the Kuala Lumpur High Court May 17, 2021. — Picture by Miera Zulyana
Former 1MDB chief executive officer Mohd Hazem Abdul Rahman arrives at the Kuala Lumpur High Court May 17, 2021. — Picture by Miera Zulyana

Shafee had also argued that Hazem had committed another offence by authorising the transfer of some US$681 million (part from the Deutsche Bankloan) in September 2014 to the fake Aabar entity in Seychelles without the approval of the board had committed CBT when the funds that were meant to be used for another purpose was misused. 

Shafee: You’ve committed CBT. Because you’ve never got authority from anybody to do this?

Hazem: Yes. 

Shafee: When you were transferring all these funds, did you get permission from Bank Negara?

Hazem: I’m not sure.   

Shafee: These funds originated from a Malaysian company.

Hazem: Yes. 

Shafee: So, you have to get permission from Bank Negara. 

Hazem: I think so, yes. 

Shafee: If you don’t get permission, that’s another offence.

Hazem: I don’t know but likelihood, yes.

Shafee: Technically that is CBT. It is also money laundering.

Hazem: Yes.

Shafee then argued that Hazem was in cahoots with Shahrol, Geh, Azmi and Low to defraud the sovereign wealth fund to which the former chief executive vehemently denied.

Hazem had previously testified that Najib as the prime minister was the one ultimately running the show at 1MDB as the company’s shareholder is the government, and that in reality he would not have been able to just resist instructions from Najib if there were any that went against 1MDB’s interests.

Last year, Hazem had also testified during the trial of how he had felt something was wrong with how 1MDB’s purported funds abroad were being handled, and how he had wanted to resign just months into his CEO job as he felt 1MDB was caught in the biggest trap in corporate history, and how he had asked to be replaced as even his officers did not want the CEO position.


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