KUALA LUMPUR, April 5 — Former 1Malaysia Development Berhad (1MDB) director Tan Sri Ismee Ismail today held back from using negative words to describe how the company’s board of directors were misled over transactions involving huge sums of money worth billions of ringgit, due to this month being “bulan puasa” or the fasting month for Muslims.
Ismee, who was testifying as the 13th prosecution witness in former prime minister Datuk Seri Najib Razak’s trial over the misappropriation of more than RM2 billion in 1MDB funds, however agreed that the 1MDB board was misled.
Today, Najib’s lead defence lawyer Tan Sri Muhammad Shafee Abdullah presented a chart of transactions where money originating from a US$975 million loan that 1MDB’s subsidiary 1MDB Energy Holdings Ltd had borrowed in 2014 from Deutsche Bank.
Shafee showed how money from the US$975 million bank loan was repeatedly shifted around and passed around in seven cycles to create the false impression that 1MDB was finally receiving money back from its purported US$2.318 billion funds that were invested overseas, when the purported investment done via six promissory notes were actually worthless.
The 1MDB board had wanted to bring back the US$2.138 billion of purported funds back to Malaysia, but did not know that the US$975 million borrowed money — supposedly a loan to enable 1MDB to buy back some options that would pave the way for its energy assets to go for public listing on the stock exchange — was actually used to give the fake perception of money returning to 1MDB.
Describing this as the “biggest fraud ever pulled”, Shafee remarked that 1MDB directors would not know the micro aspects as they would have to be dependent on the honesty of the 1MDB management briefing them, and claimed that 1MDB management had lied to the board about the overseas funds being redeemed when the money actually came from the bank loan.
Shafee: Now that you know the truth, what is your comment?
Ismee: I guess the same thing I’ve said earlier. Bulan-bulan puasa tak sedap dicakap (not nice to say it during fasting month).
Shafee: Bulan puasa also have to tell the truth because we are doing a judicial enquiry.
Ismee: I know, I know, I have said that even last year during November and I even said that during last two weeks when you asked me, so I still have to say the same thing.
Shafee: Namely the board was misled.
Ismee: Yes, misled.
In November last year, Ismee had in court responded to the suggestion that 1MDB’s board of directors may be seen as “toothless tigers”, by saying that his perception now is that the board was being “used” to make all of 1MDB transactions appear legitimate as the directors were either fed misleading information or not given any information at all or had information hidden from them.
On March 24, Shafee made the suggestion that 1MDB management had misled the board of directors over certain transactions to cover up misdeeds, with Ismee then going one step further to describe the 1MDB board as having been “abused” due to it being misled over multiple matters.
“I guess to answer that, because if I don’t say this, my fellow board members will say. I think sometime last year when I first appeared here, I think I have mentioned to this court, we the board have been used to a certain extent. Just got to say, now with the facts being shown here, I may want to use the term ‘abused’,” Ismee had said then.
A rollercoaster of transactions
Previously, 1MDB’s subsidiary 1MDB International Holdings Limited sold its 49 per cent share in PetroSaudi Oil Services Ltd (PSOSL) to Bridge Partners International Investments Limited for US$2.318 billion, but did not get any cash from this sale.
Instead of getting cash from the sale of the PSOSL shares, 1MDB’s subsidiary Brazen Sky Limited received US$2.318 billion in the form of six promissory notes.
The promissory notes were then allegedly “invested” in Cayman Island-based purported hedge fund Bridge Global Absolute Return Fund SPC, but these are now said to be a sham investment as the promissory notes were worthless pieces of paper.
The parliamentary watchdog Public Accounts Committee’s (PAC) 2016 report said 1MDB had took a high risk in deciding to invest US$2.318 billion through Bridge Global Absolute Return Fund SPC, which PAC’s report described as a “one-month company which has no licence as a fund manager or no experience to manage large funds”.
In the flow chart prepared by Najib’s lawyers, a total of US$681,317,607 (US$681 million) —from a US$975 million loan borrowed by a 1MDB subsidiary — were shown to have been given to the Seychelles-incorporated Aabar Investments PJS Limited. This Aabar is now known to be one of the fake Aabar companies that shared a similar name to the actual Abu Dhabi firm Aabar Investments PJS.
In the flow chart, the US$681 million (via a US$223.3 million-odd sum on September 2, 2014 and a US$457.9 million-odd sum on September 30, 2014) was transferred to the fake Aabar, before being sent to five different entities in seven cycles through complex transactions from September 5 to November 24, 2014.
The money from the US$681 million was sent to the fake Aabar, with various sums being then sent to either Lambasa Global Opportunity Fund or Universal Ventures Fund SCC, and then to Bridge Global Absolute Return Fund SPC, and then to Brazen Sky Limited, before being sent to 1MDB Global Investments Limited, and with most of the transactions ending up with money being sent back to the same fake Aabar in Seychelles.
In the flowchart, only US$94.42 million stayed with 1MDB Global Investments Limited and US$48.5 million stayed with the other 1MDB subsidiary Brazen Sky, instead of being sent back to the fake Aabar.
Having referred to a February 27, 2014 1MDB board meeting where the board instructed the management to immediately liquidate the purported US$2.318 billion investment in Cayman Islands and bring the money back to Malaysia, Shafee said that it showed both the 1MDB directors and the company’s shareholder being fed-up with the money being stuck overseas and not coming back, with Ismee agreeing.
Shafee said it was amid this mounting pressure for the 1MDB management to bring back the US$2.318 billion that there was this rollercoaster of transactions where the management took an unnecessary loan of US$975 million, in order to make it look like the purported hedge fund company Bridge Global was finally dispatching money back to 1MDB when it was actually just borrowed money being circulated.
When asked by Shafee if he was surprised with how the funds were manipulated to give an illusion to 1MDB directors that the money was coming back, Ismee said “the fact that it is a fake Aabar” was already shocking and confirmed that the board never knew it was a fake Aabar as they thought it was the original Aabar in Abu Dhabi.
Ismee also confirmed that 1MDB directors did not know then that the purported proceeds from Bridge Global were actually money that 1MDB had borrowed from Deustche Bank.
Shafee also then remarked, “The rollercoaster is to create an impression to the board and to the shareholder that money from this very fraudulent fund Bridge Global was coming, when in fact it never came. The six promissory notes remain as silly as it was from the very beginning.”
On the first day of trial in August 2019, the prosecution had said it would show that funds from the US$975 million had made its way into the fake Seychelles-incorporated Aabar, before being transferred to a fake Aabar’s account in Barbados and then to a Barbados firm owned by Low Taek Jho’s associate Eric Tan, before funds in sterling currency worth RM45,837,485.70 or more than RM45 million were allegedly transferred between October 2014 to December 2014 to Najib’s account.
Najib’s trial before High Court judge Datuk Collin Lawrence Sequerah resumes tomorrow, with Ismee expected to continue testifying.