KUALA LUMPUR (June 19): Datuk Seri Najib Razak put forth a memorandum during a cabinet meeting in November 2015 to ask for a RM100 million loan from the federal government to SRC International Sdn Bhd, formerly a subsidiary of 1Malaysia Development Bhd (1MDB), to cover the interest and late payment penalty for the RM4 billion loans from Kumpulan Wang Persaraan (Diperbadankan) (KWAP), also called Retirement Fund Inc.
The High Court was informed of this development by former deputy chief secretary to the cabinet Tan Sri Mazidah Abdul Majid, who is the 40th prosecution witness in the former premier’s SRC trial.
“The loan was proposed to [keep] SRC from defaulting on its loans [owed] to KWAP, which would drag the government as the loan guarantor to repay the principal and interest totalling over RM4 billion. This situation would impact the government’s fiscal position and the planning of the national budget,” Mazidah said.
She added that a default would result in KWAP having to categorise the loans to SRC as doubtful loans, which would further implicate the fund.
“If that was done, it would have raised speculation and finally a negative perception [of] the government, taking into account SRC is a unit of Minister of Finance Inc (MoF Inc),” she added.
‘Najib did not declare interest in SRC during cabinet meetings’
Earlier, Mazidah also said Najib did not declare his interest in SRC when he chaired cabinet meetings in 2011 to 2012 which discussed matters pertaining to the loans of the company.
At that time, Najib was the prime minister, the finance minister, the officer in charge of MoF Inc — SRC’s shareholder — and also the adviser emeritus of SRC.
During cross-examination, however, the 70-year-old retiree clarified that during her tenure, she did not know that Najib held the advisory role in SRC.
She also refused to say whether the position implies a conflict of interest for Najib as the chairman of the cabinet meetings.
“If I am not sure, I will refer to the legal advisor of the government (the Attorney-General’s Chambers). It has always been my philosophy. I am not a lawyer. I cannot say anything. Saya minta maaf (I apologise),” said Mazidah when pressured by the defence.
What were Najib’s memoranda about?
Mazidah’s written statement underlined at least five cabinet meetings which discussed details of a loan of up to RM2 billion for SRC, which was later given by KWAP in March 2012.
On Aug 17, 2011, a cabinet meeting attended by all cabinet ministers save for then foreign affairs minister Datuk Seri Anifah Aman raised a memorandum from Najib — received from the ministry of finance — entitled “Government Guarantee of up to RM2 billion loan for SRC International Sdn Bhd”.
The memorandum proposed for the government to provide the guarantee for the loan — both the principal and interest — which would have a tenure of up to 10 years, intended to fund investments in natural resources.
The memorandum, however, was not discussed in that meeting, but was deliberated and approved in another cabinet meeting a week later on Aug 24, 2011.
Another cabinet meeting on Feb 8, 2012 raised another memorandum by Najib for SRC to be given exemption from tax and stamp duty as well as for the finance minister to be given the power to dictate the terms and conditions of the loans to SRC.
The Feb 8 meeting saw the absence of then second finance minister Datuk Seri Ahmad Husni Mohamad Hanadzlah and then minister in the Prime Minister’s Department Datuk Seri Idris Jala.
The memorandum was approved on Feb 15, 2012.
On Feb 16, 2012, yet another cabinet meeting took place — this time without Najib as he was on a working visit to the US.
Also absent were then plantation industries and commodities minister Tan Sri Bernard Giluk Dompok, then minister in the Prime Minister’s Department Datuk Seri Mohamed Nazri Abdul Aziz and then home minister Datuk Seri Hishammuddin Hussein.
The last meeting underlined another memorandum from Najib entitled “Amendment to the Purpose of Loans by SRC International Sdn Bhd and 1MDB Real Estate Sdn Bhd”, which was approved by the cabinet.
The memorandum proposed to add “working capital” as another purpose for the loans to SRC, and for 1MDB Real Estate’s loan to be used to cover the cost of installation for the settlement for soldiers operating in the Sungai Besi Air Force Base, which was involved in the development of Bandar Malaysia and other investments in the real estate industry.
Additionally, the then finance minister would also to be given the power to conduct any amendments for the purpose of determining the terms and conditions of the aforementioned loans. The decision was made and confirmed on May 23, 2012.
This article first appeared in The Edge Financial Daily, on June 19, 2019.
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