KUALA LUMPUR (Oct 1): Brazen Sky Ltd, a company incorporated in the British Virgin Islands (BVI), was set up by Low Taek Jho and his associates specifically as a transit to repatriate 1Malaysia Development Bhd (1MDB)'s investment in PetroSaudi Oil Services Ltd (PSOSL) to Malaysia.
This was revealed by the ninth prosecution witness Datuk Shahrol Azral Ibrahim Halmi (pictured, right) in the 1MDB-Tanore trial, where former prime minister Datuk Seri Najib Razak is facing power abuse and money laundering charges involving billions of 1MDB money.
But Shahrol, formerly the CEO and director of 1MDB, said he was not privy to the details related to Brazen Sky as it was managed by 1MDB general-counsel Jasmine Loo, CFO Azmi Tahir and deputy CFO Terence Geh, who were all appointed as directors of Brazen Sky.
In late July 2012, Shahrol said he was told by Low of the US' sanctions against Venezuela. The fugitive financier had then suggested that 1MDB International Holdings Ltd, a unit of 1MDB which held a 100% stake in PSOSL, dispose of its stake to Bridge Partners International Investment Ltd.
This was done to avoid the negative perception that the US may have against Malaysia, given 1MDB's ownership of Venezuela-based PSOSL.
"On Aug 2, 2012, the board of directors of 1MDB issued a resolution to approve the sale of 1MDB International Holdings' equity holdings for no less than US$2.22 billion to Bridge Partners International Investment.
"The board also agreed that proceeds from the disposal would be put into an investment fund managed by a licensed fund manager," Shahrol testified.
The proceeds were received in the form of six promissory notes worth a combined US$2.318 billion.
"Are these promissory notes any good?" asked senior deputy public prosecutor (DPP) Datuk Seri Gopal Sri Ram.
"I now know that they are not. They are just pieces of paper," said Shahrol.
"When did you figure this out?" asked Sri Ram.
"During the investigation [into 1MDB]," said the witness.
The notes were then invested into Bridge Global Absolute Return Fund SPC but Shahrol said he was not sure whether any due diligence on the fund was done.
"At the time, I did not know that the transaction did not involve any cash and that it was only done on paper. I also did not know that the transaction was merely to mislead the board of directors and the management of 1MDB, to show them that the proceeds were invested in an offshore hedge fund for good returns," said Shahrol.
Between 2012 and 2013, KPMG, the auditor of 1MDB, had raised questions relating to the assets owned by 1MDB overseas, as it could not confirm the value of the underlying asset of the Bridge Global Absolute Return Fund investment.
Bridge Global Absolute Return Fund, via BSI Bank, had cited "client confidentiality" as the reason behind it not being able to disclose complete information on the underlying asset.