Shahrol: Repatriation of US$1.83b from 1MDB-PSI not due to loss of confidence in JV

KUALA LUMPUR (May 20): Former 1Malaysia Development Bhd (1MDB) chief executive officer (CEO) Datuk Shahrol Azral Ibrahim Halmi disagreed with the suggestion that the repatriation of US$1.83 billion (RM7.97 billion) of investment from the 1MDB-PetroSaudi International joint venture (1MDB-PSI JV) was due to the fund losing confidence in the project.

Former prime minister Datuk Seri Najib Abdul Razak’s lawyer Tan Sri Muhammad Shafee Abdullah grilled Shahrol over this topic during cross-examination today, and put it to the witness that 1MDB was repatriating the money as it was not confident in the government-to-government (G2G) deal.

Shafee: Why repatriate the money if the G2G deal was so good? Did you lose confidence in the investment?

Shahrol: Because we wanted to use it for other 1MDB projects.

Shafee: How was the decision made to repatriate the money?

Shahrol: Exactly that. At the time, we raised money and 80% of it was tied up to the JV. We needed money to kick off TRX (Tun Razak Exchange) and Bandar Malaysia. That’s why we want to repatriate as much of the money as possible.

The board of 1MDB had to convert the investment in the JV back to equity in 2012 — after previously converting it from equity to Murabaha notes in 2010 due to auditing reasons — in order to enable the repatriation of money.

This was done via 1MDB’s purchase of a 49% equity stake in PetroSaudi Oil Services Ltd (PSOSL), a subsidiary of PSI, which was satisfied with the Murabaha notes.

The conversion of the notes was discussed during a meeting between 1MDB, represented by group strategy executive director Jasmine Loo Ai Swan, and PSI.

Shahrol previously said that Loo was the one that handled matters relating to the equity investment in PSOSL, given her experience in corporate exercises, aided by talking points provided by fugitive businessman Low Taek Jho (Jho Low).

The court was previously told that 1MDB borrowed US$1 billion in order to obtain a 40% stake in the 1MDB-PSI JV, while PSI will hold the majority 60% stake by injecting certain assets.

These assets were dubious and became a point of contention between Ernst & Young (EY) and the sovereign fund, which resulted in the auditor delaying its signing off on 1MDB’s accounts for 2010.

Najib is facing four charges of abuse of power to obtain bribes totalling RM2.3 billion, and 21 charges of money laundering involving RM4.3 billion.

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