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1MDB’s ex-CEO denies he concealed info from board to protect his huge salary

KUALA LUMPUR (Aug 19): Former 1Malaysia Development Bhd CEO Mohd Hazem Abdul Rahman (pictured) today denied that he failed to disclose to the company’s directors about a purported buyback agreement with a fake company to protect his salary and annual bonus amounting to RM2.72 million.

He made the denial at the 1MDB-Tanore trial in the High Court when defence lawyer Mardhiyah Mohamed Sirajkumar asked him why he had signed on behalf of 1MDB Energy Holdings Ltd an option buyback agreement with a fake shell company set up by fugitive financier Jho Low named PJS Investments Ltd in British Virgin Islands, also known as the fake Aabar.

The agreement stated that 1MDB Energy would commit to paying US$989 million to buy back the options, and that US$175 million of the US$989 million would be paid first upon the date of the agreement, without the knowledge of the board of directors.

1MDB had taken up loans totalling US$1.225 billion from Deutsche Bank Singapore 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.

Of this sum, 1MDB Energy paid the fake Aabar US$175 million to its account in BSI Lugano, Switzerland.

Mardhiyah had zeroed in today on why Hazem did not tell the board about this when he had many chances to do so.

She referred the witness to board meeting minutes where he had “golden opportunities” to inform the board that 1MDB is acquiring the options from Aabar.

Hazem disagreed, saying that the later part of the minutes included specific mentions of the buyout of the options from Aabar.

The lawyer however suggested to Hazem that the reason he did not disclose these crucial facts was that he never had 1MDB’s approval to buy back the Aabar options for US$989 million.

Whem Hazem disagreed with the suggestion, Mardhiyah then pushed further, suggesting that he did not update the board because he did not want to jeopardise his future salary increment and annual bonus the board had already approved.

Hazem again disagreed to the suggestion.

It was reported that Hazem’s last drawn monthly salary at 1MDB was RM97,000, and that he had once received a bonus amounting to 10 months’ worth of his salary.

The lawyer also suggested that then 1MDB chief financial officer Azmi Tahir and himself had purposely concealed these agreements from the 1MDB board. Hazem disagreed with these suggestions again.

It was revealed that the board had only been informed of the financing from Deutsche Bank of US$250 million through a directors circular resolution (DCR) with vague details.

Mardhiyah said that the DCR only stated that the money was going to be used for corporate purposes, pointing out that there was no specific mention of the money being used for the options.

"I disagree. The options buyback is part of 'corporate purposes'. There is no specific definition of corporate purposes," said Hazem.

On trial is former premier Datuk Seri Najib Razak, who is facing four counts of abuse of power for using his position as Prime Minister, Finance Minister and 1MDB board of advisers' chairman to receive gratification worth RM2.28 billion.

Najib also faces 21 counts of money laundering involving over RM4.3 billion.

The trial before Justice Collin Lawrence Sequerah continues on Aug 23.

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