Former prime minister Datuk Seri Najib Razak seen at the Kuala Lumpur Courts Complex on Wednesday, March 27, 2024 for his SRC International Sdn Bhd trial. (Photos by Zahid Izzani/The Edge)

KUALA LUMPUR (March 27): Datuk Seri Najib Razak was the “grand chess-master” who “moved things around” to facilitate projects involving SRC International Sdn Bhd and even 1Malaysia Development Bhd (1MDB), the court heard on Wednesday.

Datuk Shahrol Azral Ibrahim Halmi, a former director of SRC and former 1MDB chief executive officer (CEO), testified that whenever the two companies were mandated to execute a project, there would be larger pieces that were “moved around” to facilitate these projects, resulting in the SRC board agreeing with some decisions on the assumption that Najib had access to more information (than they were privy to).

Testifying in the ongoing US$1.18 billion (RM4 billion) civil action brought by SRC against Najib and former 1MDB chief investment officer Nik Faisal Ariff Kamil, who was also former finance minister, Shahrol alluded to the placing of loans that SRC had acquired from Retirement Fund Inc (KWAP) into “time deposits” before they were to be utilised for investments in Indonesia, in the energy and resources sectors.

“My view at that time was that Najib was like a grand chess-master on the board. One clear example in the SRC case is that [investing in] uranium was put into SRC’s mandate. Around 2010, there was already a plan to diversify our electricity sources.

Datuk Shahrol Azral Ibrahim Halmi (Bernama filepix)

“And sure enough, a separate company called Malaysian Nuclear Power Corporation was set up sometime in 2010 to kickstart the nuclear programme in Malaysia. That was transformed into the Nuclear Energy Plan Implementation Office (NEPIO), (which was put) directly under the PM’s Department,” Shahrol said to defence counsel Muhammad Farhan Muhammad Shafee’s question.

Shahrol elaborated that this was also his experience in 1MDB, where he served as CEO.

SRC board raised concerns over ‘time deposits’ but signed off on it the very next day

Shahrol said that the board had raised some concerns over the “time deposits”, which were investments, and decided to hold off on them, but had ultimately approved them as they were pre-authorised by Najib.

“So, it was natural for me to assume in this particular case, that ‘Oh, we (the board) had these concerns but Nik (Faisal) showed us in black and white, [Najib’s] signature saying that he agreed to this move’, so we said in that case ‘we are okay with it because [Najib] may know something more’,” Shahrol explained, adding that this was his thought process but he could not speak for the other directors.

Muhammad Farhan was asking Shahrol to explain how the SRC board could have given its approval a day after it had decided to hold off the decision to make an advance payment while waiting for more information on the "time deposits".

Najib’s defence counsel Muhammad Farhan Muhammad Shafee (The Edge filepix by Zahid Izzani)

Sharol’s defence counsel Chong Yik Loong seen at Wednesday’s trial.

The defence lawyer suggested that the board had breached its fiduciary duty to the company, to which Shahrol disagreed.

Shahrol: I do not remember if there was a presentation by the bankers (for more information), as requested by the board. I remember signing this (resolution) and I cannot be 100% sure but I believe that it was Nik (Faisal) who brought me the Director’s Resolution Circular (DCR) and showed me the Shareholder’s Resolution to approve the transaction.

Muhammad Farhan: By virtue of you signing this DCR, that would be inconsistent with the board’s own directions the day before, as you said you have not met the bankers or seen any presentations.

Shahrol: Correct.

Muhammad Farhan: So all those concerns raised literally the day before, effectively amounted to nothing?

Shahrol: Yes.

Muhammad Farhan: This is also despite you yourself saying that the (SRC) board has a fiduciary duty to protect the company’s assets. Don’t you think that is a bit reckless?

Shahrol: We were under instructions. In my mind, when Nik (Faisal) presented this proposal to the board and when he encountered the board’s resistance (about the payment), he came back with a DCR with a signed Shareholder’s Resolution, telling us that this is okay with the (then) PM (Najib), so therefore, [to] please comply. So my frame of mind was that if this was what Najib wanted done, he should know something more than I do.

Shahrol also added that it was normal to assume that a political head of the government would have more information on certain things beyond a company’s board.

The money that went to these “time deposits” were syphoned off by fugitive businessman Low Taek Jho (more commonly known as Jho Low) to shell companies associated to him and his associates; US$120 million of the RM4 billion KWAP loans were also funnelled into Najib’s personal accounts.

Najib wanted SRC M&A amended to have ultimate say on directors’ appointments

SRC International Sdn Bhd’s co-counsel P Gananathan seen at the Kuala Lumpur Courts Complex for the trial on Wednesday.

SRC International Sdn Bhd’s co-counsel Kwan Will Sen also appeared at Wednesday’s trial.

Earlier, Shahrol also testified that Jho Low had told him that Najib wanted certain articles to be included in the SRC’s memorandum and articles of association (M&A) to have the ultimate say on the appointment of directors.

In relation to the article that no director could be appointed or removed without formalisation of the position by Najib, Shahrol said, “The background is that this article is copied directly from the 1MDB M&A. I was personally involved in the discussions leading up to the inclusion and even the design of this article. He (Jho Low) added that the initial view was that 1MDB and SRC needed to be free from political interference. That is why specifically, there is no member of a political party or Member of Parliament (in 1MDB or SRC). Also, the stipulation was that there should be no civil servants on the board”.

Shahrol added that the direction, as communicated by Jho Low, was that Najib wanted this in place, so that any removal or appointment of directors must go through him. “So, I disagree with the statement that [Najib] doesn’t have a free hand over the appointment of the directors, because he is ultimately the person to say, ‘yes’ or ‘no’ to any director’s appointment,” he said on the stand.

Shahrol said that although the articles said such decisions would go through the board and be formalised by the prime minister, in practice, the board would “never move ahead” to appoint a director without Najib’s prior approval.

Shahrol had also said in hindsight that it was possible that Nik Faisal was telling Najib a very different thing as opposed to what was presented to the board.

He also admitted that he neglected to do further due diligence on the investments that went through because he took things that were proposed to him by Nik Faisal at "face value".

SRC is suing Najib and Nik Faisal (who is currently at large) in this civil suit, which revolves around a RM4 billion KWAP loan given in two tranches in the second half of 2011 and first half of 2012 to SRC.

SRC filed the RM4 billion suit against Najib and Nik Faisal in May 2021. Initially, the suit also named Datuk Mohammed Azhar Osman Khairuddin, Shahrol, Tan Sri Ismee Ismail, Datuk Suboh Md Yassin and Datuk Che Abdullah @ Rashidi Che Omar as defendants but they were later dropped, only for Najib to bring them back again as third parties.

A defendant can initiate this against a third party who is not part of the main suit, in order to claim contribution, indemnity or any remedy which is claimed by the plaintiff.

As was reported in this trial on March 5, SRC lead counsel Datuk Lim Chee Wee said out of the total KWAP loan of RM4 billion, a sum of RM3.6 billion was immediately transferred out when the funds came into SRC, of which a sum of US$120 million had eventually ended up in Najib’s bank account.

Lim said the RM3.6 billion had flowed into a Swiss BSI account, followed by elaborate transactions with Enterprise Emerging Market Fund in Curacao, and then to Blackstone Asia Real Estate Partners Ltd in British Virgin Island, and then to Singapore, where the US$120 million had made its way into Najib’s bank account.

Shahrol had also previously testified in Najib’s 1MDB-Tanore criminal trial.

SRC had obtained a judgement in default against Nik Faisal, who was named as Najib’s proxy.

The trial on Wednesday was held before High Court judge Datuk Ahmad Fairuz Zainol Abidin.