KUALA LUMPUR (April 2): Former prime minister Datuk Seri Najib Razak was not a “monster” who led the 1Malaysia Development Bhd (1MDB) board of directors like “lambs to the slaughter” in botched investment deals which led the state investment arm to lose billions of dollars, according to his lawyer Tan Sri Muhammad Shafee Abdullah.

Shafee had alluded to this in Najib’s 1MDB-Tanore trial in his cross-examination of the prosecution’s 50th key witness Jasmine Loo, while asking her about a joint venture (JV) 1MDB had entered in 2010 with PetroSaudi International (PSI) where the former had borrowed US$1 billion in order to obtain a 40% stake in the 1MDB-PSI JV, while PSI held the majority 60% stake by injecting certain oil drilling assets from Venezuela which turned out to be dubious in nature.

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 Loo — and PSI.

During the cross-examination of Loo, Shafee was arguing about what is stated in the 1MDB's memorandum and articles of association (M&A), highlighting articles where Najib had the "final" say in these matters.

Shafee then said that Najib, as the single and only shareholder in 1MDB had merely abided by article 117 of the M&A by approving signing off on the deals and JV’s that 1MDB’s board of directors had intended to enter into.

Article 117 states that the PM has the final say to the M&A amendments, or appointment and dismissal of directors and highest management of 1MDB. It also states that any investment, financial and structuring decision involving the company's interests that are closely related to any national interest, security and government policy must obtain written approval from the PM.

It has to be noted that Najib was the then PM, the minister of finance, 1MDB's chairman of the advisory board and its sole shareholder.

However, Loo had said that Najib had signed off on the deals before it was tabled to the board.

Shafee: So directors follow blindly what the shareholder says? Don’t they do due diligence to check?

Loo: They (the board) took comfort in what the shareholder (Najib) has given.

Shafee: Directors don’t exercise due diligence?

Loo: For article 117 you require approval of the prime minister for substantial transactions.

Shafee then challenged Loo to show him the paper or resolution where Najib did not act in accordance with the law of the M&A.

Shafee: Najib as the Minister of Finance did it (signed off) in accordance with the law, he took note of the directors views and he gave the approval as stated in [article] 117 as is his right as a shareholder. So, where is the inconsistency. Where is the paper that made the prime minister that power and the monster and he led the poor directors like lamb to the slaughter?

Loo: Although it doesn’t say, in sum and substance, it is the same. 1MDB treated the shareholder in his capacity as the prime minister.

Shafee to Loo: Jho Low valued you because you are the “queen of structuring and restructuring” deals.

Shafee had then told Loo that he has information from someone from 1MDB who told him that Loo was the "queen of structuring and restructuring" deals which is why she was valued by the fugitive Low Taek Jho or Jho Low. He, however, did not name his source.

Shafee: [I've been told] that you are the queen of structuring and restructuring these deals.

Loo: I have no comments. People are entitled to their opinions.

Shafee: You are so valued by Jho Low and his team because your job is to make legal what is in fact illegal.

Loo: I don’t agree.

Previously in the trial, former 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi had testified 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 Jho Low.

However, Loo testified on the stand on Tuesday that she had received information from PSOSL themselves and had presented it to the board in February 2012.

Shafee: Where did you get the information to present to the board?

Loo: It is information from PSOSL which was sent to us. It was pre due-diligence on whether we would want to explore this option of investment or not.

She also agreed that the board was dependent on her briefing about this deal.

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.

The Edge is covering the trial live here.

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