KUALA LUMPUR (JUNE 5): Former SRC International Sdn Bhd chairman Tan Sri Ismee Ismail testified in the High Court here on Wednesday that decisions made by the Ministry of Finance (MOF) were effectively decisions by the government, in relation to the fact that former prime minister Datuk Seri Najib Razak was wearing two hats, one at SRC and one at MOF.

Ismee, 59, who was testifying in Najib’s SRC International civil suit, was speaking about the workings of SRC International and how its board of directors never objected to decisions made by the main shareholder, the Ministry of Finance Inc (MOF Inc), which was under the purview of Najib’s then-ministry.

MOF Inc was under the Ministry of Finance, whose minister at the time was Najib. At the same time, Najib was also the “advisor emeritus” of SRC International.

“Any decisions made by the main shareholder of SRC was also approved by Najib, who also was the advisor emeritus to SRC,” Ismee said in his witness statement to the court.

“Therefore, decisions by the minister of finance are effectively decisions made by the government of Malaysia. I must stress here that Najib at that time was also Prime Minister,” said Ismee.

In this SRC International civil suit, the company is suing Najib and the former chief executive officer of the company, Nik Faisal Ariff Kamil (who is currently at large), over a RM4 billion Retirement Fund Inc (KWAP) loan which was disbursed in the second half of 2011 and the first half of 2012 to SRC.

As reported in this trial, a sum of RM3.6 billion was immediately transferred out when the funds came in. Out of that total, a sum of US$120 million (RM563.7 million) made its way to Najib’s bank account.

In Ismee’s recorded witness statement, he said that the claims by Najib against him were baseless. He elaborated that he and the board of directors had carried out the orders and decisions of SRC’s main shareholder (Najib) “in good faith”, without suspicion that any criminal activity was going on.

“... to my understanding, the orders given were the government’s wishes to carry out investments for the better of the country by SRC as a ‘special purpose vehicle’,” Ismee said.

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

Ismee: I was not a puppet to Najib

Najib’s counsel, Harvinderjit Singh then asked Ismee whether he was acting as a puppet to Najib while he served on the board.

Harvinderjit: Were you a puppet of Najib’s in SRC?

Ismee: What do you mean?

Harvinderjit: Would you consider yourself a puppet?

Ismee: No, I was not.

Ismee said that he was appointed to the position on August 1, 2011.

He resigned on Aug 15, 2014, citing corporate governance issues pertaining to the management of the company by Nik Faisal — especially regarding the company’s accounts and its finances.

Harvinderjit then pressed him on the issue of whether Ismee had been a “puppet”, which seemed to confuse Ismee.

Harvinderjit: The phrase “puppet” implies that whatever was told to you, you don’t think twice, you don’t question. You just did it.

Ismee: Yes and no.

Harvinderjit then asked him about Najib being a “puppeteer”, and that if Ismee was not a puppet, that must mean Najib was not a “puppeteer” as has been claimed by previous witnesses.

Harvinderjit: You accept you weren’t a puppet, and in the same way, Najib wasn’t a puppeteer?

Ismee: Yes, to the board.

Harvinderjit then asked him about his personal relationship with Najib and whether he had gone to see Najib about the misgivings in SRC, to which Ismee replied “No”. The lawyer then asked him if he had Najib’s personal phone number to which Ismee responded with a monosyllabic “No”, as he had been doing during the cross-examination by Harvinderjit.

SRC International filed the US$1.18 billion suit against Najib and Nik Faisal in May 2021. Initially, the suit also named former 1MDB chief executive officer Datok Shahrol Azral Ibrahim Halmi, former SRC directors Datuk Mohammed Azhar Osman Khairuddin, Datuk Suboh Md Yassin and Datuk Che Abdullah @ Rashidi Che Omar as defendants, but they were subsequently dropped, only for Najib to bring them back again as third parties.

According to SRC, Bank Negara Malaysia (BNM) had in 2011 granted it permission to transfer the RM1.8 billion from the first tranche of funds to SRC British Virgin Islands (SRC BVI), a shell company under SRC, on condition that the sum was to be used to acquire specific overseas companies as identified in the energy and resources sector; that the RM1.8 billion was to be deposited with a licensed local bank; and that the sum was only to be transferred to SRC BVI after investment negotiations with these overseas companies were concluded.

This was not complied with by the SRC management and Nik Faisal. No due diligence was carried out on these overseas companies prior to the purported investment activities being carried out.

The purported investment activities were a departure from the nature of business and the objectives of SRC, and the money was transferred out to an overseas account before any investment negotiations were concluded.

Najib had allegedly disregarded the (conditions of the) first permission by BNM through resolutions he had passed in SRC, as he was a shareholder through MOF Inc.

The second tranche of funds was transferred on April 6, 2012, and BNM had again granted SRC permission to transfer the second sum of RM1.8 billion from the second tranche of funds to SRC BVI.

BNM had set another set of conditions such as: the sum was to be used for the energy and natural resources industry, but exclude oil and gas; SRC BVI was to deposit the funds in a foreign currency account with BSI Bank and Julius Baer; and that the sums were to only be transferred out from the bank after negotiations on these investments had been concluded.

However, money to the tune of US$864.5 million was transferred to SRC BVI even before the board of SRC had the chance to pass the resolution on the utilisation of the funds, and before BNM’s second permission had been granted.

It is from this money that SRC claims that US$120 million had entered Najib’s personal bank account.

The trial took place in the morning, but was adjourned in the afternoon as Harvinderjit was unwell. The trial will continue on Thursday.

The trial is before High Court judge Datuk Ahmad Fairuz Zainol Abidin.