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Najib and SRC International alleged to have disregarded BNM conditions on RM4 bil KWAP loan

Publish date: Tue, 05 Mar 2024, 03:56 PM

KUALA LUMPUR (March 5): The utilisation of an RM4 billion loan from Retirement Fund Inc (KWAP) to SRC International Sdn Bhd for what SRC claimed was investment activities were allegedly in “flagrant disregard” of Bank Negara Malaysia’s conditions imposed on it, and shows how SRC International’s assets were misappropriated.

Describing this SRC International case as a “multi-jurisdiction fraud”, P Gananathan, co-counsel for SRC International, said that SRC International had disregarded multiple conditions set by BNM on the outflow of this money, in his opening statement to the trial before High Court judge Datuk Ahmad Fairuz Zainol Abidin on Tuesday. 

Gananathan, in his opening statement, outlined the restrictions and explained that on Nov 3, 2011, BNM had granted permission to SRC International to transfer RM1.8 billion from the first tranche funds to SRC BVI (a shell company under SRC International), on conditions 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. 

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However, Gananathan noted in his statement that the conditions outlined above known, as the “first permission”, were not followed by the management of SRC International.

“The BNM’s First Permission was not followed. There was no due diligence carried out on these 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 (International),” he said. 

“The monies were transferred out to an overseas account before any investment negotiations were concluded,” he said. 

Gananathan further added that the first defendant in this civil suit, former prime minister Datuk Seri Najib Abdul Razak, had disregarded the first permission by BNM through resolutions he had passed in SRC International, as he was a shareholder through the Ministry of Finance Inc (MOF Inc). Najib was finance minister at that time. 

“The resolutions passed by the 1st Defendant as shareholder through MOF Inc, disregarded the conditions placed under BNM’s First Permission,” he said.

This action caused BNM to put SRC International on notice that SRC International had breached the first permission. BNM had sought explanations from the board of SRC International.

On April 6, 2012, Gananathan said that BNM had again granted permission for SRC International to transfer the second 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 energy and natural resources industry excluding 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. 

Gananathan said that money to the tune of US$864.5 million were 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 was granted.

“Ultimately, more monies were transferred to Julius Baer than what was permitted from BNM’s First and Second Permission. The monies transferred out from SRC BVI’s account with BSI Bank were not in accordance with the conditions placed under the BNM’s First and Second Permission,” he said, adding that BNM had later revoked both permissions. 

Gananathan summarised that the funds received by SRC International under KWAP loans that it took for the sham investment activities were in flagrant disregard of the BNM conditions imposed.

“It is further evidence of how the assets of SRC (International) were misappropriated. Hence, the causes of action of fraud, conversion, conspiracy, dishonest assistance and knowing receipt,” he said against Najib.

Its is from this money that SRC International and the government claim that RM120 million had entered Najib’s personal accounts.

Najib has brought several former directors of SRC International, namely Datuk Suboh Md Yassin, Datuk Shahrol Azral Ibrahim Halmi, Tan Sri Ismee Ismail, Datuk Mohammed Azhar Osman Khairuddin and Nik Faisal Ariff Kamil as third party respondents.

Nik Faisal, who is Najib’s proxy in managing his Ambank accounts, is still at large and has left the country.

In this trial, SRC International is seeking several declarations, namely that Najib is liable for the breaches of duties and trust; that Najib and Nik Faisal is liable for and pay the US$1.18 billion from the investment funds; an order for Najib to compensate the US$120 million, and for Nik Faisal to compensate US$2 million to SRC International; and for SRC International to be entitled to trace the amount in general, exemplary and aggravated damages.

The action against Najib is for fraud, breach of fiduciary duties and breach of trust, conspiracy, tort of misfeasance in public office, conversion, dishonest assistance and knowing receipt of assets belonging to SRC International.

“The fraud and dishonest conduct on the part of the 1st Defendant and Nik Faisal is clearly visible in the fact that both the 1st Defendant and Nik Faisal personally benefitted from such conduct,” Gananathan said.

“While lurking in the shadows, and sheltering behind others, the 1st Defendant (Najib) in fact was enriched when US$120 million ended up in his personal bank account with AmIslamic Bank. Nik Faisal also benefitted to the sum of US$2 million which was paid up [by] Blackstone (Asia Real Estate Partners Ltd in British Virgin Island), a third layer entity in the overall unlawful scheme,” he added.

“The ultimate objective of all acts and roles played by the 1st Defendant with the assistance of Nik Faisal culminated in personal gratification of the 1st Defendant and Nik Faisal to the detriment of SRC (International) and the public’s interest,” he said.

“It was a case of clear misapplication of trust property. It was deliberate interference and abuse of powers, designed to deprive SRC (International) and the people, the rakyat, of the property held on their behalf, bearing in mind that full trust and confidence was reposed on the 1st Defendant and Nik Faisal.

The fact that the 1st Defendant personally benefitted from the fraud and the dishonest conduct, will put it beyond any suggestion that what he did was in the national interest,” Gananathan said.

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