KUALA LUMPUR (Sept 18): Former Public Accounts Committee (PAC) member Tony Pua told the High Court here that other board members of 1Malaysia Development Bhd (1MDB) should also be liable for the fund's loss of over RM2.9 million that it paid as ex-gratia payment to its former chief executive officer Arul Kanda Kandasamy.

Pua, who was testifying as 1MDB's witness in the fund's US$6.59 billion lawsuit against Arul Kanda and its former board chairman Tan Sri Irwan Serigar Abdullah, also said the Ministry of Finance and its Government Investment Companies (GIC) division had agreed to giving an ex-gratia bonus of RM5 million and a six month extension under an Employment Extension Agreement (EEA) to Arul Kanda, whose contract was supposed to end in Dec 31, 2017.

On Tuesday, Pua said in his sworn witness testimony that Irwan had breached his duties to 1MDB by entering into this EEA with Arul Kanda via private negotiations. “He should not have entered into private negotiations or discussions with Arul Kanda on the ex-gratia payment to be paid to him without first seeking or obtaining the board’s prior approval,” he said as he read out the testimony.

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However, he seemed to backtrack on his witness statement on Wednesday when cross-examined by Irwan’s lawyer, Lavinia Kumaraendran. Below is an excerpt of their exchange:

Lavinia: There is no basis for you to say that the second defendant [Irwan] procured or caused 1MDB to enter into the EEA.

Pua: I disagree.

Lavinia: There is no evidence to suggest that there were private negotiations or discussions.

Pua: Agreed.

Lavinia: Therefore, the statement you made of private negotiations is incorrect

Pua: Yes.

Lavinia then showed him documents that Arul’s EEA - which included the RM5 million payment - was taken to a working committee in GIC in charge of 1MDB known as team “Negaraku”.

She also showed him that the committee had deliberated and decided about the RM5 million payment to Arul Kanda and that Irwan - who was under the MOF at that time as Treasury secretary general - had merely taken the proposal to 1MDB’s board to show them what the committee had decided.

Lavinia then asked him whether it is right that Irwan alone should be sued for Arul Kanda’s EEA, to which he said it could be that other parties which are liable for the losses as well.

Lavinia: You agree with me that the entire 1MDB board is also to be blamed for the loss?

Pua: It could be.

Lavinia: But going with what you’re saying, MOF and the 1MDB board are also responsible.

Pua: I agree, Irwan is not [the] only [one] responsible. They should be sued equally.

He, however, disagreed with the suggestion that the EEA was not a fraudulent document.

Arul Kanda claimed that his employment contract ended on Dec 31, 2017, but prior to its expiration, he was requested by the 1MDB board to extend his employment contract. Under the agreement, he would be given the ex-gratia bonus of RM5 million and a salary of RM101,300.06 per month from January 2018 to June 2018.

The employment extension agreement was executed in January 2018 after half of the RM5 million was paid to him, together with more than RM400,000 as advance salary. But he claimed that the balance of the ex-gratia sum was not paid, together with his May and June salaries, following a change in government in May 2018 that led to the termination of his employment extension.

Arul Kanda has since taken legal action against the government for the balance payment.

1MDB filed its lawsuit against Arul Kanda and Mohd Irwan in May 2021, claiming that both Arul Kanda and Mohd Irwan were liable for breaches of duties and trust that resulted in the company suffering losses amounting to US$1.83 billion in relation to its investment in 1MDB-PetroSaudi Ltd, which was converted into stakes in Brazen Sky Ltd and then converted into an investment in Bridge Global Fund.

It also alleged that Arul Kanda and Mohd Irwan committed a breach of trust and conspiracy by misappropriating US$3.5 billion of 1MDB money and paying it to Aabar Investments PJS Ltd - a shell company pretending to be a subsidiary of International Petroleum Investment Company (IPIC) - and subsequently paying another US$1.265 billion to IPIC in May 2017. 

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