Ex-1MDB CEO: US$1b partnership with PetroSaudi built on Najib, Saudi king’s personal relationship

Ida Lim
Former 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi is pictured at the Kuala Lumpur Court Complex October 16, 2019. ― Picture by Hari Anggara

KUALA LUMPUR, Oct 16 — The US$1 billion cash “investment” that 1Malaysia Development Berhad (1MDB) entered into in 2009 with PetroSaudi International Ltd (PSI) was built from the personal relationship between Datuk Seri Najib Razak and Saudi Arabia’s then-ruler King Abdullah, the High Court heard today.

Datuk Shahrol Azral Ibrahim Halmi, formerly the CEO of 1MDB, said he had viewed 1MDB’s partnership with PetroSaudi as a “government-to-government” deal that had been agreed to by the two leaders of the Malaysian and Saudi government.

When asked if he had assumed the governments would not “cheat” each other, Shahrol agreed, saying: “Yes, especially because this was represented to me that was something personal between Datuk Seri Najib and the king.”

Asked by Najib’s lawyer Tan Sri Muhammad Shafee Abdullah of what he meant by “personal”, Shahrol said “I meant that this was seemingly to me, at that time, based on the personal relationship between Datuk Seri Najib and the king.”

“I would go a step further to say this 1MDB-PSI joint venture was created by this personal relationship,” Shahrol added.

When asked by Shafee who told him of this alleged personal relationship, Shahrol said this was told to him by businessman Low Taek Jho who had claimed to be present in the discussion on a yacht during the holidays.

Shafee then noted that an August 28, 2009 letter by the Saudi ruler’s son Prince Turki to Najib had referenced the meeting together with Najib’s family during the summer of 2009, but had not mentioned the word “yacht”.

Prince Turki’s August 28, 2009 letter to Najib had mentioned an enclosed copy of a business deal proposal for 1MDB and PSI, as a follow-up to their previous discussions.

The enclosed copy was an August 28, 2009 letter from PSI CEO Tarek Obaid to Najib with details of the joint-venture proposal, where it was suggested that 1MDB inject US$1 billion cash and PSI inject US$1.5 billion assets into the joint-venture company.

PSI had also in the letter said it was ready to sign the joint-venture deal by the targeted date of September 28, 2009, a tight one-month timeframe which Shahrol viewed as a deadline that 1MDB had to comply with.

Datuk Seri Najib Razak is pictured at the Kuala Lumpur Court Complex October 16, 2019. ― Picture by Hari Anggara

‘Friend helping friend’

Shahrol today confirmed that he had then called for a special TIA board meeting on September 18, 2009 to discuss and decide whether to proceed with PSI’s proposal for the joint venture with 1MDB. (At that time, the name change of Terengganu Investment Authority (TIA) Berhad to become 1MDB had yet to be officially recognised by the Companies Commission of Malaysia. Shahrol was also the TIA CEO).

Based on the minutes of the special board meeting, TIA executive director of business development Casey Tang was recorded saying that PetroSaudi is “ultimately owned by King Abdullah and the Kingdom of Saudi Arabia”.

Questioned by Shafee, Shahrol said he was “never able to confirm” if PetroSaudi was actually owned by the Saudi king and the Saudi kingdom.

Later when asked if he had trusted PSI as it was purportedly from Saudi Arabia, Shahrol said: “I think we need to be very clear that I trusted PSI because they were represented as being a company owned by the Saudi royal family.”

Shahrol said he had actually discussed the matter of PSI’s ownership with Tang, noting: “In Saudi Arabia, there’s no real difference between the kingdom and the Saudi royal family because it is a kingdom.”

Among other things in the September 18, 2009 board minutes, Shafee highlighted that Shahrol was recorded as having said that “1MDB is in an excellent position because King Abdullah of Saudi Arabia views this as a friend helping a friend”.

Shahrol confirmed that he had conveyed this information to the company’s board of directors, saying that he had heard from Low that the “deal is done on a friend helping a friend basis”.

“Clearly the king did not speak to Jho and say ‘brother, this is a friend helping a friend’, what Jho informed me was King Abdullah sees this as a friend helping a friend,” Shahrol said, but disagreed with Shafee that he had mentioned this in the board meeting to try and “convince” the board to approve the deal.

Shahrol had previously testified that 1MDB eventually signed on September 28, 2009 the joint venture agreement with a similar-sounding company named PetroSaudi Holdings (Cayman) Ltd, instead of the purported business partner PSI.

Following the deal signed by Shahrol on behalf of 1MDB and PSI CEO Obaid on behalf of the Cayman-based company, Shahrol also confirmed in court previously that 1MDB’s US$1 billion investment in this partnership resulted in zero returns for 1MDB.

Shahrol had also testified that US$700 million of 1MDB’s US$1 billion was diverted to Good Star Limited, which he did not then know was owned by Low.

The prosecution had on Day One of Najib’s 1MDB trial said that it will prove Good Star is a company owned and controlled by Low, and had also said it will show that US$20 million of the US$700 million sent to Good Star eventually ended up allegedly with Najib.


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