KUALA LUMPUR, Sept 24 — The Terengganu Investment Authority (TIA) Berhad which later became 1Malaysia Development Berhad (1MDB) had went ahead and carried out a fundraising exercise for RM5 billion under Datuk Seri Najib Razak’s instructions, but had only received almost RM4.4 billion after hundreds of millions were lost to bond-flipping by companies owned by businessman Low Taek Jho, the High Court heard today.

TIA former chief executive Datuk Shahrol Azral Ibrahim Halmi today said the company had raised the RM5 billion by issuing bonds or Islamic medium-term notes via a total of eight agreements signed with AmInvestment Bank Berhad on May 26, 2009.

The eight agreements were signed in quick succession just minutes apart on May 26, 2009 — with the first tranche at 9.33am, followed by the other tranches at 9.36am, 9.39am, 9.42am, 9.44am, 9.47am, 9.49am, and 9.52am.

Through the agreements signed with AmInvestment Bank Berhad through the Shariah-compliant concept of Murabahah, Shahrol said that TIA had however received a total of only RM4.39615 billion, as about RM100 million to RM200 million was the fee for AmInvestment Bank as the bond’s underwriter and lead arranger.

"And the rest which is about RM500-RM600 million was accounted for by having to sell the bonds at a discount. We were not informed at that time who bought these bonds at a discount,” Shahrol said, explaining that AmInvestment was like a "shield” between TIA and the final bond purchasers.

It was only years later when Shahrol was probed over the 1MDB financial scandal that he found out who had bought the TIA bonds at a discount.

"During the investigation in 2018 when I was called by PDRM commercial crimes [division], they showed me the paper trail of the transactions after the bonds were sold to the first buyers.

"I remember two entities that bought the bonds at a discount, one based in Singapore and one based in Hong Kong — I can’t recall their names now — who then flipped the bonds, resold the bonds at face value back to entities in Malaysia,” he said, adding that the police had told him that the two companies "belong to Jho Low”.

Former 1MDB chief executive officer Datuk Shahrol Azral Ibrahim Halmi arrives at the Kuala Lumpur Courts Complex September 24, 2019. ― Picture by Hari Anggara

Najib asked to ‘go ahead’

Shahrol is the ninth witness in Najib’s ongoing corruption trial over funds originating from 1MDB — a company that was initially Terengganu’s TIA before it was taken over by the federal government during Najib’s leadership.

TIA was set up as a RM2 company that asked the Finance Ministry to give a government guarantee for the RM5 billion borrowing, with plans for the Terengganu state government to also inject a separate sum of RM6 billion through oil royalties. 

After a series of letters between TIA and the Finance Ministry, finance minister II Datuk Seri Ahmad Husni Hanadzlah had on May 15, 2009 signed the government guarantee for the RM5 billion debt that TIA took on to raise funds.

Today, Shahrol explained that the Terengganu ruler Sultan Mizan Zainal Abidin had on May 22, 2009 ordered him and TIA then director Tan Sri Ismee Ismail to sign a resolution to suspend the RM5 billion fund-raising exercise.

After informing Low of the new development, Shahrol said he had on the same day of May 22, 2009 went to Najib’s house as instructed by Low.

Shahrol said Najib had asked for an explanation of what transpired earlier that day at the Istana Terengganu in Kuala Lumpur, noting that Najib had asked him to "go ahead” and proceed with the RM5 billion fund-raising.

"I took this as an instruction and mandate from the Prime Minister who is also the Finance Minister to continue the IMTN because he is the minister responsible for giving that government guarantee,” Shahrol said, later confirming that TIA eventually became 1MDB.

Najib’s ongoing 1MDB trial involves 25 criminal charges — four counts of abusing his position for his own financial benefit totalling almost RM2.3 billion allegedly originating from 1MDB and the resulting 21 counts of money-laundering.