KUALA LUMPUR, Nov 16 — A debt of US$3 billion that a 1Malaysia Development Berhad (1MDB) subsidiary took on was never used for its original intended purpose of funding a joint venture, but was instead used for unrelated purposes such as payments to “donate” to two 1Malaysia foundations, the High Court heard today.

Former 1MDB chief financial officer Azmi Tahir said he believed that the donations to Yayasan Rakyat 1Malaysia and Kelab Kebajikan 1Malaysia Pulau Pinang were based on instructions from then prime minister Datuk Seri Najib Razak.

Azmi said this while testifying as the 12th prosecution witness in a trial where former prime minister Najib is facing 25 charges over more than RM2 billion of allegedly misappropriated funds from 1MDB.

Back in March 2013, 1MDB subsidiary 1MDB Global Investments Limited (1MDB GIL) issued a bond for a US$3 billion sum with a 4.4 per cent interest until 2023, with the funds intended for a planned joint venture between 1MDB and Aabar Investments PJS in an envisioned government-to-government deal between Malaysia and Abu Dhabi. 

It is now known however that 1MDB had dealt with fake companies with names strikingly similar to the Abu Dhabi firm Aabar.

Although 1MDB GIL had taken on the US$3 billion debt, it did not receive the full sum and only saw US$2.721 billion entering its account in BSI Bank, Lugano, Switzerland on March 19, 2013, as the rest went to paying the service charges and fees of bond arranger Goldman Sachs.

Azmi today then confirmed how money kept flowing out of 1MDB GIL’s bank account to 14 entities to the tune of US$2.8 billion within just a matter of months after the US$2.721 billion was received, and all for purposes unrelated to the planned joint venture between 1MDB and Aabar in the joint venture firm Abu Dhabi Malaysia Investment Company (Admic).

Where the US$2.7b flowed to

Based on 1MDB GIL bank statements from March 14, 2013 to April 21, 2015, Azmi confirmed a total of 14 recipients which received money paid out of 1MDB GIL, with the first being a transfer totalling US$100,000,101 or over US$100 million to Kelab Kebajikan 1Malaysia Pulau Pinang between the period of March 25 to April 29, 2013.

“The purpose this money was transferred is as donations to Kelab Kebajikan 1Malaysia Pulau Pinang on Datuk Azlin’s orders which I believe to be Datuk Seri Najib’s orders,” he said, referring to the late Datuk Azlin Alias who was a senior officer in the Prime Minister’s Department who later went on to become Najib’s principal private secretary.

Azmi also confirmed US$105,000,101.30 or more than US$105 million being transferred from 1MDB GIL to Yayasan Rakyat 1Malaysia between March 25 to May 2, 2013, also saying that this was a donation on Azlin’s instructions which he believed to be Najib’s instructions.

“Besides that, Datuk Seri Najib is a trustee of this foundation,” he said.

Najib’s lawyer Wan Aizuddin Wan Mohammed had today raised objections on alleged hearsay at various points Azmi’s testimony, including when Azmi referred to alleged instructions from Azlin.

As for the other 12 recipients based on 1MDB GIL bank statements, they include Cistenique (Netherlands) with a total of US$379,575,381 or over US$379 million received during March 20 to March 22, 2013; Enterprise (Netherlands) with US$414,756,416 or over US$414 million (March 20 to March 27, 2013); Devonshire (Switzerland) at US$586,828,284.98 or over US$586 million (March 20 to April 17, 2013); Brazen Sky Limited at US$3.3 million recorded as an “intercompany advance” (February 28 to June 28, 2013); over US$791 million to 1MDB also recorded as an “intercompany advance” (April 2 to September 11, 2013); over US$248 million to Ambank (M) Berhad - 1MDB Term Facility Pre-payment recorded as an “intercompany advance” to 1MDB for the latter to service its loan (April 2 to June 26, 2013); and over US$126 million to Pacific Harbor Global Growth (April 9 to July 22, 2013).

The rest are three payments on July 11, 2013 of US$4,281.63 to Law Debenture Services Limited for 1MDB GIL’s company secretary fees; over US$1.15 million to Standard & Poor’s Singapore Pte Ltd as fees for the rating of 1MDB GIL’s bond; US$511.60 to Conyers Dill & Pearman for legal services; as well as over US$1.5 million to Linklaters Singapore Pte Ltd (August 29, 2013) for legal services; and over US$62.3 million to Corporate Trust Services on September 9, 2013 for a half-year payment of coupon or interest on 1MDB GIL’s US$3 billion bond as part of the bond issuance conditions. 

The prosecution had on the first day of Najib’s trial said it would show that 1MDB GIL had on March 19, 2013 only received US$2.721 billion of the US$3 billion funds it raised with the balance paid to arranger Goldman Sachs as fees, and that over US$1 billion of the US$2.721 billion was paid to two funds known as Devonshire Funds Limited and Enterprise Emerging Markets Fund (EEMF) on March 20 and March 21, 2013.

The prosecution had also said it would show that a total of US$890 million — including a US$430 million sum passing through Granton Property Holding — made its way within days from Devonshire and EEMF to Tanore Finance Corporation, and that it would also showed that Tanore had by early April 2013 transferred US$681 or over RM2 billion to Najib’s account.

Devonshire and EEMF are now known to be linked to Low Taek Jho, or Jho Low as he is popularly known, while Granton and Tanore are now known to be under Low’s associate Eric Tan’s control.

Last week, Azmi had verified a letter of support signed by Najib as finance minister on March 14, 2013 to represent the Malaysian government in supporting 1MDB GIL to issue the US$3 billion bond, saying that it had the same effect as a government guarantee. 

Highlighting the importance of the letter of support to enable 1MDB GIL to take on the US$3 billion debt, Azmi had said it places the responsibility on the Malaysian government if 1MDB fails to make repayments on the US$3 billion debt.

“This letter of support is the source of authorisation for the approval for the US$3 billion bond issuance by 1MDB GIL, as without the Malaysian government’s guarantee, the bank would certainly not allow the bond issuance to be done by 1MDB or even 1MDB GIL, which did not have strong financial sources and cashflow,” Azmi had said then.

After Najib’s March 14 letter of support and the 1MDB board’s March 12 resolution and March 12 resolution by MOF Inc-owned 1MDB’s shareholder as signed by finance minister Najib, the 10-year bond of US$3 billion was issued by 1MDB GIL on March 19, 2013 with a 4.4 per cent interest on the US$3 billion sum to be paid until 2023.

The trial before High Court judge Datuk Collin Lawrence Sequerah resumes this afternoon, with Azmi expected to continue testifying.