Ex-1MDB director says believed Najib wanted TIA to proceed with RM5b bond, but agrees may have assumed wrongly

KUALA LUMPUR, March 17 — Tan Sri Ismee Ismail today confirmed he had believed that Datuk Seri Najib Razak had wanted 1Malaysia Development Berhad’s (1MDB) predecessor Terengganu Investment Authority (TIA) to push through with issuing a RM5 billion bond in 2009, even after the Terengganu sultan and TIA’s board had decided to suspend the bond issuance.

But Ismee also acknowledged it was possible that his belief was mistaken, based on the outcome of Najib’s meeting with the Terengganu Sultan several days later after the TIA board’s decision to suspend the bond issuance.

Ismee is a former director of both the Terengganu government-owned TIA and 1MDB which was renamed from TIA and which later came under the Finance Ministry’s ownership.

Ismee said this while testifying as the 13th prosecution witness against former prime minister Najib in the latter’s trial involving the misappropriation of more than RM2 billion of 1MDB funds.

Although the 1MDB trial involves 25 corruption and money-laundering charges against Najib in relation to 1MDB transactions and deals, Najib’s lawyer Datuk Hariharan Tara Singh devoted the entire day of hearing today to examining events that took place before TIA became 1MDB.

Hariharan today focused on a RM5 billion bond issuance, which Terengganu ruler Sultan Mizan Zainal Abidin had on May 22, 2009 asked to be suspended. The RM5 billion bond would result in TIA taking on the debt in order to raise funds.

Ismee had previously testified that the Terengganu ruler had on May 22, 2009 afternoon told him and then TIA director Datuk Shahrol Azral Ibrahim Halmi of the ruler’s wishes for TIA to not go ahead with plans to issue the RM5 billion bond.

Ismee said he and Shahrol had then on May 22, 2009 signed a TIA board resolution for the company to suspend and not go on to issue the RM5 billion bond via Islamic medium-term notes (IMTN).

Ismee had said he was then asked to be at Najib’s house at night on the same day and that Shahrol was also present in the meeting, and that the first thing Najib had asked was why the two of them had signed the board resolution and why they had not asked the Terengganu ruler for time to think.

“What I can say to Datuk Seri Najib is that this is Tuanku’s decree so what can we do. I assumed by Datuk Seri Najib’s reaction and intonation that he wanted the IMTN bond issuance to go on,” Ismee had said when previously testifying in this trial.

Ismee had previously testified that this matter was beyond his jurisdiction as he had met both the Terengganu sultan and the prime minister and left the matter to them to resolve, and said he was of the impression that Najib would raise the matter to the Terengganu sultan on the coming Wednesday.

These events had taken place on May 22, 2009 which was a Friday, while May 27, 2009 would be Wednesday on the next week. The Terengganu sultan was then also the Yang di-Pertuan Agong, and it is customary for the prime minister — who was then Najib — to meet the Yang di-Pertuan Agong on Wednesday before the weekly Cabinet meetings on the same day.

Today, Hariharan zeroed in on a May 28, 2009 letter that he said the palace via the king’s private secretary had written to Najib, which had referred to Najib having had an audience with the king.

“Paragraph 2 (of the letter), in line with YAB Datuk Seri’s agreement to suspend the bond to enable a re-evaluation… Do you agree with me, Datuk Seri Najib, based on this letter from the palace written by the private secretary of His Royal Highness, that Datuk Seri Najib himself has agreed to withhold the bond issuance?” Hariharan asked.

“It appears that Datuk Seri Najib is not pushing for the IMTN programme, do you agree with me?” Hariharan asked, to which Ismee then replied “Yes.”

Hariharan: Would it be correct that—I believe both you and Shahrol would have some kind of opinion that Datuk Seri Najib wants to proceed, in light of the letter I showed to you just now, do you agree that you perceive or maybe what Datuk Shahrol perceive could be wrong?

Ismee: Like you mentioned, ‘anggapan’, so in this case, maybe ‘anggapan saya salah’ (maybe my assumption was wrong).

Previously, Shahrol as the ninth prosecution witness in this trial had also testified that Najib had on May 22, 2009 asked him to “go ahead” and proceed with the RM5 billion fund-raising by saying: “You go ahead, I will talk to Tuanku”.

Shahrol had said he took Najib’s words to be an “instruction and mandate from the prime minister who is also the finance minister” to continue the RM5 billion bond issuance, as he was the minister responsible for giving a government guarantee on the RM5 billion bond.

Tan Sri Ismee Ismail is pictured at the Kuala Lumpur High Court March 17, 2022. ― Picture by Hari Anggara

About the RM5b bond and Najib’s role

Hariharan today sought to downplay Najib’s role in the May 22, 2009 meeting at night with Ismee and Shahrol, after the latter two had heard the Terengganu sultan’s wishes for TIA to not proceed with the RM5 billion bonds issuance.

Ismee agreed with Hariharan’s suggestion that the meeting with Najib was only due to the federal government’s guarantee for the RM5 billion bond, with Ismee saying: “Yeah, and probably because due to that thing, the federal government may have some interest on the issuance of the IMTN, by virtue of the federal government is giving guarantee for the issuance.”

Hariharan then suggested that Najib was not the representative of TIA’s shareholder at that time and he was “not in a position to decide whether” the RM5 billion bond issuance could proceed, with Ismee then agreeing.

In response to Hariharan’s questions, Ismee today agreed “with hindsight” that TIA’s 30-year RM5 billion bond had a quite unusually long duration for a government bond, and agreed that there was no urgency for TIA to raise funds by issuing the bond with a huge discount.

However, Ismee said he believed that TIA had complied with the procedures to issue the RM5 billion bond, as it involved a government guarantee that would only be issued if all was in order.

Recalling his experience while working with Pengurusan Danaharta Nasional Berhad in the past where he was very much involved in the issuing of Danaharta bonds to acquire non-performing loans of banks, Ismee said he knew how difficult it is to get a government guarantee for bonds.

“So I know the process. We had discussion with the AG’s office, the Treasury, they will want to know the details of the paper. So I believe at that time and probably you can ask Shahrol, that all these processes will take place, otherwise the government won’t issue guarantees. I will be relying on the government system to issue government guarantee properly, I believe all the papers will be in order,” he said.

Among other things, Hariharan had repeatedly attempted to suggest that Shahrol was the one who had committed wrongdoing by signing documents that enabled the RM5 billion bond to be issued, including by reading out multiple parts of parliamentary watchdog Public Accounts Committee’s (PAC) 2016 report on 1MDB and asking if Ismee agreed with the PAC report’s contents.

At one point after Hariharan had read out several paragraphs of the PAC’s report to Ismee, deputy public prosecutor Mohamad Mustaffa P. Kunyalam objected: “I’m objecting to the line of questioning, this is a matter which is already stated in the report. It can be raised in submissions, no reason to raise it to the witness.”

The judge also noted that the PAC report is already marked as a document that is part of the trial and that Najib’s lawyers could submit their arguments on the matter.

Najib’s 1MDB trial before High Court judge Datuk Collin Lawrence Sequerah resumes next Monday.