In SRC’s US$1.1b suit against Najib, offshore asset recovery specialist says none of funds transferred out used for company’s intended long-term purposes

KUALA LUMPUR, March 11 — None of the US$1.18 billion transferred out of SRC International (Malaysia) Limited’s (SRC BVI) bank account appeared to have been used to ensure the long-term supply of energy and natural resources for which the company was established, an offshore asset recovery specialist told the Commercial High Court today.

Angela Barkhouse, managing director at Quantuma International, was testifying as the second witness in SRC International Sdn Bhd’s US$1.18 billion (RM5.58 billion) civil suit against former prime minister Datuk Seri Najib Razak.

Explaining to the court via video-conferencing, Barkhouse said her international advisory firm had been appointed as liquidator of SRC BVI in August 2021 by 1Malaysia Development Berhad (1MDB) and SRC International’s global legal counsel following the United States Department of Justice’s September 2020 filings as part of the 1MDB sovereign wealth fund fraud.

In her witness statement, Barkhouse said specialist expertise that her firm offered included restructuring and insolvency, corporate finance, forensic accounting and investigations, cross-border asset recovery and creditor services.

Apart from SRC BVI, Barkhouse said she was also appointed joint liquidators for over 12 other entities which either received funds from SRC International or became the intermediaries where these funds passed through.

“I have, using the powers available to me as liquidator of companies incorporated in the British Virgin Islands, Cayman Islands and Samoa, been able to obtain a significant amount of financial and corporate records from numerous and difficult jurisdictions.

“Analysis of these records has led me to trace the funds misappropriated from SRC International through a complex network of offshore entities associated with those involved with the fraud,” she said.

As to the origin of the US$1.18 billion, Barkhouse said these funds originated from a loan of RM4 billion which SRC International obtained from the Retirement Fund Incorporated (KWAP) — a statutory body which manages the pension scheme for Malaysia’s civil servants.

“None of the funds transferred out of the SRC BVI BSI (Bank) Account appear to have been used to ensure the long-term supply of energy and natural resources (other than gas and oil) for Malaysia, which was the purpose for which SRC International was established,” her witness statement read.

Based on her understanding of the documents on the record, Barkhouse also said Bank Negara Malaysia (BNM) had set prerequisites on SRC International when it allowed the loans from KWAP.

"On 3 November 2011, BNM set out conditions regarding the use of the first KWAP loan.

"This stated that RM1.8 billion should only be used to acquire PT ABM Investama and Bumi Resources Tbk PT in Indonesia and Gobi Coal and Energy Limited and Erdens-Tavan Tolgoi in Mongolia.

"Furthermore, on 6 April 2012, BNM's second permission stated that the second KWAP loan should be used for investments in energy and natural resources industries, excluding oil and gas," she said.

Subhead: Layering of funds from SRC BVI to various intermediaries

However, Barkhouse said the majority of the KWAP loans were neither to acquire the four entities listed nor invested in the energy sector as stipulated in BNM's first and second permission.

During the investigation on the flow of SRC International's funds, Barkhouse said a sum of US$864.4 million was transferred to Cistenique Investment Fund BV (US$357.5 million) between April 17, 2012 and April 3, 2014; Enterprise Emerging Market Funds BV (US$481 million) between Dec 23, 2011 and July 2 2012; and Pacific Rim Global Growth Ltd (US$12.19 million) on Dec 20, 2013.

The remaining went to Muraset Ltd (US$15 million) on Dec 27, 2011; and Gobi Resources Coal Ltd (US$4.5 million) on Feb 2, 2012.

"My investigations, including obtaining and analysing documents received from the liquidator of Cistenique and Enterprise, have shown that they were not legitimate investments and were in fact "pass-through" entities used to conceal the misappropriation of assets and facilitate the onward movement of funds.

"Muraset is a private limited company incorporated in the British Virgin Islands and research indicates that former Mongolian prime minister Sükhbaataryn Batbold controlled Muraset whose nature of business is unknown.

"None of the payments made to Cistenique, Enterprise Emerging Funds, or Pacific Rim was made in furtherance of investment in the energy and resources sector but were in fact vehicles used to obfuscate the movement of funds misappropriated from SRC International," she said.

Notably, Barkhouse pointed out that there seems little commercial sense in the fund transfers to Muraset or to Gobi Resources which was linked to Malaysian businessman-turned-fugitive Low Taek Jho or Jho Low as there was no basis of payment she could identify.

In her witness statement, Barkhouse also meticulously outlined the various fund transfers and layering she traced throughout her investigation of the flow of funds, the fraudulent schemes and the entities involved.

Among the recipients of the US$864.4 million transferred out of SRC International included ex-Goldman Sachs banker Tim Leissner's ex-wife JudyChan; Najib's stepson Riza Aziz’s Red Granite Capital Ltd; American rapper Swiss Beatz; vendors of jewellery and other high-value goods; Najib; former SRC International chief executive Nik Faisal Ariff Kamil; and various entities owned by Low and his associates.

Imprisoned since August 23, 2022, Najib is serving his 12-year jail sentence and RM210 million fine for his conviction over the misappropriation of SRC International’s RM42 million funds, which has recently been reduced to six years of jail and RM50 million fine by the Pardons Board.

SRC, under its new management, had filed legal action against Najib and its former directors Datuk Suboh Md Yassin, Datuk Mohammed Azhar Osman Khairuddin, Nik Faisal Ariff Kamil, Datuk Che Abdullah @ Rashidi Che Omar, Datuk Shahrol Azral Ibrahim Halmi and Tan Sri Ismee Ismail in May 2021.

However, later, it removed six names from the suit and retained Najib as the defendant.

Additionally, Najib has brought the former named SRC International directors as third-party respondents.

SRC as a plaintiff in the writ of summons had alleged that Najib had abused his power and obtained personal benefits from SRC International’s funds as well as misappropriated the funds. Najib was SRC’s Emeritus Advisor from May 1, 2012, until March 4, 2019.

SRC International, which is now wholly owned by the Ministry of Finance Incorporated (MoF Inc), is seeking general damages, exemplary, additional interest, costs and other appropriate relief provided by the court.

SRC International is currently seeking a declaration from the court that Naijib is liable to account for the company’s losses due to his breach of duties and trust.

The company is also seeking an order that Najib pay the US$1.18 billion in losses it suffered, and damages for breach of duties and trust; including an order that Najib compensate the sum of US$120 million as well.