1MDB failed to service loan, govt now paying off US$3 billion debt, court hears

A former finance ministry deputy secretary-general told the Kuala Lumpur High Court today that the government was still paying off a US$3 billion loan taken by 1MDB nine years ago.

Siti Zauyah Mohd Desa, 63, who was attached to the loan management, financial market and actuary division (BPKA), said the US$3 billion loan was approved by the government in a support letter signed by Najib Razak, who was finance minister in 2013.

The 26th prosecution witness also confirmed that the division received no reports whatsoever from 1MDB on how the money was spent or used.

“I confirm that 1MDB, as the party that took the loan totalling US$3 billion, failed to make the loan payments as per the stipulated terms. This has caused the government today to bear the 1MDB debt based on the support letter issued by the government and signed by the finance minister (Najib),” she said.

The US$3 billion was raised from bonds issued by 1MDB’s subsidiary, 1MDB Global Investment Ltd (1MDB GIL), for a 50:50 joint venture between 1MDB and Aabar Investments PJS.

The court was previously told that the debt should have been paid in full by 2023.

Reading from her witness statement at the former prime minister’s trial for the misappropriation of RM2.3 billion in funds from 1MDB, Siti Zauyah said BPKA was responsible at the time for obtaining reports from 1MDB.

However, she added that during her tenure at the division, she had not received any counter-report from the 1MDB management regarding the use of the US$3 billion.

“1MDB was responsible for submitting investment reports as stipulated in the application for the letter of support to the finance ministry.

“On our side, we contacted the 1MDB representative then, Zahid Taib, for them (1MDB) to provide feedback, submit documents or reports to the finance ministry. However, they never did,” she said.

“I also confirm that I myself never saw the agreement document between 1MDB and Aabar as stated in their application because 1MDB did not report to my division at that time. Among the documents we consistently requested were 1MDB’s audited financial reports, a copy of which must be provided to the finance ministry, but they failed to do so,” she said.

Siti Zauyah said there were policies stipulating that Minister of Finance Incorporated (MoF Inc) companies that wished to enter joint ventures or investment agreements with external parties must be presented to the MoF Inc division, after which the division would prepare approval papers from the finance ministry and, subsequently, for Cabinet approval.

“This is the existing policy and process. In the case of 1MDB, I confirm that 1MDB did not submit a report for them to enter into a joint venture agreement with Aabar as referred to in my testimony today,” Siti Zauyah said, adding that she was not sure whether 1MDB had received special approval from the finance minister for the joint venture.

She said once the support letter was issued to 1MDB in 2013, the finance ministry no longer issued any guarantee documents to 1MDB.

On the running of 1MDB, which had been placed under the control of MoF Inc, Siti Zauyah confirmed that no officers from the finance ministry or the MoF Inc division had been appointed to the 1MDB board.

She said this was because in other MoF Inc companies, the finance minister was not directly involved, unlike 1MDB where Najib had appointed himself as the 1MDB advisory board chairman.

“I confirm that in other MoF Inc companies, these sorts of situations do not happen,” the witness said, adding that 1MDB had been in regular contact with Najib if the BPKA division had requests or views pertaining to matters concerning the support letter for the US$3 billion loan.

Najib, 68, faces four charges of using his position to obtain bribes totalling RM2.3 billion from 1MDB funds and 21 charges of money laundering involving the same amount.

The trial before judge Collin Lawrence Sequerah continues tomorrow.