KUALA LUMPUR (Nov 10): Former 1Malaysia Development Bhd (1MDB) chief executive officer (CEO) Mohd Hazem Abd Rahman testified that Datuk Seri Najib Razak might have known that the investments made by the troubled wealth fund in six portfolio funds under Bridge Global Absolute Return Fund SPC were "worthless".

Najib's lawyer Mardhiyah Siraj Kumar had grilled Mohd Hazem over the investments made in the six funds and the subsequent audit by KPMG, the external auditor of 1MDB, which could not be completed due to issues surrounding the valuations of the funds.

The witness said he had his suspicions about the investments, but believed at the material time that Bridge Global had the capacity to honour any redemption by 1MDB.

"You were suspicious because you knew the papers were worthless," the lawyer said, to Hazem's disagreement.

She then suggested that a "strategy" was concocted by Hazem, fugitive businessman Low Taek Jho, then 1MDB CFO Azmi Tahir and former 1MDB finance director Terence Geh to mislead KPMG and to get the auditor to "shut up".

The lawyer also asserted that this so-called strategy was concealed from Najib.

"I disagree," said Hazem.

"So Datuk Seri Najib knew that the funds were worthless?" asked Mardhiyah.

"Perhaps, yes," responded the witness.

He also disagreed with the lawyer's contention that the other directors of 1MDB such as Tan Sri Ismee Ismail and Tan Sri Lodin Wok Kamaruddin were unaware of the plan.

However, the lawyer said that if the former prime minister was indeed aware of the Bridge Global investments being a sham, Najib would not have directed the managment to retrieve more information for KPMG to complete its audit. Hazem disagreed.

She also said that Najib had acted independently, and did not follow Low's talking points in the December 2013 meeting with KPMG at the former premier's residence.

Hazem said that although Najib did not follow Low's brief in its entirety, Najib did use some of the pointers given.

"I think there was a question of whether all the documents provided were enough for KPMG to complete the audit, and Datuk Seri Najib had read the documents and said they were enough. KPMG disagreed with this," explained Hazem.

Mardhiyah suggested that the witness himself had misled and lied to KPMG under instructions from Low, referring to what Hazem stated in his witness statement — that the fugitive businessman had asked him to lie to the auditor.

Hazem responded saying that Low had "indirectly" asked him to lie.

"What do you mean indirectly? Tell the court the truth — you are under oath," said the lawyer.

"I am telling the truth. What is recorded in the witness statement is true. When the materials were given to KPMG at the material time, they were true and factual.

"It's just that the documents were not sufficient for them to complete the audit," said Hazem.

He then said that it was not lying, but rather it was not giving KPMG the documents to complete the audit.

Najib has been charged with four counts of abuse of power to enrich himself with RM2.3 billion from 1MDB, and 21 counts of money laundering for the same amount.

He faces up to 20 years' imprisonment, if convicted.

The trial will resume on Thursday morning.

The Edge is covering the trial live here.

Users of The Edge Markets app may tap here to access the live report.