This article first appeared in The Edge Malaysia Weekly on December 13, 2021 - December 19, 2021

IN handing down its judgment last week upholding the High Court’s decision that Datuk Seri Najib Razak was guilty on all seven criminal charges levelled against him in the misappropriation of RM42 million belonging to SRC International Sdn Bhd, the Court of Appeal (CoA) had some choice words for the former prime minister.

National embarrassment was but one of the descriptions used by the three-man appellate court to describe the financial and national scandal at SRC International, a description that Najib and his lead counsel Tan Sri Muhammad Shafee Abdullah took umbrage at. They are considering requesting that it be expunged, they told a media conference after the court’s decision.

Shafee said the judges’ use of the words “national embarrassment” in the CoA’s 308-page judgment was unnecessary, and would have an effect akin to defamation.

“This is still a matter that is going on appeal. In light of that, I find it disappointing that that kind of remark was made by the court — that this is not for national interest, but rather a national embarrassment,” he said of the three-man panel, chaired by Justice Datuk Abdul Karim Abdul Jalil, adding that maintaining the chosen words could have a serious impact on his client’s reputation.

“They could have said that the defence of national interest did not subsist and we reject [the appeal]. That would have been the end of the matter. To go further and say that this is a national embarrassment was unnecessary and that can cause some serious element of perception of Datuk Seri Najib, considering that the entire conviction and sentence have been stayed,” said Shafee, adding that the remark could be expunged during the course of Najib’s final appeal at the Federal Court. Najib has asked his lawyers to file an immediate appeal against the decision, which was unanimous.

In reaching its decision, the CoA found that the facts of the case totally demolished Najib’s defence that his actions in relation to SRC had been motivated by “national interest”.

“One wonders what benefit Najib’s action had brought to the Malaysian government. Given this, under no circumstances could the actions taken be said to be in the interest of the Malaysian government,” said Abdul Karim, who sat with Datuk Has Zanah Mehat and Datuk Vazeer Alam Mydin Meera.

The Memorandum and Articles of Association of SRC, set up nearly 10 years ago, stated that it was to identify and invest in projects associated with the exploration, extraction, processing and trading of conventional and renewable energy resources, natural resources and minerals.

During the trial, the court was told that SRC was envisaged to replace or support Tenaga Nasional Bhd (TNB) in securing coal supplies and Petroliam Nasional Bhd (Petronas) in finding further alternative energy sources to meet the country’s rising energy needs as resources such as coal and petroleum were becoming scarce.

SRC was a subsidiary of 1 Malaysia Development Bhd (1MDB), and the Memorandum and Articles of Association of both companies contained article 117, which made the then prime minister, namely Najib, adviser emeritus to the companies.

Even though it had no track record, Minister in the Prime Minister’s Department Tan Sri Mohamed Nor Yakcop gave SRC an initial grant of RM20 million in early 2011 for its expansion.

SRC pushed for an initial RM3.95 billion, which Najib later agreed should be increased to RM4 billion, and sourced internally from Retirement Fund Inc (KWAP), the civil servants’ pension fund (see “How company landed RM4 bil of KWAP loans”).

The court found the testimonies of Najib’s three vital defence witnesses — former attorney-general Tan Sri Mohamed Apandi Ali, former Malaysian Anti-Corruption Commission (MACC) chief commissioner Tan Sri Dzulkifli Ahmad and former Treasury secretary-general Tan Sri Mohamed Irwan Serigar — largely unconvincing.

Abdul Karim said High Court judge Mohd Nazlan Mohd Ghazali was right to reject Apandi’s and Dzulkifli’s testimonies and to arrive at a fair and just decision.

“Irwan’s testimony did not have any effect on the prosecution’s case nor did it raise any doubt. Najib tried to rely on Irwan’s evidence for the purposes of establishing his defence that the principal consideration in granting government guarantees to SRC was the promotion of national interest as a strategic investment vehicle and that SRC’s ability to repay the RM4 billion loans was not the primary concern,” Abdul Karim said.

“However, this attempt seems to have fallen flat when Irwan confirmed that whether it was a newly formed GLC or not, or whether it had some strategic investment purpose, the ability to repay the loan was the prime consideration.

“It would be rather absurd for the government to guarantee a loan to a GLC corporate body knowing well that the corporate body does not have the ability to repay the loan or service it. That is simply bad financial management of public funds.”

Abdul Karim added that it would not be in the national interest to have a stable of insolvent companies with full government exposure to the loans taken by these companies.

As SRC was unable to repay the RM4 billion loan and to service interest payments, the government in 2015, through the Ministry of Finance, which Najib also helmed, had to provide three short-term loans amounting to RM650 million, to avoid a declaration of an event of default.

As the government stood guarantee for the KWAP loan, it would have to repay the full RM4 billion loan in the event of a default.

“The loans were never repaid by SRC and, in fact, the government has been honouring its guarantee with periodic payments to KWAP,” the appellate judge said, and this was one of seven reasons the High Court judge found SRC not to have benefitted the government as claimed by the defence.

Abdul Karim said while Najib was seen actively involved in ensuring SRC received the RM4 billion, oddly, he became indifferent to the whereabouts of the funds and did not even enquire from the company as to what happened or how they were utilised.

“He even instructed the second finance minister (Tan Sri Ahmad Husni Hanadzlah) then to keep off SRC (when Husni offered to retrieve the funds overseas). This conduct of the appellant can be indicative of one thing, that is, once the funds had been secured by SRC, over which he had overarching control, he was free to utilise them for his personal benefits.

“This was manifested by the flow of RM42 million from SRC into his personal accounts (in late 2014 and early 2015). This is not something that can be said to have been done in the national interest. There is no national interest here, just a national embarrassment,” the judge admonished.

Apart from the RM42 million for which Najib was charged, the court noted that another sum exceeding RM100 million from SRC was deposited into Najib’s account and also spent.

Testimony in the High Court trial revealed that as soon as the two loans of RM2 billion each were disbursed by KWAP in August 2011 and February 2012, the bulk was immediately transferred to Swiss accounts, never to be seen again.

Abdul Karim said the appellate court noticed that Najib had failed to answer these points.

“There was simply no reason why the government would go out of the way to assist SRC, a newly incorporated company without any track record. The speed and manner with which the KWAP loans were approved, without proper diligence, the manner the (two) government guarantees were arranged and approved, rushed and expedited and the RM4 billion dispersal from the pension fund and the manner the loan amounts were spirited out of the country do not help Najib’s case.

“In fact, these facts demolish his defence. There is a total lack of evidence as to what purpose the RM4 billion of public funds were actually utilised for; if indeed they were for the benefit of the Malaysian government and its people, surely there would be some evidence. However, glaringly, SRC defaulted on the loan repayments to KWAP, the government had to incur further costs and expenses.

“One wonders what benefit Najib’s action had brought to the Malaysian government. Given this, under no circumstances could the actions taken be said to be in the interest of the Malaysian government,” Abdul Karim surmised. 

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