Malaysia had plan to use Chinese money to bail out 1MDB, court hears

KUALA LUMPUR (Reuters) - Malaysia’s former leader Najib Razak approved a plan to bail out troubled state fund 1MDB by offering stakes in several big infrastructure projects to Chinese firms in 2016, a former aide told a court on Wednesday.

FILE PHOTO: Former Malaysian Prime Minister Najib Razak leaves Kuala Lumpur High Court in Kuala Lumpur, Malaysia August 28, 2019. REUTERS/Lai Seng Sin

Najib, who was voted out of power last year amid public anger over alleged graft at 1Malaysia Development Berhad (1MDB), is on trial for allegedly receiving hundreds of millions of dollars from the state fund he set up in 2009.

He has pleaded not guilty.

Former special officer Amhari Effendi Nazaruddin said Najib sent him to China in June 2016 on a “secret mission” to reaffirm economic ties and investments between the two countries.

The talking points prepared for his meeting with Chinese officials showed there were plans to use Chinese investments to help pay off the debts of 1MDB and its former unit, SRC International, Amhari told the Kuala Lumpur High Court.

“The phrase ‘while simultaneously completely resolving 1MDB and SRC debts’ clearly meant that Najib intended to send the message that this cooperation would aid 1MDB and SRC International through the bailout of 1MDB’s debts,” Amhari said, referring to the talking points.

China has denied reports that its officials had offered to bail out 1MDB in 2016, saying it never attaches political conditions to its cooperation with other countries.

Amhari said among the deals offered to Chinese companies to fund the bailout were two pipeline projects and the $20 billion East Coast Rail Link (ECRL), a major part of China’s Belt and Road initiative.

The pipeline projects were later canceled and the cost of the railway project nearly halved to $11 billion after Prime Minister Mahathir Mohamad took over last year.

Mahathir, who swiftly reopened probes into 1MDB, has said investigators are looking into whether a $2.3 billion loan from the Export-Import Bank of China for the two pipeline projects was used to repay 1MDB debts.

China Communications Construction Co. Ltd, the lead contractor for the ECRL project, did not immediately respond to a request for comment on Amhari’s testimony.

Amhari said his talking points were prepared by fugitive Malaysian financier Low Taek Jho, or Jho Low, who attended the meeting with Chinese officials as a translator.

Low, who faces charges in the United States and Malaysia over his alleged central role in the 1MDB scandal, has denied wrongdoing. His whereabouts are unknown.

“In summary, based on the situation that had unfolded and the documents prepared by Jho Low, I believe that Najib had knowledge and had given the mandate to Jho Low to plan and manage efforts to bail out 1MDB and SRC from its losses and debts,” Amhari said.

Malaysian and U.S. investigators say that at least $4.5 billion was misappropriated from 1MDB by Low and other high-level officials of the fund and their associates.

Najib’s trial continues on Thursday.

Reporting by Rozanna Latiff and Joseph Sipalan; editing by Darren Schuettler