Investment in Mongolia failed to take off despite millions paid, witness tells court
KUALA LUMPUR: SRC International paid US$60mil (RM281mil at current rates) for a joint venture (JV) between its subsidiary SRC BVI and the government of Abu Dhabi relating to a coal mine – but there was no coal produced or revenue generated from mining operations.

The US$60mil came from Retirement Fund Inc (KWAP) loans to SRC and was meant to pay for the JV between SRC BVI and Aabar UAE, offshore asset recovery specialist Angela Barkhouse told the High Court.

An expert in financial investigation, Barkhouse is the second witness in the hearing of a lawsuit filed by SRC International against former prime minister Datuk Seri Najib Razak over allegations of breach of statutory duties before Justice Ahmad Fairuz Zainol Abidin.

Barkhouse is now a managing director at Quantuma International, an international advisory firm with specialist expertise in forensic accounting and investigations.

According to the JV agreement, each shareholder (SRC BVI and Aabar UAE each held 50% of the company shares) was to contribute a sum of US$500mil (RM2.3bil) with an initial contribution of US$60mil.

Barkhouse said that on Nov 21, 2011, SRC International paid the US$60mil from its AmBank account to the JV company Aabar-SRC’s account. Aabar UAE made a similar transaction of US$60mil to the same receiving account on Nov 30, 2011.

Aabar-SRC used the majority of funds it received to acquire 14 million shares in Mongolia’s Gobi Coal & Energy Ltd (GCE) for US$91mil on Dec 8, 2011.

GCE is a BVI incorporated company which holds the rights to two large open-cut coal mines in Mongolia.

“Aabar-SRC acquired its shares in GCE in advance of a planned Initial Public Offering (IPO) in 2012. The funds from the pre-IPO were to be used to complete initial construction work on the mine and put in place infrastructure to further increase the value of the coal at IPO,” she said in her testimony via Zoom.

Barkhouse said there was no evidence that the IPO took place.

“Information from GCE indicates that the mines have never produced coal on a commercial basis or generated any revenue from mining operations.

“An email from the current director of GCE, Joseph Borkowski, to Quantuma in 2021 indicates that the mines are stranded without logistics to export coal. I note that in the pre-IPO document for GCE, the lack of infrastructure was noted and GCE stated they planned to build a temporary road to the Chinese border for US$35mil.

“It is not clear why, in the 10 years since the investment was made, this road has apparently not been completed,” she said.

SRC, now under new management, filed the legal action in May 2021, alleging that Najib had committed breach of trust, abuse of power, misappropriated the company’s funds and personally benefited from it.

It named Najib along with SRC’s 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, it later removed six names from the suit and retained Najib and Nik Faisal as the first and second defendants.

Additionally, Najib has brought the former named SRC International directors as third-party respondents in the suit. Najib was SRC’s Emeritus Adviser from May 1, 2012, until March 4, 2019.

The company is seeking damages, interests, costs and a court declaration that Najib is responsible for the company’s losses due to his breach of duties and trust, and is demanding that Najib pay back the US$1.18bil in losses that it has suffered.

It is also seeking US$120mil and US$2mil from Najib and Nik Faisal respectively, on account of fraudulent breach of fiduciary duties and breach of trust.

Najib has been serving a jail sentence at the Kajang Prison since Aug 23, 2022, after being convicted of misappropriating RM42mil in SRC International funds.

After he filed a petition for a royal pardon on Sept 2, 2022, his jail term was reduced from 12 years to six years and the fine was reduced to RM50mil from RM210mil.

The hearing continues.
Courts Crime,SRC Lawsuit,Najib Razak,SRC BVI,Courts
KUALA LUMPUR: SRC International paid US$60mil (RM281mil at current rates) for a joint venture (JV) between its subsidiary SRC BVI and the government of Abu Dhabi relating to a coal mine – but there was no coal produced or revenue generated from mining operations.