Counsel Alex Tan described the unspecified sum of monies kept in Clyde & Co as “clean” money which came from an oil drilling contract that PSI had entered into with a Venezuelan-based company, Petróleos de Venezuela (PDVSA).
Tan was representing PSI, its subsidiary Petrosaudi Oil Services (Venezuela) Ltd (PSOS-VZ) and Temple Fiduciary Services Limited, who are the second, third and fifth respondents in the government’s application to block PSI director Tarek Obaid, PSI and PSOS-VZ from using the money kept in the UK law firm.
In the suit, the government claimed the money originated from 1MDB funds in a joint venture with PSI to form 1MDB PetroSaudi Ltd in 2010.
During the application hearing before judge Ahmad Shahrir Mohd Salleh today, Tan argued that PSOS-VZ had entered into an oil drilling contract with PDVSA and carried out the drilling activity using a drillship called “Saturn”, hired from a Singapore-based entity.
“PSOS-VZ never owned the ‘Saturn’ drillship, the drilling contract was entirely self-funded and no funds from 1MDB were used for its operations. PSOS-VZ performed its obligation under the drilling contract and PDVSA was required to make payments.
“When PDVSA failed to make payment, PSOS-VZ relied on the standby letter of credit and when they (PSOS-VZ) engaged into an arbitration, the arbitral tribunal ruled in favour of them,” he said, adding that following the arbitration process, the arbitration tribunal had ordered PDVSA to make payments into the said escrow account.
Summing up his submission, Tan said it was clear that the money in the escrow account was clean money and no 1MDB money could be traced to the arbitration’s final award.
Meanwhile, counsel Yusof Zainal Abiden, who appeared for Obaid, argued that the supporting affidavit affirmed by the investigating officer (IO) for the case was based on hearsay and relied solely upon a copy of the United States department of justice’s report (exhibit “MAAA-1”) and a witness statement (exhibit “MAAA-3”) by former 1MDB chief executive officer Shahrol Azral Ibrahim Halmi.
“Paragraphs 30 to 40 in the affidavit affirmed by the IO, Mohd Afiq Ab Aziz, are not facts that support the application, but rather his findings after he set out the chronology of the facts based on ‘MAAA-1’ and ‘MAAA-3’.”
“We do not know which part of the averments that he obtained was from both the exhibits and which was his own. Any averment based on these two documents should be disregarded,” Yusof said.
Yusof added that on the basis of hearsay, Shahrol’s statement was a witness statement in a trial and it could not be verified to be used in this application.
“If Shahrol filed an affidavit for this application, we might be able to cross-examine him, but since it (his witness statement) is only referred to in the affidavit of the IO, how do we actually challenge whatever statement that may have implicated my client?” he asked.
On July 16, 2020, the court granted the government’s application for an interim order to block the parties from moving the money linked to 1MDB and to keep it in a client’s account at a United Kingdom-based law firm.
The interim order is to maintain the status quo of the parties until the disposal of the government’s prohibition application to seek an order to restrain any dealings on the money belonging to PSI and its subsidiary, PSOS-VZ, which is currently in an escrow account held by Clyde & Co.
The government, in its application, is also seeking unspecified money that was deposited under an intermediate account name, Temple Fiduciary Services Limited, at Barclays Bank in the UK.
The application, filed under Section 53 of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act, named Obaid, PSI, PSOS-VZ, Clyde & Co and Temple Fiduciary as the first to fifth respondents.
The submission before Shahrir continues tomorrow.