KUALA LUMPUR: Former prime minister Datuk Seri Najib Razak had asked Felda Investment Corp Sdn Bhd (FIC) to review its decision not to proceed with the purchase of Merdeka Palace Hotel & Suites in Kuching.

The FIC board had twice rejected the deal because the asset was overpriced, the High Court was told yesterday.

Former FIC chief executive officer Mohd Zaid Abdul Jalil, testifying in the graft trial of former Federal Land Development Authority (Felda) chairman Tan Sri Mohd Isa Abdul Samad, said Mohd Isa had informed him of Najib’s request at the FIC’s board meeting on April 29, 2014.

“Isa told us that PM (Najib) wanted FIC to consider again the acquisition of the hotel. The board took into consideration what Isa said and no questions were asked,” said Mohd Zaid, adding that this was not recorded in the minutes of the meeting as Mohd Isa wanted it to be off the record.

The board members who attended the meeting were Mohd Isa, Mohd Zaid, Tan Sri Dr Mohd Irwan Serigar Abdullah, Datuk Faizoull Ahmad, Datuk Dr Omar Salim, Datuk Noor Ehsanuddin Mohd Harun and Datuk Nik Azman Mohd Zain.

Mohd Zaid, 48, said Mohd Isa directed FIC to acquire the hotel from Gegasan Abadi Properties Sdn Bhd for RM160 million, after FIC had rejected two previous offers for the hotel.

FIC is a wholly-owned subsidiary of Felda, which was placed under the Prime Minister’s Department.

Mohd Zaid said the fair value for the asset as determined in a valuation carried out during the first offer was RM137.6 million, and was raised to RM153 million during the second offer after taking into consideration future developments in the area surrounding the hotel.

Mohd Zaid said that on March 28, 2014, Mohd Isa told him by phone to conduct another study to acquire the hotel as Najib wanted the decision to be reviewed.

‘Help with Sarawak political activities’

“A day after the phone conversation I met Isa and he told me to continue with the acquisition of the hotel in order to ‘help with Sarawak political activities’,” he said in reply to a question from Deputy Public Prosecutor Afzainizam Abdul Aziz.

Afzainizam: The then PM asked FIC to review its purchase, is it a form of a directive?

Mohd Zaid: Yes it is a directive to study the proposal again.

Afzainizam: Is it compulsory for the FIC board to follow the suggestion (by the PM)

Mohd Zaid: It is not necessary as the board can decide whether the acquisition would bring profit to FIC without taking into consideration a directive or any outside party.

He explained further that when Mohd Isa said Najib wanted the matter reviewed, it is a decision that is to be taken by the board on whether to continue with the acquisition as the board had prior to this rejected the purchase based on a cost benefit analysis that the return on the investments would take 27 years.

The witness said FIC had rejected the offer twice as the asking price of RM165 million was big when compared to the RM137.6 million valued earlier, and the RM153 million when it was valued for a second time.

“It had to be rejected as the value price is less than Gegasan Abadi’s asking price although the company had reduced it to RM160 million,” he said.

“In the end, the majority at the board agreed to the purchase price at RM160 million except me as I proposed RM153 million in the working paper,” he said, adding, however, that his objection was not recorded.

‘Felda board approval required’

Mohd Zaid told the court that FIC’s approval for the purchase was not in accordance with the proper procedures as any transaction above RM100 million must first gain Felda’s board approval.

In this case, the witness said approval was secured from the FIC board and the matter was not brought to the Felda board.

“Isa instructed that it not be brought to the Felda board and he told me that if it is recorded in the minutes it would be detrimental to him (Isa) as this is a directive that came from the Felda chairman, who is also the FIC chairman. Mohd Isa said there is no reason for it to be tabled at the Felda board as the majority of the Felda board members are also FIC board members.

“In my view not all Felda board members are also FIC board members. Only five FIC board members are also in the Felda board namely Isa, Irwan, Faizoull, Omar and Noor Ehsanuddin,” he said, adding that previously when there was a proposal to purchase an equity in Iris Corp Bhd for RM144.7 million by FIC, Mohd Isa told the FIC board to submit the proposal to the Felda board.

Mohd Isa is charged with criminal breach of trust with approving the hotel’s purchase for RM160 million without Felda’s board approval.

He is also charged with corruption for dishonestly receiving RM3.09 million for gratification from a board member of Gegasan Abadi through one Muhammad Zahid Md Arip, between July 21, 2014 and Dec 11, 2015, in order to approve the project.

Mohd Zaid also told the court that he along with Mohd Isa’s aide Muhamad Zahid Md Arip had gone to Kuching sometime in November 2013, on Mohd Isa’s instructions to conduct a preliminary study to purchase the hotel.

“There we met with the then deputy chief minister Datuk Abang Johari Abang Openg at his house where he showed us the planning around the hotel site that had been approved by the Sarawak government,” he added.

The hearing before Justice Mohd Nazlan Mohd Ghazali continues today.