Malaysia's former prime minister Najib Razak yesterday took the stand to answer charges that he illegally received RM42 million (S$13.7 million) from SRC International, a sub-unit of 1Malaysia Development Berhad (1MDB).

Najib maintained that SRC was set up with good intentions to diversify the country's energy resources, and denied having any influence over the firm's investments and its massive debt accumulation later.

While chronicling 1MDB and SRC's inception, Najib said that the federal government had, out of goodwill, bailed out 1MDB's predecessor Terengganu Investment Authority (TIA) after it issued Islamic bonds without prior agreement between the state government and Menteri Besar Terengganu Incorporated, the state's investment agency.

This was a reluctantly made decision to protect the state government and the sultan from embarrassment, and to prevent adverse impact on Malaysia's bond market globally, Najib testified in a packed courtroom.

He also said Terengganu's Sultan Mizan Zainal Abidin and the sultan's sister, Tengku Datuk Rahimah Sultan Mahmud, were close acquaintances of fugitive businessman Low Taek Jho, better known as Jho Low.

"From what I understand, TIA's concept came about from discussions (among) Low, the sultan and the state government. I was made to understand that Low was handpicked by the sultan himself as adviser to TIA's board of advisers," he added.

Najib said Low had "portrayed himself as a very influential person in the Middle East".

In justifying Low's involvement with 1MDB after the fund changed hands from Terengganu state to the country's finance ministry, Najib asserted that Low's network was deemed necessary to aid 1MDB's investments.

Najib said: "I was of the mindset that Low's influence and connections would have facilitated 1MDB's goals and investments."

Lead defence lawyer Shafee Abdullah, in his opening remarks, said the prosecution's case is based on witnesses' testimonies that relied on "inadmissible hearsay evidence and do not amount to any proof".

Mr Shafee said Najib "had no knowledge of or reasonable suspicion to believe that there were proceeds of any illegal activity transacted into his accounts".

Calling them "accounts opened for CSR purposes and not for personal enrichment", Mr Shafee said the bulk of the money in the accounts had been used to "promote political, social, charitable causes and community-related projects".

"The amount utilised for personal matters was minimal," Mr Shafee said, adding that "the RM42 million transferred into (Najib's) account was done without his knowledge or involvement and was not a form of gratification".

Painting Najib as a victim of fraud and fingering SRC's management and board of directors for blame, Mr Shafee said that a firm with experienced individuals is unlikely to act "unquestioningly" based on the words of the firm's former CEO, Nik Faisal Ariff Kamil. Nik Faisal fled the country two days before last year's general election.

SRC had received loans totalling RM4 billion from the civil servant pension fund, Retirement Fund Incorporated, in 2011 and 2012, with a government guarantee that was approved by the Cabinet when Najib was both the prime minister and finance minister.

Both 1MDB and SRC were under the finance ministry's jurisdiction.