Jho Low accused of siphoning US$700m from 1MDB

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KUALA LUMPUR: Businessman Low Taek Jho (Jho Low) orchestrated a 2009 joint venture (JV) between 1Malaysia Development Bhd (1MDB) and PetroSaudi International Ltd to allegedly siphon off US$700 million (RM2.53 billion) from the strategic development fund, whistleblower website Sarawak Report has claimed.

The United Kingdom-based website revealed that the 1MDB-PetroSaudi JV company’s US$700 million loan repayment to PetroSaudi in 2009 was a front, and the funds were channelled to a firm called Good Star Ltd, allegedly owned by Low.

The US$700 million loan repayment provision was part of the JV contract between PetroSaudi and 1MDB, Sarawak Report said, citing documents it had obtained. It also published those documents with its report.

“What that evidence goes on to show is that critical manoeuvres for transferring the US$$700 million ‘loan’ cum ‘premium’ into the control of Jho Low took place straight after the signing of the agreement [between PetroSaudi and 1MDB] on Sept 29 — that and Jho Low was involved and copied-in on every step,” Sarawak Report said.

According to copies of the PetroSaudi loan agreement obtained by Sarawak Report, the US$700 million had been loaned from PetroSaudi Caymans Holdings Ltd to the 1MDB-PetroSaudi JV company on Sept 25, 2009.

“However, there is no evidence to suggest that this ‘loan’ was anything apart from an entirely contrived transaction between two arms of PetroSaudi, a company with very little working capital.

“Three days later, 1MDB was committed to pay it back in hard currency,” it said.

On Sept 29, 2009, PetroSaudi chief executive officer (CEO) Tarek Obaid issued a letter of demand to 1MDB PetroSaudi Ltd for US$700 million credited to account number 11116073, at RBS Coutts Bank Ltd in Zurich, Switzerland.

Sarawak Report claimed that the account was registered under a company called Good Star, which was controlled by Low.

“This means that the money, which was stated as having been paid back to PetroSaudi as part of the joint-venture agreement, was in fact signed over by Tarek Obaid to an entirely separate third party, Good Star Ltd.”

It added that the US$700 million was repaid by 1MDB alone, as PetroSaudi had brought in “zero cash” into the JV and had only committed the valuation of its assets.

Good Star then paid Tarek Obraid a “broker fee of US$85 million” on the same day the letter of demand was written, it said.

Sarawak Report claimed that the entire 1MDB-PetroSaudi JV deal was initiated by Low and his team on Sept 8, 2009 — less than a month before the deal was signed.

Those involved in the initial meeting were Low, UK businessman Patrick Mahony, and Low’s colleague Seet Li Lin and lawyer Tiffany Heah.

Mahoney worked for an investment group called Ashmore, which was funding PetroSaudi’s main operation, while Seet is the chief investment officer of Good Star, and the vice-president of Low’s company Jynwel Capital Ltd, said Sarawak Report.

The website said it managed to contact Seet to ask about his role at Good Star, but he denied knowing anything and then “turned off his phone”.

In an email transaction between Low and Mahony, the latter said he understood Low wanted “to use PetroSaudi as a front for certain deals” and that “they would be happy to do that”.

Sarawak Report said 1MDB CEO Datuk Shahrol Halmi and his Malaysian colleagues were only involved in the proceedings on Sept 15, on the initiative of Low, who organised the conference call between the parties.

The website also furnished an email, purportedly written by Shahrol, which it said showed that 1MDB was still in the dark about the actual business of PetroSaudi, as Shahrol had yet to receive the company’s profile days before signing the JV.

On Feb 21, 2015, 1MDB claimed that its JV with PetroSaudi had earned it a profit of US$488 million.

In a statement on the company’s website, 1MDB president Arul Kanda Kandasamy also claimed that the money it had invested in the JV had been converted into murabaha notes when the plan did not go through.

“In 2009, 1MDB entered into a joint venture with PetroSaudi, which was set up to undertake investments in certain projects.

“Both parties eventually decided not to proceed with the joint venture and our investment was converted into murabaha notes.

“These murabaha notes were paid back in full, with 1MDB earning a profit of US$488 million in 2013,” Arul said in the statement. — The Malaysian Insider

 

This article first appeared in The Edge Financial Daily, on March 2, 2015.