This article first appeared in The Edge Malaysia Weekly on November 4, 2019 - November 10, 2019

LITTLE wonder Tarek Obaid was so keen for 1Malaysia Development Bhd (1MDB) to form a joint venture (JV) with PetroSaudi International Ltd (PSI) in the shortest time possible. After all, when the deal was clinched in just over a month on Sept 30, 2009, the former CEO of PSI pocketed a cool US$85 million in “commission”.

As the partnership benefited the Swiss co-founder of the oil and gas group so handsomely, Malaysia’s strategic development company was, unsurprisingly, left a great deal poorer.

From early on, Obaid was one of the principal individuals pushing for the establishment of 1MDB PetroSaudi Ltd — the US$2.5 billion JV in which 1MDB would pump in US$1 billion cash for a 40% stake while PSI would inject US$1.5 billion in oilfield-related assets for its 60% stake. Subsequently, it was revealed that PSI’s US$1.5 billion worth of assets was in fact worth a mere US$108 million.

But that was long after 1MDB had transferred US$1 billion over in two tranches. A US$300 million tranche was sent to PetroSaudi Cayman. A PSI-controlled company, PetroSaudi Cayman was not even the actual JV company.

The balance US$700 million was transferred to Good Star Ltd, which former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi claimed he initially believed was a company linked to PSI, but was later revealed to be controlled by financier Low Taek Jho. Low, alleged by the prosecution to be in cahoots with former prime minister Datuk Seri Najib Razak to defraud 1MDB, is now in hiding.

When 1MDB requested assistance for the return of the US$700 million, Obaid refused. In a letter dated Oct 6, 2009, PSI even acknowledged receipt of the US$1 billion, Shahrol — the prosecution’s ninth witness — told the court last week.

During cross-examination of Shahrol, defence counsel Tan Sri Muhammad Shafee Abdullah highlighted a bank statement showing a transfer of US$85 million from Good Star to Obaid, purportedly a “commission” for raising funds from the Middle East for investment in Malaysia. The transfer was made within days of the signing of the JV agreement.

Of the US$85 million, Obaid shared US$33 million with his fellow PSI executive director, Patrick Mahony — another key player in the 1MDB PetroSaudi scam.

Shafee: That’s interesting, isn’t it? Now that you know this, do you know what sort of commission one can make in a JV deal? Can this be a bona fide commission? Or is this outright stealing?

Shahrol: I don’t have enough information to determine.

Going through other bank statements, Shafee also revealed a payment to law firm White & Case LLP, which represented the JV. Obaid paid White & Case £127,015.

Shafee: Isn’t it strange that the payment was made by Obaid?

Shahrol: Yes, the payment should have come from the company — either PSI or PetroSaudi Cayman.  

Shafee: But the fact that it came from Obaid, does that tell you something? Is it possible to say that Obaid paid White & Case for the legal services because he had a personal interest?

Shahrol: It is possible.

In a Nov 28, 2018, report, The Washington Post wrote, “Obaid remains in Switzerland. He is under investigation there and in the US on suspicion of improper payments from the Malaysian sovereign wealth fund, known as 1MDB, to a company called PetroSaudi International, which was founded by Turki bin Abdullah and Obaid. He has not been accused of any wrongdoing.”

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