IN our reporting of the troubles at 1Malaysia Development Bhd (1MDB) over the past 18 months, The Edge had several times highlighted the role played by flamboyant deal maker Low Taek Jho (Jho Low). We even called him the Puppet Master. The 34-year-old has denied that he was involved in 1MDB dealings and claimed he played the role of adviser only for a brief period in 2009 when the company just started as the Terengganu Investment Authority.
Last week’s move by the United States’ Justice Department (DOJ) to file a civil suit to seize US$1.0 billion of assets that it said were purchased with money stolen (estimated at US$3.5 billion) from 1MDB has laid bare many facts.
Details contained in the 136-page DOJ document show clearly that despite not having any official role at 1MDB, Jho Low was the central figure throughout all the dealings. More importantly, the DOJ provided facts, figures and dates on the large amount of money that originated from 1MDB, which ended up with Jho Low and his relatives and associates — cash that they used to indulge in a life of luxury and high-powered dealings.
Why this was allowed to happen is anybody’s speculation. But as US Attorney-General Loretta Lynch said bluntly last week, “it was an international conspiracy to launder funds stolen from 1MDB”.
“Unfortunately, sadly, tragically, a number of corrupt 1MDB officials treated this public trust (1MDB) as a personal bank account,” she said, adding that the assets seized will be returned to Malaysia.
While criminal investigations continue at home and abroad, let us look at the modus operandi of Jho Low, the amount of money that went through his hands and what he did with it, based on the 136-page DOJ document.
Jho Low layers his bank transfers to launder 1MDB money
Individuals engaged in money laundering and other unlawful conduct often pass money through intermediary accounts to conceal the true source of the funds.
This was exactly what Jho Low did to try and conceal that the source of his money was from 1MDB. In one instance, he funnelled the exact same amount of money through six different accounts at the same financial institution on or about the same day.
Jho Low’s father, Tan Sri Larry Low Hock Peng, and brother, Low Taek Szen, were parties to the layering, as their accounts were used as intermediaries between accounts that belonged to him.
Following are a few examples cited in the DOJ documents of what son and father did using stolen money from 1MDB:
The purchase of Time Warner penthouse: On March 22, 2011, Jho Low signed to buy a penthouse at the Time Warner building in New York for US$30 million. On June 28, US$55 million was wired from the Good Star account at RBS Coutts in Zurich to an account at BSI Bank in Singapore under Abu Dhabi Kuwait Malaysia International Corp (ADKMIC). Jho Low owned both companies. On the same day, US$54.75 million was moved from the ADKMIC account to another account at BSI Singapore that belonged to Larry Low. From there, US$30 million was transferred to an account under Selune Ltd at Rothschild Bank in Switzerland. Jho Low was the beneficiary owner of Selune. This money was subsequently used to buy the penthouse.
The purchase of the Oriole mansion: On Nov 20, 2012, Jho Low paid US$38.98 million to buy the Oriole mansion in Beverly Hills . Eighteen days before that (Nov 2), US$153 million was wire transferred from the Good Star RBS Coutts account to the ADKMIC BSI account. And then on Nov 5, US$153 million was shifted to Larry Low’s account at BSI and two days later, US$150 million was moved to another BSI account held by Jho Low. From there US$110 million was wired to the account of Selune at Rothschild Switzerland, of which US$37.85 million was used for the purchase of Oriole.
The purchase of Park Lane Hotel: The DOJ alleged that Jho Low laundered more than US$200 million from the US$3.0 billion bond issued by 1MDB Global Investments Ltd to part finance the purchase of New York’s Park Lane Hotel for US$654.32 million.
On March 21, 2013, US$835 million of the funds raised by 1MDB Global was moved to an account held by Tanore Finance Corp at Falcon Bank in Singapore after being routed via three overseas funds. The beneficial owner of the account was Jho Low’s associate, Eric Tan Kim Loong, while another associate, Jasmine Loo Ai Suan, was a signatory of the account.
On March 25, US$378 million was wired from Falcon Bank to another account at the same bank belonging to Granton Property Holdings. From there, the entire sum moved to an RBS Coutts account in Switzerland in the name of Dragon Market Limited, whose beneficial owner is Jho Low.
Two more transfers from the Granton account were made to the Dragon Market account to bring the total amount to US$518.50 million.
Between April 25, 2013, and Nov 8, 2013, a sum of US$476 million was moved from the Dragon Market account to an account at BSI Singapore held by Dragon Dynasty Limited. Jho Low was a signatory to the Dragon Dynasty account. Then, on Nov 12, US$248 million was wired from Dragon Dynasty to the account of Larry Low at BSI Singapore and on the same day, US$235.50 million was sent to Jho Low’s account at the same bank with the wire details, “Gift from Low Hock Peng to Low Taek Jho”. At the same time, Larry Low moved US$12.5 million to the BSI account of his other son Taek Zen.
The two brothers subsequently moved a total of US$218 million from their respective accounts to a lawyer’s account, which was then used to part-pay the purchase of Park Lane Hotel.
The DOJ accused them of moving money “in a manner intended to conceal the origin, source and ownership of criminal proceeds”.
“There is no apparent commercial reason that (Jho) Low would transfer funds from Dragon Market, an account he controlled, to Dragon Dynasty, another account he controlled, and then to an account belonging to his father, only to have a substantially similar amount of funds transferred from his father’s account to (Jho) Low’s personal account on or about the same day,” the DOJ said.
Offshore companies used to funnel billions from 1MDB
Good Star Limited (Seychelles): Between 2009 and 2011, 1MDB entered into three deals totalling US$1.8 billion with PetroSaudi International (PSI), a private Saudi company co-founded by Prince Turki and Tarek Obaid. Of that amount, US$1.0 billion was diverted from 1MDB to a Swiss bank account (RBS Coutts) held in the name of Good Star Limited.
Officials at 1MDB caused this diversion by providing false information to banks about the ownership of the Good Star account. Contrary to representations made by 1MDB officials, the account was beneficially owned not by PSI or the joint venture, but by Jho Low.
Some of the banks that were involved in the transfers of the US$1.8 billion were AmBank, Deutsche Bank, JP Morgan Chase, BSI and RBS Coutts.
RBS Coutts’ bank account records show that Good Star was formed in the Seychelles on or about May 18, 2009. The sole director of Good Star is Smart Power, of which Jho Low is the sole director and Smart Power’s ownership equity in Good Star consists of a single bearer share issued to Jho Low.
Good Star’s Articles of Association indicate that the company’s books, records, and minutes would be maintained at 50 Raffles Place in Singapore, c/o SINGAPORE BANKER 1, whose office is also designated as the location where “all correspondence” to Good Star should be sent. At the time, SINGAPORE BANKER 1 was employed as a banker at RBS Coutts in Singapore .
1MDB’s senior management made material misrepresentations and omissions to Deutsche Bank (Malaysia) officials in order to cause Deutsche to divert US$700 million of 1MDB’s funds to the Good Star account on Sept 30, 2009.
Despite questions raised by the compliance departments of Deutsche and RBS Coutts, the US$700 million was eventually sent to the Good Star account at the insistence of the senior 1MDB officers. The DOJ produced transcripts of telephone conversations and email correspondences between officers of the two banks and 1MDB executives over this transaction.
Another US$330 million was subsequently funnelled into the Good Star account in 2011, again under false pretenses. Although these funds were intended to be transmitted to the 1MDB-PSI JV under a financing agreement, the funds were instead transmitted to Good Star.
From Good Star, Jho Low used the money to buy properties, hotels, a private plane, jewellery and investments as well as to gamble in casinos.
Aabar-BVI: The DOJ says that about US$1.37 billion of 1MDB money was misappropriated and diverted to bank accounts at BSI Bank in Switzerland and Singapore from money raised from two separate bonds totalling US$3.5 billion to buy two power companies in 2012. Goldman Sachs was behind the bond issues.
Almost immediately after receiving the proceeds, 1MDB wire-transferred US$1.37 billion to a Swiss bank account belonging to an entity called Aabar Investments PJS Limited, a British Virgin Islands-registered corporation (Aabar-BVI) that bears a similar name to a legitimate subsidiary of Abu Dhabi’s International Petroleum Investment Corp (IPIC) called Aabar Investments PJS (Aabar).
The Swiss bank account belonging to Aabar-BVI was used to siphon off proceeds for the personal benefit of individuals affiliated with IPIC, Aabar and 1MDB, as well as their associates.
Beginning within days of receiving funds from 1MDB, Aabar-BVI transferred a total of US$636 million to the Singapore bank account held by Blackstone Asia Real Estate Partners. During this period, Aabar-BVI transferred, through multiple overseas investment funds, an additional US$465 million to the Blackstone account. The beneficial owner of the Blackstone Account was identified in bank records as Eric Tan Kim Loong, a Malaysian national and an associate of Jho Low.
The DOJ says the Blackstone account was used as a transit account to improperly distribute funds to individuals affiliated with 1MDB, IPIC and Aabar.
Between approximately May 25, 2012, and Dec 14, 2012, five wire transfers totalling US$636 million were sent from the Aabar-BVI Swiss account to an account at Standard Chartered Bank in Singapore held in the name of Blackstone Asia Real Estate Partners (Blackstone). These wire transfers were processed through correspondent bank accounts at Standard Chartered Bank and Citibank in the US.
Tan was identified as the beneficial owner of the Blackstone account and an authorised signatory of the account. The account was originally opened in the name of Foreign FX Trading Limited. The account name was changed to Blackstone Asia Real Estate Partners on or about May 26, 2011.
The DOJ says Blackstone was a shell corporation created for the purpose of maintaining a bank account to funnel diverted money, based on the following facts and circumstances, among others:
a. The flow of money into and out of the Blackstone account is not consistent with what can reasonably be characterised as regular business activity. For example, the account did not have the types of debits and credits consistent with legitimate business activity, including, for example, transfers to vendors, payroll or receipt of proceeds from customers.
b. Blackstone made extensive use of a money exchange business in Singapore called Raffles Cash Exchange. Between approximately July 2011 and February 2013, 20 wires were sent from the Blackstone Account to Raffles Cash Exchange, totalling approximately US$12. 8 million. Frequent use of currency exchange brokers, especially for large sums and where the entity already maintains an account at a major bank capable of processing currency exchanges, is a technique commonly used by individuals engaged in money laundering and other unlawful conduct to move money in a way that is less likely to be traced by law enforcement and regulatory officials.
c. Blackstone’s full name — Blackstone Asia Real Estate Partners — is similar, though not identical, to the name of a major real estate private equity firm, Blackstone Real Estate. Blackstone Real Estate is an affiliate of the well-known private investment firm Blackstone Group — an entity listed on the New York Stock Exchange — and has, according to its website, US$101 billion in assets under management. The practice of utilising a bank account held by an entity with a name that mimics a well-known commercial enterprise is a technique commonly employed to lend the appearance of legitimacy to transactions that might otherwise be subject to additional scrutiny by the financial institutions involved, for example, because of the size of the transaction or because of the role of a politically-exposed person or entity in the transaction.
Tanore Finance Corp BVI : In March 2013, 1MDB Global Investments Ltd through Goldman Sachs raised another US$3.0 billion for the development of the Tun Razak Exchange in Kuala Lumpur. The DOJ says that about US$1.26 billion of this money was misappropriated from 1MDB Global and fraudulently diverted to bank accounts in Switzerland and Singapore held by Tanore Finance Corp and Granton Property Holdings Ltd at Falcon Bank in Singapore. Falcon is owned by Aabar.
As with the Blackstone account, Tan was the beneficial owner of record for the Tanore account at Falcon Bank in Singapore.
Funds transferred to the Tanore Account were distributed for the benefit of at least one public official associated with 1MDB.
1MDB funds diverted to the Tanore account were also used by Jho Low and Tan to purchase artwork for their personal benefit and an interest in thePark Lane Hotel in New York for the personal benefit of Jho Low.
This article first appeared in Corporate, The Edge Malaysia Weekly, on July 25 – 31, 2016.