Why we say the US$1.83 billion 1 Malaysia Development Bhd invested in Petro Saudi International between 2009 and 2011 was a scheme to defraud Malaysia
1. The joint-venture agreement was signed on Sept 28, 2009. The terms include 1MDB contributing US$1.0 billion cash for a 40% stake in the JV Co called 1MDB PetroSaudi Ltd. PetroSaudi Holdings Cayman will put in assets worth US$2.7 billion. The JV Co will be valued at US$2.5 billion with PetroSaudi Holdings’ 60% stake derived from assets it will inject into the JV Co.
2. The valuation of the assets that PetroSaudi Holdings will put in was done by one Edward Morse who was hired by PetroSaudi and work was done within days. Morse was issued his appointment letter on Sept 20, 2009 and submitted his report on Sept 29, 2009 — a day after the JV was signed. He valued the Turkmenistan assets at US$3.5 billion and the Argentinian assets at US$108 million.
3. PetroSaudi Holdings never owned the Turkmenistan assets that were to be injected into the JV Co. Those assets were owned by Buried Hill Energy (Cyprus) Co Limited. PetroSaudi Holdings was only in negotiation to buy the assets from Buried Hill. They signed a negotiation agreement on July 4, 2009 and this was eventually terminated on Nov 23, 2009.
4. 1MDB did not hire its own independent valuer to do the valuation. 1MDB management did not comply with a decision of its own board of directors to do an independent valuation.
5. PetroSaudi Holdings committed FRAUD by selling assets which it did not own into the JV Co.
6. Lawyers for 1MDB, Wong & Partners, as well as the 1MDB board of directors were not given the valuation report by Edward Morse until after Sept 30, 2009 — two days after the JV agreement was signed.
7. When the deposit money of US$7.1 million paid to Buried Hill was returned after the negotiation was cancelled, the cash was not returned to the JV Co but to PetroSaudi Holdings. This deposit money should have been returned to the JV Co as it formed part of the assets sold by PetroSaudi Holdings to the JV Co.
8. There was also FRAUD in the creation of a fake US$700 million loan from PetroSaudi Holdings to the JV Co. These are the evidence of fraud:
a) There was no corresponding cash in the JV Co or any of its subsidiaries on or after Sept 25, 2009 (the date the loan agreement was signed). But a letter of demand dated Sept 29, 2009 from PetroSaudi Holdings was sent to the JV Co to pay the loan.
b) From the US$1 billion cash that 1MDB remitted for the JV, US$700 million was paid directly from 1MDB to Good Star Limited instead of the supposed lender PetroSaudi Holdings.
c) The scheme to scam US$700 million from 1MDB was discussed as “over payment” in various email exchanges and attachments between Jho Low and his associates Seet Li Lin, Tiffany Heah, with PetroSaudi executives Patrick Mahony and Tarek Obaid between Sept 11, 2009 and the signing of the JV on Sept 28, 2009.
d) Timothy Buckland (from the UK law firm of White & Case which represented PetroSaudi Holdings) admitted in an email to Charlie Sparrow of PetroSaudi Holdings and copied to Mahony that the letter of demand for repayment of the US$700 million loan was not needed but only “necessary for your docs to legitimise prepayment”.
e) The board of directors of 1MDB was not told about this “loan” prior to the signing of the JV on Sept 28, 2009.
9. The remittance of the US$700 million from 1MDB to Good Star at its bank account at RBS Coutts (Zurich) approved by then 1MDB CEO Sharol Halmi was done without the consent of the 1MDB board of directors which had approved payment of the entire US$1 billion directly to the bank account of the JV Co at JP Morgan Suisse (SA). Two directors of 1MDB Mohd Bakke Salleh and Azlan Zainol resigned because of this payment of US$700 million to Good Star.
10. This transfer of the US$700 million was also a breach of the approval given by Bank Negara Malaysia for 1MDB to remit US$1 billion for the JV. BNM approved payment to the account of the JV Co at JP Morgan Suisse (SA) and not to anyone else.
Why we say Good Star was controlled by Jho Low at the time 1MDB transferred US$700 million
1. 1MDB’s lawyers Wong & Partners, had questioned why the US$700 million was to be paid to Good Star Limited and not to the “lender” PetroSaudi Holdings Cayman. Patrick Mahony, the CEO of the JV Co, said that they were all part of the same company. He lied.
2. 1MDB had on Sept 29, 2009 remitted US$700 million to account number 11116073 at RBS Coutts Zurich. The Malaysian remittance bank was Deutsche Bank Malaysia. RBS Coutts’ risk and compliance unit wanted to know the beneficial owner of the account and then 1MDB CEO Shahrol Halmi replied that it was Good Star Limited.
3. Email communication between the banks and 1MDB on this payment was forwarded to Jho Low by 1MDB executive director Casey Tang.
4. Good Star executed an agreement on Sept 30, 2009 to pay PetroSaudi Holdings’ executive and shareholder Tarek Obaid US$85 million as broker fee. If Good Star was part of PetroSaudi why was there a need to do this?
5. Good Star signed a draft investment management agreement with another PetroSaudi executive Patrick Mahony on Sept 29, 2009. The chief investment officer of Good Star in the agreement was Seet Li Lin, an employee of Jho Low at Jynwell Capital. The metadata of this document in an email attachment showed Jho Low to be the last person to save this file on Oct 1, 2009.
6. On July 21, 2010, Jho Low emailed to Mahony’s Good Star bank account details at RBS Coutts in Zurich to receive part of the US$500 million that was to come from the Murabaha notes 1MDB was to subscribe.
7. On Sept 13, 2010, Jho Low emailed again to Mahony asking him to remit the money to Good Star.
8. Between June 2011 and September 2013, Good Star remitted a total of US$529 million in several transfers to a bank account at the Swiss private bank BSI in Singapore that belonged to Abu Dhabi-Kuwait-Malaysia Investment Corp (ADKMIC).
9. Jho Low has been identified as the beneficial owner of that bank account which was closed in February, 2014.
10. Jho Low had declared himself as a shareholder of ADKMIC when he was involved in the acquisition of the then Bursa Malaysia-listed UBG Bhd in 2010.
Who got what and the trail of international money laundering
1. Good Star Limited received in total about US$970 million from the US$1.83 billion that 1MDB invested with PetroSaudi Holdings Cayman between 2009 and 2011. From this amount of US$970 million, US$529 million went to the bank account of Abu Dhabi Kuwait Malaysia Investment Corp (ADKMIC) at BIS Bank in Singapore. Jho Low was the beneficial owner of that account.