ON THE UNRAVELLING OF 1MDB. THAT Also Leads to THE UNRAVELLING OF PM NAJIB RAZAK and his BN ADministration. AND DESi prays PAKAtan RAKyat -- PR BARU or PR 2.0? -- would be able to get their jailed-on-trumped-up-charges de facto LEADER DS ANWAR IBRAHIM OUT OF Sungai BULoh PRISon to form a NEW FEDERAL GOVERNMENT! With more progressive and brave MAlaysians -- including the outspoken ROyal HOUse from JOhore, well done! -- stepping out of their COmfort ZOne to take to the streets if needed under another BERSIH4.0 much for JUSTICE so that MALAYSIANS CAN WALK WITH THEIR HEADS HIGHT AGAIN< AFTER THEIR GOVERNMENT had made them a LAUGHING STOCK OF THE WORLD, AGAIN, AGAIn and Again!, BUT NOGAIN for the RAKYAT!!
I've writ about:
*** WHY I SAY MALAysia is moving towards the ABYSS (4 PARts)
)
****THE Winding UP of 1MDB
and
****** THE LEADER who can arrest the SPIRALLING TOWARDS THE ABYSS and the UNravelling of the 1MDB -- SDR ANWAR IBRAHIM: THE "NELSON MANDela of MALaysia"
and all these will come to pass when the storms all climax in a PERFECT STORM, THE SOoner, the better for all GOOD MALAYSIANS. MAY GOD Help us AWE, AMEn.
**********************
NOW the UPDATE FROM kinibiz.com...
PM Najib feels the heat as 1MDB melts down
In
the spring of 2013, Song Dal Sun, head of securities investment at
Seoul-based Hanwha Life Insurance, sat down to a presentation by a
Goldman Sachs banker. The young Goldman salesman, who had flown in from
Hong Kong, made a pitch for bonds to be issued by 1Malaysia Development
Bhd (1MDB), a state-owned company closely tied to Malaysian Prime
Minister Najib Abdul Razak.
It was enticing. The 10-year, dollar-denominated bonds
offered an interest rate of 4.4%t, about 100 basis points higher than
other A-minus-rated bonds were yielding at the time, he recalls. But
Song, a veteran of 25 years in finance, sensed something was amiss. With
such an attractive yield, 1MDB could easily sell the notes directly to
institutional investors through a global offering. Instead, Goldman
Sachs was privately selling 1MDB notes worth US$3 billion (RM11.3
billion) backed by the Malaysian government. “Does it mean ‘explicit
guarantee’?” he recalls asking the Goldman salesman, whom he declined to
name. “I didn’t get a straight answer,” Song says. “I decided not to
buy them.”
The bond sale that Song passed up is part of a scandal
that has all but sunk 1MDB, rattled investors, and set back Malaysia’s
quest to become a developed nation. Najib,
who also serves as Malaysia’s finance minister, sits on 1MDB’s advisory
board as chairman. The scandal’s aftershocks have rocked his office,
his government, and the political party he leads, United Malays National
Organisation, or UMNO. A state investment company trumpeted as a
cornerstone of Najib’s economic policy after he became prime minister in
April 2009, 1MDB is now mired in debts of at least US$11 billion.
Former Prime Minister Mahathir Mohamad, a one-time political mentor
who’s turned on Najib, says “vast amounts
of money” have “disappeared” from 1MDB funds. 1MDB has denied the claim
and said all of its debts are accounted for. The prime minister’s
office declined to comment for this article.
From the moment in 2009 when Najib
took over a sovereign wealth fund set up by the Malaysian state of
oil-rich Terengganu and turned it into a development fund owned by the
federal government, 1MDB has been controversial. Since the beginning of
this year—with coverage driven by the Sarawak Report, a blog, and The
Edge, a local business weekly—the scandal has moved closer and closer to
the heart of government, sparking calls for Najib’s ouster and
recalling Malaysia’s long struggle with corruption and economic
disappointment.
Mahathir, who was prime minister from 1981 to 2003, now accuses Najib
of “hijacking” the Terengganu Investment Authority, or the TIA, from
the state government. Not so, 1MDB said in a statement: The state
government willingly “decided to withdraw from the TIA” after the
federal government guaranteed the TIA’s bonds.
That didn’t end the argument. Beginning in March, as
public pressure grew, the country’s auditor general, the parliament’s
public accounts committee, the central bank, and the police have all
homed in on 1MDB. The force of the scandal helped topple the ringgit,
the worst-performing currency in Asia as of July 16, down 8.1% against
the dollar since the start of the year. Foreign reserves plunged 20% in
June from a year earlier.
On
July 3, the Wall Street Journal, citing documents from government
probes, reported that investigators believe almost US$700 million (RM2.6
billion) in cash moved through state agencies, banks, and companies
linked to 1MDB before eventually finding its way into Najib’s personal
accounts.
The money reportedly included two transactions—one
worth US$620 million; another, US$61 million—made in March 2013, two
months before a general election returned Najib to power as part of the Barisan Nasional, or National Front, coalition.
In a country with no public campaign financing and few
strictures on political donations, the alleged cash flows caused alarm.
Before the 2013 election, on March 12, 1MDB chairman Lodin Wok
Kamaruddin and Khadem Al Qubaisi, then chairman of Abu Dhabi’s Aabar
Investments, signed an agreement to form a joint venture. The following
month, 1MDB announced it had raised US$3 billion for its share of the
partnership. “1MDB opted for a private placement to ensure the timely
completion of this economic initiative,” the company said in a statement
on April 15 of that year.
The timing was controversial. “1MDB may have been
created with one of the key objectives being to raise a slush fund to
finance Barisan Nasional’s election campaigns,” says MP Tony Pua, of the
opposition Democratic Action Party. A statement from the prime
minister’s office dismissed the allegations in the Wall Street Journal,
saying they amounted to “political sabotage” at the hands of “certain
individuals to undermine confidence in our economy, tarnish the
government, and remove a democratically elected prime minister.” In a
statement, 1MDB said it “has never provided any funds to the prime
minister.”
Malaysia’s biggest-ever financial scandal has
spotlighted a colorful cast of characters—some connected to 1MDB, some
not. A politician since the age of 23, the mustachioed Najib
is the eldest son of the country’s second prime minister following its
independence from Britain in 1957, Abdul Razak Hussein, and a nephew of
the third, Hussein Onn.
Rosmah Mansor
Najib’s wife, Rosmah Mansor, is an influential figure
in her own right. A former executive at Island & Peninsular, a real
estate company, she’s often lampooned in the local media for her
bouffant hairstyle and penchant for luxury.
Riza Aziz, Rosmah’s son from her first marriage, is
close to a Kuala Lumpur man about town who’s been linked to 1MDB named
Low Taek Jho. Jho Low, as he’s known, is a whiz-kid dealmaker who
exploded onto the gossip pages in 2009. One photo shows the moon-faced
Low partying with California socialite Paris Hilton and clutching a
bottle of Cristal champagne. The prime minister’s stepson co-founded a
Los Angeles company that produced The Wolf of Wall Street, the 2013 film
about lifestyle excesses and criminal exploits in the world of finance;
Low got a full-screen “special thanks” credit at the end of Wolf. Low
helped set up 1MDB’s first joint venture, with PetroSaudi International,
according to reports in The Edge and the Sarawak Report.
An additional touch of glamour comes from Goldman
Sachs executive Tim Leissner, a lanky, blue-eyed German who’s married to
former US fashion model and designer Kimora Lee Simmons, the ex-wife of
Russell Simmons, co-founder of New York hip-hop music label Def Jam
Recordings. In September 2013, when Najib
and Rosmah traveled to San Francisco to open a new office of Khazanah
Nasional, Malaysia’s sovereign wealth fund, Rosmah and Simmons were
photographed together. Leissner, now Goldman’s Southeast Asia chairman,
was a fixture in Malaysian dealmaking in the late 2000s. Goldman helped
manage billionaire T Ananda Krishnan’s 2009 initial public offering of
Maxis, Malaysia’s biggest mobile phone service provider.
Goldman established a close and profitable
relationship with 1MDB. From 2012 to 2013, the bank arranged three bond
sales for the company, totaling US$6.5 billion. Fees, commissions, and
expenses for Goldman totaled US$593 million—about 9.1% of the money
raised—according to a person familiar with the sales. “These
transactions were individually tailored financing solutions, the fee and
commissions for which reflected the underwriting risks assumed by
Goldman Sachs on each series of bonds, as well as other prevailing
conditions at the time, including spreads of credit benchmarks, hedging
costs, and general market conditions,” says Hong Kong–based Goldman
spokesman Edward Naylor.
In 2013, Goldman arranged 1MDB’s US$3 billion bond
sale, the one passed up by Hanwha Life’s Song. The note is included in
JPMorgan’s benchmark Asian and Emerging-Market Bond indexes. Goldman’s
commissions, fees, and expenses from the sale were US$283 million, or
9.4% of the amount raised, according to the prospectus. The person
familiar with the transaction says Goldman’s take was high because the
bank bought bonds from 1MDB, assuming the risk, and then resold them to
customers.
In many ways, 1MDB’s star-crossed existence mirrors the misfortunes of this country of 30 million people. Najib
set up 1MDB at a time when the Malaysian economy was on the mend; it
expanded by 7.4% in 2010, becoming one of the fastest growing in
Southeast Asia. The company—supported by the advisory board chaired by Najib
and including high-ranking government officials from China, Saudi
Arabia, and the United Arab Emirates—set out to be a state-owned
strategic development company that would forge global partnerships, draw
foreign investment to Malaysia, and build up the country’s industrial
base.
Early on, 1MDB formed joint ventures with Saudi and
Abu Dhabi companies. On a visit to Malaysia in July 2013, Japanese Prime
Minister Shinzo Abe attended a signing ceremony that was meant to
initiate discussions on 1MDB’s plan to issue Samurai bonds guaranteed by
the Japan Bank for International Cooperation. None of these plans
panned out as they were supposed to. Over time, to its growing number of
detractors, 1MDB looked more and more like a giant black box, its inner
workings echoing the mysteries suggested by the wayang kulit,
traditional shadow puppets, that frolic on the office walls of the Kuala
Lumpur–based company.
Arul Kanda
1MDB, which has announced plans to wind itself down,
is reducing its debt, according to President Arul Kanda. “1MDB has
undertaken various initiatives to reduce the company’s debt levels and
ensure that maximum value is generated for its 100 percent shareholder,
the Ministry of Finance,” Kanda said in a statement to Bloomberg Markets
on July 16. As part of the plan, 1MDB has repaid a US$975 million loan,
while more than 40 potential investors have shown interest in one of
its property developments, Bandar Malaysia. He said the company also
intends to sell its power plants. “We are focused and are making good
progress,” he said.
The 1MDB story begins in 2008. In December of that
year, Terengganu, a sultanate located across the Malay Peninsula from
Kuala Lumpur, got federal government approval to set up its sovereign
wealth fund, the TIA. Goldman Sachs and Boston Consulting Group advised
the TIA in its early days. Jho Low advised the TIA from January to
mid-May, according to a statement released on his behalf to local media
in May 2014.
In May 2009, the TIA raised RM5 billion ringgit
through the sale of 30-year Islamic bonds. Guaranteed by the federal
government, they were offered at an interest rate of 5.75%. In fact,
according to Mahathir, the bonds were sold at a discounted price that
effectively yielded bondholders 7%. “Who approved such terrible terms
for a loan to a government-owned company?” the former prime minister
asked on his blog. 1MDB said in response that the effective yield was
actually 6.15% and was reasonable considering that these were Malaysia’s
first 30-year notes.
Jho Low
Two months later, the Najib
government quietly took over the TIA and renamed it 1MDB. As the new
company was getting up and running, the well-connected Low laid the
groundwork for 1MDB’s dealings with the Saudis, according to reports in
The Edge and the Sarawak Report. The son of a wealthy Malaysian
businessman, Larry Low, Jho studied at Harrow, an elite London boarding
school. While there, he met Najib’s stepson, Riza Aziz, who was studying
at the London School of Economics and Political Science, and came to
know Riza’s mother, Rosmah, when she visited London, according to a New
York Times report in February. Later, at the Wharton School at the
University of Pennsylvania, he took a semester off to start a company
called Wynton Group, managing US$25 million pooled mostly from his
friends’ families, according to an interview he gave to Malaysia’s Star
newspaper in 2010.
In a similar vein, Low’s role at 1MDB involved
“OPM”—other people’s money, says a former business associate in Kuala
Lumpur. By now, Low had assembled an impressive array of connections. On
Sept 7, 2009, Low met Patrick Mahony, an executive of PetroSaudi
International, in New York, according to a report in The Edge. Tarek
Obaid, a co-founder of PetroSaudi, had introduced them to each other via
e-mail on Aug. 28, the report said. It didn’t take long for 1MDB and
PetroSaudi to cobble together a US$2.5 billion joint venture. Mahony
didn’t respond to e-mailed questions. Obaid couldn’t be reached for
comment.
As it got off the ground, 1MDB worked with more than a
dozen financial institutions, but it forged especially close ties with
Goldman. A helping hand came from Roger Ng, Goldman’s head of Southeast
Asia sales and fixed-income trading, a Malaysian national well-known for
his connections to politicians and tycoons, according to two people who
know him. Leissner, then based in Singapore as Goldman’s co-president
for Southeast Asia, played a key role in expanding the bank’s business
in Malaysia. He declined to comment for this article. Ng, who left
Goldman last year, didn’t respond to phone calls or a text message.
In December 2009, Goldman won a license from
Malaysia’s Securities Commission to set up fund management and corporate
finance advisory operations in the country. “The future outlook for
Malaysia’s capital markets and its asset management industry is very
positive,” Leissner said in a statement released by the commission at
the time. “Through our local presence, we look forward to playing a
larger role in their development.”
For 1MDB, Goldman played multiple roles. In 2012, it
advised the firm on its acquisition of Tanjong Energy Holdings from
Malaysian billionaire Krishnan and domestic power plants from Genting, a
conglomerate. The following year, the bank helped 1MDB purchase the
Jimah Energy Ventures power plant in Selangor, Malaysia, a deal that was
completed in 2014.
The true extent of the trouble at 1MDB didn’t become
apparent until late last year. Scandal aside, 2014 was a difficult year
for Najib and his government. First came
the disappearance of Malaysia Airlines Flight 370 and all 239 people on
board in March. Then, in July, Flight 17, also operated by the
state-owned airline, crashed near Donetsk in strife-torn eastern
Ukraine, possibly after being hit by a surface-to-air missile; all 298
passengers and crew died. It was around that time that the Sarawak
Report and The Edge, under longtime editor Ho Kay Tat, began their
exposés of 1MDB, adding to Najib’s woes.
Clare Rewcastle Brown
The Sarawak Report was founded by Clare Rewcastle
Brown, who was born in Sarawak, a state on the island of Borneo, of
British parents and now runs the site out of London. (Her husband,
Andrew Brown, who recently retired as the head of media relations at EDF
Energy, is the brother of former UK Prime Minister Gordon Brown.)
Earlier this year, the website claimed to have
obtained e-mails and other documentation showing how Jho Low and several
business associates siphoned US$700 million from 1MDB’s venture with
PetroSaudi Holdings, which was registered in the Cayman Islands in the
Caribbean.
Low, who has denied playing any role in 1MDB after the
work he did for the TIA, didn’t respond to requests for an interview or
to e-mailed questions. The government, without giving any details, has
tried to discredit the e-mails as reported by the Sarawak Report, saying
the communications may have been tampered with. Then on July 19, the
Malaysian Communications and Multimedia Commission said it had blocked
the Sarawak Report’s website in Malaysia for publishing content that
could “destabilize the country.” Rewcastle Brown said she won’t be
impeded by the government’s action, describing it as the “latest blow to
media freedom.”
In an unprecedented crackdown, Malaysian authorities
this year have arrested more than 150 journalists, activists, opposition
politicians, and lawyers on sedition charges or under a peaceful
assembly act that strictly regulates public protests. One of Malaysia’s
best-known political cartoonists, who goes by the name Zunar, has been
charged with nine counts of sedition and faces up to 43 years in prison.
Xavier Justo (seated)
On June 22, Thai police arrested a tattooed Swiss
national named Xavier Justo, a former executive at 1MDB investment
partner PetroSaudi International, on the resort island of Koh Samui.
Police said they suspected Justo of trying to extort money from
PetroSaudi and leaking e-mails about the oil company’s dealings with
1MDB. Justo denied the allegations, the Bangkok Post reported.
Adding to a climate of fear and tension, the Malaysian
police launched an investigation into whether government officials,
including central bank personnel, were behind the leaking of documents
that allegedly showed 1MDB money turning up in Najib’s accounts. The
central bank on July 12 denied any impropriety.
As allegations swirl around him, the stakes for Najib
are high. Not only is he prime minister and finance minister; he’s also
president of a political machine, UMNO, that has been in power since
Malaysia’s independence. What’s more, he’s chairman of the Khazanah
Nasional sovereign wealth fund, which had US$29 billion under management
at the end of 2014. “Power is too concentrated to one person,” says
Zaid Ibrahim, a former law minister who built the country’s largest law
firm. He says the total lack of checks and balances in Malaysia has led
to abuse of power.
In the early days of Najib’s rule, Malaysians had more
cause for optimism than now, says Danny Quah, an economics professor at
the LSE. Like many successful Malaysians overseas, Quah has maintained
ties with his native country. He served on Malaysia’s National Economic
Advisory Council from 2009 to 2011, and he still vividly recalls a
day—March 30, 2010—when Najib stood in
front of global investors and promised a “1Malaysia” where all
Malaysians of different races would work together toward one
goal—turning Malaysia into a developed nation by 2020. At the time, Najib had enough popular support to aim high. “Right then, it was a golden opportunity,” Quah says. “It’s a moment that passed.”
Mahathir,
90, shows no signs of letting his erstwhile protégé off the hook.
After a poor showing by UMNO in the March 2008 elections, Prime Minister
Abdullah Ahmad Badawi stepped down the following year and was replaced
by his deputy prime minister, Najib. Over
time, Mahathir said later, he became disillusioned with Najib’s
management of the economy. He said he expressed his doubts first
privately and then publicly.
With the 1MDB scandal gaining momentum, outright war broke out between Mahathir and Najib.Najib,
Mahathir said in June, had crossed the line. “1MDB is the straw that
broke the camel’s back,” said Mahathir, who has repeatedly called for Najib to resign. Najib,
who says he won’t step down, lashed back at Mahathir, known by the
honorific Tun. “The ‘mess’ that Tun refers to is largely of his own
making as a result of his attacks and his echoing of opposition lies and
slander,” Najib wrote on his website.
As words flew between Mahathir and Najib in June, the Malaysian Volunteer Lawyers Association organized a forum to hear from Najib
on 1MDB. It was called Nothing2Hide. Mahathir saw a chance to speak his
mind about 1MDB and the money he said was missing. “I feel obligated to
explain to the people what really happened and why I’ve decided not to
support Najib any longer,” he said to the gathering. “This is not about me or Najib.
It’s about the whole nation because what was lost belonged to all of
us. I am just a spokesperson. Many people have come to me, asking me to
do something.”
About 10 minutes into Mahathir’s speech, uniformed
police moved in and stopped the aging but still spry former prime
minister from speaking. Whatever Najib
thought of the action taken against his mentor-turned-rival may never be
known. Amid police concerns about “public order and national harmony,”
he didn’t show up.
— by Yoolim Lee & Elffie Chew
PM Najib feels the heat as 1MDB melts down
In
the spring of 2013, Song Dal Sun, head of securities investment at
Seoul-based Hanwha Life Insurance, sat down to a presentation by a
Goldman Sachs banker. The young Goldman salesman, who had flown in from
Hong Kong, made a pitch for bonds to be issued by 1Malaysia Development
Bhd (1MDB), a state-owned company closely tied to Malaysian Prime
Minister Najib Abdul Razak.
It was enticing. The 10-year, dollar-denominated bonds
offered an interest rate of 4.4%t, about 100 basis points higher than
other A-minus-rated bonds were yielding at the time, he recalls. But
Song, a veteran of 25 years in finance, sensed something was amiss. With
such an attractive yield, 1MDB could easily sell the notes directly to
institutional investors through a global offering. Instead, Goldman
Sachs was privately selling 1MDB notes worth US$3 billion (RM11.3
billion) backed by the Malaysian government. “Does it mean ‘explicit
guarantee’?” he recalls asking the Goldman salesman, whom he declined to
name. “I didn’t get a straight answer,” Song says. “I decided not to
buy them.”
The bond sale that Song passed up is part of a scandal
that has all but sunk 1MDB, rattled investors, and set back Malaysia’s
quest to become a developed nation. Najib,
who also serves as Malaysia’s finance minister, sits on 1MDB’s advisory
board as chairman. The scandal’s aftershocks have rocked his office,
his government, and the political party he leads, United Malays National
Organisation, or UMNO. A state investment company trumpeted as a
cornerstone of Najib’s economic policy after he became prime minister in
April 2009, 1MDB is now mired in debts of at least US$11 billion.
Former Prime Minister Mahathir Mohamad, a one-time political mentor
who’s turned on Najib, says “vast amounts
of money” have “disappeared” from 1MDB funds. 1MDB has denied the claim
and said all of its debts are accounted for. The prime minister’s
office declined to comment for this article.
From the moment in 2009 when Najib
took over a sovereign wealth fund set up by the Malaysian state of
oil-rich Terengganu and turned it into a development fund owned by the
federal government, 1MDB has been controversial. Since the beginning of
this year—with coverage driven by the Sarawak Report, a blog, and The
Edge, a local business weekly—the scandal has moved closer and closer to
the heart of government, sparking calls for Najib’s ouster and
recalling Malaysia’s long struggle with corruption and economic
disappointment.
Mahathir, who was prime minister from 1981 to 2003, now accuses Najib
of “hijacking” the Terengganu Investment Authority, or the TIA, from
the state government. Not so, 1MDB said in a statement: The state
government willingly “decided to withdraw from the TIA” after the
federal government guaranteed the TIA’s bonds.
That didn’t end the argument. Beginning in March, as
public pressure grew, the country’s auditor general, the parliament’s
public accounts committee, the central bank, and the police have all
homed in on 1MDB. The force of the scandal helped topple the ringgit,
the worst-performing currency in Asia as of July 16, down 8.1% against
the dollar since the start of the year. Foreign reserves plunged 20% in
June from a year earlier.
On
July 3, the Wall Street Journal, citing documents from government
probes, reported that investigators believe almost US$700 million (RM2.6
billion) in cash moved through state agencies, banks, and companies
linked to 1MDB before eventually finding its way into Najib’s personal
accounts.
The money reportedly included two transactions—one
worth US$620 million; another, US$61 million—made in March 2013, two
months before a general election returned Najib to power as part of the Barisan Nasional, or National Front, coalition.
In a country with no public campaign financing and few
strictures on political donations, the alleged cash flows caused alarm.
Before the 2013 election, on March 12, 1MDB chairman Lodin Wok
Kamaruddin and Khadem Al Qubaisi, then chairman of Abu Dhabi’s Aabar
Investments, signed an agreement to form a joint venture. The following
month, 1MDB announced it had raised US$3 billion for its share of the
partnership. “1MDB opted for a private placement to ensure the timely
completion of this economic initiative,” the company said in a statement
on April 15 of that year.
The timing was controversial. “1MDB may have been
created with one of the key objectives being to raise a slush fund to
finance Barisan Nasional’s election campaigns,” says MP Tony Pua, of the
opposition Democratic Action Party. A statement from the prime
minister’s office dismissed the allegations in the Wall Street Journal,
saying they amounted to “political sabotage” at the hands of “certain
individuals to undermine confidence in our economy, tarnish the
government, and remove a democratically elected prime minister.” In a
statement, 1MDB said it “has never provided any funds to the prime
minister.”
Malaysia’s biggest-ever financial scandal has
spotlighted a colorful cast of characters—some connected to 1MDB, some
not. A politician since the age of 23, the mustachioed Najib
is the eldest son of the country’s second prime minister following its
independence from Britain in 1957, Abdul Razak Hussein, and a nephew of
the third, Hussein Onn.
Rosmah Mansor
Najib’s wife, Rosmah Mansor, is an influential figure
in her own right. A former executive at Island & Peninsular, a real
estate company, she’s often lampooned in the local media for her
bouffant hairstyle and penchant for luxury.
Riza Aziz, Rosmah’s son from her first marriage, is
close to a Kuala Lumpur man about town who’s been linked to 1MDB named
Low Taek Jho. Jho Low, as he’s known, is a whiz-kid dealmaker who
exploded onto the gossip pages in 2009. One photo shows the moon-faced
Low partying with California socialite Paris Hilton and clutching a
bottle of Cristal champagne. The prime minister’s stepson co-founded a
Los Angeles company that produced The Wolf of Wall Street, the 2013 film
about lifestyle excesses and criminal exploits in the world of finance;
Low got a full-screen “special thanks” credit at the end of Wolf. Low
helped set up 1MDB’s first joint venture, with PetroSaudi International,
according to reports in The Edge and the Sarawak Report.
An additional touch of glamour comes from Goldman
Sachs executive Tim Leissner, a lanky, blue-eyed German who’s married to
former US fashion model and designer Kimora Lee Simmons, the ex-wife of
Russell Simmons, co-founder of New York hip-hop music label Def Jam
Recordings. In September 2013, when Najib
and Rosmah traveled to San Francisco to open a new office of Khazanah
Nasional, Malaysia’s sovereign wealth fund, Rosmah and Simmons were
photographed together. Leissner, now Goldman’s Southeast Asia chairman,
was a fixture in Malaysian dealmaking in the late 2000s. Goldman helped
manage billionaire T Ananda Krishnan’s 2009 initial public offering of
Maxis, Malaysia’s biggest mobile phone service provider.
Goldman established a close and profitable
relationship with 1MDB. From 2012 to 2013, the bank arranged three bond
sales for the company, totaling US$6.5 billion. Fees, commissions, and
expenses for Goldman totaled US$593 million—about 9.1% of the money
raised—according to a person familiar with the sales. “These
transactions were individually tailored financing solutions, the fee and
commissions for which reflected the underwriting risks assumed by
Goldman Sachs on each series of bonds, as well as other prevailing
conditions at the time, including spreads of credit benchmarks, hedging
costs, and general market conditions,” says Hong Kong–based Goldman
spokesman Edward Naylor.
In 2013, Goldman arranged 1MDB’s US$3 billion bond
sale, the one passed up by Hanwha Life’s Song. The note is included in
JPMorgan’s benchmark Asian and Emerging-Market Bond indexes. Goldman’s
commissions, fees, and expenses from the sale were US$283 million, or
9.4% of the amount raised, according to the prospectus. The person
familiar with the transaction says Goldman’s take was high because the
bank bought bonds from 1MDB, assuming the risk, and then resold them to
customers.
In many ways, 1MDB’s star-crossed existence mirrors the misfortunes of this country of 30 million people. Najib
set up 1MDB at a time when the Malaysian economy was on the mend; it
expanded by 7.4% in 2010, becoming one of the fastest growing in
Southeast Asia. The company—supported by the advisory board chaired by Najib
and including high-ranking government officials from China, Saudi
Arabia, and the United Arab Emirates—set out to be a state-owned
strategic development company that would forge global partnerships, draw
foreign investment to Malaysia, and build up the country’s industrial
base.
Early on, 1MDB formed joint ventures with Saudi and
Abu Dhabi companies. On a visit to Malaysia in July 2013, Japanese Prime
Minister Shinzo Abe attended a signing ceremony that was meant to
initiate discussions on 1MDB’s plan to issue Samurai bonds guaranteed by
the Japan Bank for International Cooperation. None of these plans
panned out as they were supposed to. Over time, to its growing number of
detractors, 1MDB looked more and more like a giant black box, its inner
workings echoing the mysteries suggested by the wayang kulit,
traditional shadow puppets, that frolic on the office walls of the Kuala
Lumpur–based company.
Arul Kanda
1MDB, which has announced plans to wind itself down,
is reducing its debt, according to President Arul Kanda. “1MDB has
undertaken various initiatives to reduce the company’s debt levels and
ensure that maximum value is generated for its 100 percent shareholder,
the Ministry of Finance,” Kanda said in a statement to Bloomberg Markets
on July 16. As part of the plan, 1MDB has repaid a US$975 million loan,
while more than 40 potential investors have shown interest in one of
its property developments, Bandar Malaysia. He said the company also
intends to sell its power plants. “We are focused and are making good
progress,” he said.
The 1MDB story begins in 2008. In December of that
year, Terengganu, a sultanate located across the Malay Peninsula from
Kuala Lumpur, got federal government approval to set up its sovereign
wealth fund, the TIA. Goldman Sachs and Boston Consulting Group advised
the TIA in its early days. Jho Low advised the TIA from January to
mid-May, according to a statement released on his behalf to local media
in May 2014.
In May 2009, the TIA raised RM5 billion ringgit
through the sale of 30-year Islamic bonds. Guaranteed by the federal
government, they were offered at an interest rate of 5.75%. In fact,
according to Mahathir, the bonds were sold at a discounted price that
effectively yielded bondholders 7%. “Who approved such terrible terms
for a loan to a government-owned company?” the former prime minister
asked on his blog. 1MDB said in response that the effective yield was
actually 6.15% and was reasonable considering that these were Malaysia’s
first 30-year notes.
Jho Low
Two months later, the Najib
government quietly took over the TIA and renamed it 1MDB. As the new
company was getting up and running, the well-connected Low laid the
groundwork for 1MDB’s dealings with the Saudis, according to reports in
The Edge and the Sarawak Report. The son of a wealthy Malaysian
businessman, Larry Low, Jho studied at Harrow, an elite London boarding
school. While there, he met Najib’s stepson, Riza Aziz, who was studying
at the London School of Economics and Political Science, and came to
know Riza’s mother, Rosmah, when she visited London, according to a New
York Times report in February. Later, at the Wharton School at the
University of Pennsylvania, he took a semester off to start a company
called Wynton Group, managing US$25 million pooled mostly from his
friends’ families, according to an interview he gave to Malaysia’s Star
newspaper in 2010.
In a similar vein, Low’s role at 1MDB involved
“OPM”—other people’s money, says a former business associate in Kuala
Lumpur. By now, Low had assembled an impressive array of connections. On
Sept 7, 2009, Low met Patrick Mahony, an executive of PetroSaudi
International, in New York, according to a report in The Edge. Tarek
Obaid, a co-founder of PetroSaudi, had introduced them to each other via
e-mail on Aug. 28, the report said. It didn’t take long for 1MDB and
PetroSaudi to cobble together a US$2.5 billion joint venture. Mahony
didn’t respond to e-mailed questions. Obaid couldn’t be reached for
comment.
As it got off the ground, 1MDB worked with more than a
dozen financial institutions, but it forged especially close ties with
Goldman. A helping hand came from Roger Ng, Goldman’s head of Southeast
Asia sales and fixed-income trading, a Malaysian national well-known for
his connections to politicians and tycoons, according to two people who
know him. Leissner, then based in Singapore as Goldman’s co-president
for Southeast Asia, played a key role in expanding the bank’s business
in Malaysia. He declined to comment for this article. Ng, who left
Goldman last year, didn’t respond to phone calls or a text message.
In December 2009, Goldman won a license from
Malaysia’s Securities Commission to set up fund management and corporate
finance advisory operations in the country. “The future outlook for
Malaysia’s capital markets and its asset management industry is very
positive,” Leissner said in a statement released by the commission at
the time. “Through our local presence, we look forward to playing a
larger role in their development.”
For 1MDB, Goldman played multiple roles. In 2012, it
advised the firm on its acquisition of Tanjong Energy Holdings from
Malaysian billionaire Krishnan and domestic power plants from Genting, a
conglomerate. The following year, the bank helped 1MDB purchase the
Jimah Energy Ventures power plant in Selangor, Malaysia, a deal that was
completed in 2014.
The true extent of the trouble at 1MDB didn’t become
apparent until late last year. Scandal aside, 2014 was a difficult year
for Najib and his government. First came
the disappearance of Malaysia Airlines Flight 370 and all 239 people on
board in March. Then, in July, Flight 17, also operated by the
state-owned airline, crashed near Donetsk in strife-torn eastern
Ukraine, possibly after being hit by a surface-to-air missile; all 298
passengers and crew died. It was around that time that the Sarawak
Report and The Edge, under longtime editor Ho Kay Tat, began their
exposés of 1MDB, adding to Najib’s woes.
Clare Rewcastle Brown
The Sarawak Report was founded by Clare Rewcastle
Brown, who was born in Sarawak, a state on the island of Borneo, of
British parents and now runs the site out of London. (Her husband,
Andrew Brown, who recently retired as the head of media relations at EDF
Energy, is the brother of former UK Prime Minister Gordon Brown.)
Earlier this year, the website claimed to have
obtained e-mails and other documentation showing how Jho Low and several
business associates siphoned US$700 million from 1MDB’s venture with
PetroSaudi Holdings, which was registered in the Cayman Islands in the
Caribbean.
Low, who has denied playing any role in 1MDB after the
work he did for the TIA, didn’t respond to requests for an interview or
to e-mailed questions. The government, without giving any details, has
tried to discredit the e-mails as reported by the Sarawak Report, saying
the communications may have been tampered with. Then on July 19, the
Malaysian Communications and Multimedia Commission said it had blocked
the Sarawak Report’s website in Malaysia for publishing content that
could “destabilize the country.” Rewcastle Brown said she won’t be
impeded by the government’s action, describing it as the “latest blow to
media freedom.”
In an unprecedented crackdown, Malaysian authorities
this year have arrested more than 150 journalists, activists, opposition
politicians, and lawyers on sedition charges or under a peaceful
assembly act that strictly regulates public protests. One of Malaysia’s
best-known political cartoonists, who goes by the name Zunar, has been
charged with nine counts of sedition and faces up to 43 years in prison.
Xavier Justo (seated)
On June 22, Thai police arrested a tattooed Swiss
national named Xavier Justo, a former executive at 1MDB investment
partner PetroSaudi International, on the resort island of Koh Samui.
Police said they suspected Justo of trying to extort money from
PetroSaudi and leaking e-mails about the oil company’s dealings with
1MDB. Justo denied the allegations, the Bangkok Post reported.
Adding to a climate of fear and tension, the Malaysian
police launched an investigation into whether government officials,
including central bank personnel, were behind the leaking of documents
that allegedly showed 1MDB money turning up in Najib’s accounts. The
central bank on July 12 denied any impropriety.
As allegations swirl around him, the stakes for Najib
are high. Not only is he prime minister and finance minister; he’s also
president of a political machine, UMNO, that has been in power since
Malaysia’s independence. What’s more, he’s chairman of the Khazanah
Nasional sovereign wealth fund, which had US$29 billion under management
at the end of 2014. “Power is too concentrated to one person,” says
Zaid Ibrahim, a former law minister who built the country’s largest law
firm. He says the total lack of checks and balances in Malaysia has led
to abuse of power.
In the early days of Najib’s rule, Malaysians had more
cause for optimism than now, says Danny Quah, an economics professor at
the LSE. Like many successful Malaysians overseas, Quah has maintained
ties with his native country. He served on Malaysia’s National Economic
Advisory Council from 2009 to 2011, and he still vividly recalls a
day—March 30, 2010—when Najib stood in
front of global investors and promised a “1Malaysia” where all
Malaysians of different races would work together toward one
goal—turning Malaysia into a developed nation by 2020. At the time, Najib had enough popular support to aim high. “Right then, it was a golden opportunity,” Quah says. “It’s a moment that passed.”
Mahathir,
90, shows no signs of letting his erstwhile protégé off the hook.
After a poor showing by UMNO in the March 2008 elections, Prime Minister
Abdullah Ahmad Badawi stepped down the following year and was replaced
by his deputy prime minister, Najib. Over
time, Mahathir said later, he became disillusioned with Najib’s
management of the economy. He said he expressed his doubts first
privately and then publicly.
With the 1MDB scandal gaining momentum, outright war broke out between Mahathir and Najib.Najib,
Mahathir said in June, had crossed the line. “1MDB is the straw that
broke the camel’s back,” said Mahathir, who has repeatedly called for Najib to resign. Najib,
who says he won’t step down, lashed back at Mahathir, known by the
honorific Tun. “The ‘mess’ that Tun refers to is largely of his own
making as a result of his attacks and his echoing of opposition lies and
slander,” Najib wrote on his website.
As words flew between Mahathir and Najib in June, the Malaysian Volunteer Lawyers Association organized a forum to hear from Najib
on 1MDB. It was called Nothing2Hide. Mahathir saw a chance to speak his
mind about 1MDB and the money he said was missing. “I feel obligated to
explain to the people what really happened and why I’ve decided not to
support Najib any longer,” he said to the gathering. “This is not about me or Najib.
It’s about the whole nation because what was lost belonged to all of
us. I am just a spokesperson. Many people have come to me, asking me to
do something.”
About 10 minutes into Mahathir’s speech, uniformed
police moved in and stopped the aging but still spry former prime
minister from speaking. Whatever Najib
thought of the action taken against his mentor-turned-rival may never be
known. Amid police concerns about “public order and national harmony,”
he didn’t show up.
— by Yoolim Lee & Elffie Chew
PM Najib feels the heat as 1MDB melts down
In
the spring of 2013, Song Dal Sun, head of securities investment at
Seoul-based Hanwha Life Insurance, sat down to a presentation by a
Goldman Sachs banker. The young Goldman salesman, who had flown in from
Hong Kong, made a pitch for bonds to be issued by 1Malaysia Development
Bhd (1MDB), a state-owned company closely tied to Malaysian Prime
Minister Najib Abdul Razak.
It was enticing. The 10-year, dollar-denominated bonds
offered an interest rate of 4.4%t, about 100 basis points higher than
other A-minus-rated bonds were yielding at the time, he recalls. But
Song, a veteran of 25 years in finance, sensed something was amiss. With
such an attractive yield, 1MDB could easily sell the notes directly to
institutional investors through a global offering. Instead, Goldman
Sachs was privately selling 1MDB notes worth US$3 billion (RM11.3
billion) backed by the Malaysian government. “Does it mean ‘explicit
guarantee’?” he recalls asking the Goldman salesman, whom he declined to
name. “I didn’t get a straight answer,” Song says. “I decided not to
buy them.”
The bond sale that Song passed up is part of a scandal
that has all but sunk 1MDB, rattled investors, and set back Malaysia’s
quest to become a developed nation. Najib,
who also serves as Malaysia’s finance minister, sits on 1MDB’s advisory
board as chairman. The scandal’s aftershocks have rocked his office,
his government, and the political party he leads, United Malays National
Organisation, or UMNO. A state investment company trumpeted as a
cornerstone of Najib’s economic policy after he became prime minister in
April 2009, 1MDB is now mired in debts of at least US$11 billion.
Former Prime Minister Mahathir Mohamad, a one-time political mentor
who’s turned on Najib, says “vast amounts
of money” have “disappeared” from 1MDB funds. 1MDB has denied the claim
and said all of its debts are accounted for. The prime minister’s
office declined to comment for this article.
From the moment in 2009 when Najib
took over a sovereign wealth fund set up by the Malaysian state of
oil-rich Terengganu and turned it into a development fund owned by the
federal government, 1MDB has been controversial. Since the beginning of
this year—with coverage driven by the Sarawak Report, a blog, and The
Edge, a local business weekly—the scandal has moved closer and closer to
the heart of government, sparking calls for Najib’s ouster and
recalling Malaysia’s long struggle with corruption and economic
disappointment.
Mahathir, who was prime minister from 1981 to 2003, now accuses Najib
of “hijacking” the Terengganu Investment Authority, or the TIA, from
the state government. Not so, 1MDB said in a statement: The state
government willingly “decided to withdraw from the TIA” after the
federal government guaranteed the TIA’s bonds.
That didn’t end the argument. Beginning in March, as
public pressure grew, the country’s auditor general, the parliament’s
public accounts committee, the central bank, and the police have all
homed in on 1MDB. The force of the scandal helped topple the ringgit,
the worst-performing currency in Asia as of July 16, down 8.1% against
the dollar since the start of the year. Foreign reserves plunged 20% in
June from a year earlier.
On
July 3, the Wall Street Journal, citing documents from government
probes, reported that investigators believe almost US$700 million (RM2.6
billion) in cash moved through state agencies, banks, and companies
linked to 1MDB before eventually finding its way into Najib’s personal
accounts.
The money reportedly included two transactions—one
worth US$620 million; another, US$61 million—made in March 2013, two
months before a general election returned Najib to power as part of the Barisan Nasional, or National Front, coalition.
In a country with no public campaign financing and few
strictures on political donations, the alleged cash flows caused alarm.
Before the 2013 election, on March 12, 1MDB chairman Lodin Wok
Kamaruddin and Khadem Al Qubaisi, then chairman of Abu Dhabi’s Aabar
Investments, signed an agreement to form a joint venture. The following
month, 1MDB announced it had raised US$3 billion for its share of the
partnership. “1MDB opted for a private placement to ensure the timely
completion of this economic initiative,” the company said in a statement
on April 15 of that year.
The timing was controversial. “1MDB may have been
created with one of the key objectives being to raise a slush fund to
finance Barisan Nasional’s election campaigns,” says MP Tony Pua, of the
opposition Democratic Action Party. A statement from the prime
minister’s office dismissed the allegations in the Wall Street Journal,
saying they amounted to “political sabotage” at the hands of “certain
individuals to undermine confidence in our economy, tarnish the
government, and remove a democratically elected prime minister.” In a
statement, 1MDB said it “has never provided any funds to the prime
minister.”
Malaysia’s biggest-ever financial scandal has
spotlighted a colorful cast of characters—some connected to 1MDB, some
not. A politician since the age of 23, the mustachioed Najib
is the eldest son of the country’s second prime minister following its
independence from Britain in 1957, Abdul Razak Hussein, and a nephew of
the third, Hussein Onn.
Rosmah Mansor
Najib’s wife, Rosmah Mansor, is an influential figure
in her own right. A former executive at Island & Peninsular, a real
estate company, she’s often lampooned in the local media for her
bouffant hairstyle and penchant for luxury.
Riza Aziz, Rosmah’s son from her first marriage, is
close to a Kuala Lumpur man about town who’s been linked to 1MDB named
Low Taek Jho. Jho Low, as he’s known, is a whiz-kid dealmaker who
exploded onto the gossip pages in 2009. One photo shows the moon-faced
Low partying with California socialite Paris Hilton and clutching a
bottle of Cristal champagne. The prime minister’s stepson co-founded a
Los Angeles company that produced The Wolf of Wall Street, the 2013 film
about lifestyle excesses and criminal exploits in the world of finance;
Low got a full-screen “special thanks” credit at the end of Wolf. Low
helped set up 1MDB’s first joint venture, with PetroSaudi International,
according to reports in The Edge and the Sarawak Report.
An additional touch of glamour comes from Goldman
Sachs executive Tim Leissner, a lanky, blue-eyed German who’s married to
former US fashion model and designer Kimora Lee Simmons, the ex-wife of
Russell Simmons, co-founder of New York hip-hop music label Def Jam
Recordings. In September 2013, when Najib
and Rosmah traveled to San Francisco to open a new office of Khazanah
Nasional, Malaysia’s sovereign wealth fund, Rosmah and Simmons were
photographed together. Leissner, now Goldman’s Southeast Asia chairman,
was a fixture in Malaysian dealmaking in the late 2000s. Goldman helped
manage billionaire T Ananda Krishnan’s 2009 initial public offering of
Maxis, Malaysia’s biggest mobile phone service provider.
Goldman established a close and profitable
relationship with 1MDB. From 2012 to 2013, the bank arranged three bond
sales for the company, totaling US$6.5 billion. Fees, commissions, and
expenses for Goldman totaled US$593 million—about 9.1% of the money
raised—according to a person familiar with the sales. “These
transactions were individually tailored financing solutions, the fee and
commissions for which reflected the underwriting risks assumed by
Goldman Sachs on each series of bonds, as well as other prevailing
conditions at the time, including spreads of credit benchmarks, hedging
costs, and general market conditions,” says Hong Kong–based Goldman
spokesman Edward Naylor.
In 2013, Goldman arranged 1MDB’s US$3 billion bond
sale, the one passed up by Hanwha Life’s Song. The note is included in
JPMorgan’s benchmark Asian and Emerging-Market Bond indexes. Goldman’s
commissions, fees, and expenses from the sale were US$283 million, or
9.4% of the amount raised, according to the prospectus. The person
familiar with the transaction says Goldman’s take was high because the
bank bought bonds from 1MDB, assuming the risk, and then resold them to
customers.
In many ways, 1MDB’s star-crossed existence mirrors the misfortunes of this country of 30 million people. Najib
set up 1MDB at a time when the Malaysian economy was on the mend; it
expanded by 7.4% in 2010, becoming one of the fastest growing in
Southeast Asia. The company—supported by the advisory board chaired by Najib
and including high-ranking government officials from China, Saudi
Arabia, and the United Arab Emirates—set out to be a state-owned
strategic development company that would forge global partnerships, draw
foreign investment to Malaysia, and build up the country’s industrial
base.
Early on, 1MDB formed joint ventures with Saudi and
Abu Dhabi companies. On a visit to Malaysia in July 2013, Japanese Prime
Minister Shinzo Abe attended a signing ceremony that was meant to
initiate discussions on 1MDB’s plan to issue Samurai bonds guaranteed by
the Japan Bank for International Cooperation. None of these plans
panned out as they were supposed to. Over time, to its growing number of
detractors, 1MDB looked more and more like a giant black box, its inner
workings echoing the mysteries suggested by the wayang kulit,
traditional shadow puppets, that frolic on the office walls of the Kuala
Lumpur–based company.
Arul Kanda
1MDB, which has announced plans to wind itself down,
is reducing its debt, according to President Arul Kanda. “1MDB has
undertaken various initiatives to reduce the company’s debt levels and
ensure that maximum value is generated for its 100 percent shareholder,
the Ministry of Finance,” Kanda said in a statement to Bloomberg Markets
on July 16. As part of the plan, 1MDB has repaid a US$975 million loan,
while more than 40 potential investors have shown interest in one of
its property developments, Bandar Malaysia. He said the company also
intends to sell its power plants. “We are focused and are making good
progress,” he said.
The 1MDB story begins in 2008. In December of that
year, Terengganu, a sultanate located across the Malay Peninsula from
Kuala Lumpur, got federal government approval to set up its sovereign
wealth fund, the TIA. Goldman Sachs and Boston Consulting Group advised
the TIA in its early days. Jho Low advised the TIA from January to
mid-May, according to a statement released on his behalf to local media
in May 2014.
In May 2009, the TIA raised RM5 billion ringgit
through the sale of 30-year Islamic bonds. Guaranteed by the federal
government, they were offered at an interest rate of 5.75%. In fact,
according to Mahathir, the bonds were sold at a discounted price that
effectively yielded bondholders 7%. “Who approved such terrible terms
for a loan to a government-owned company?” the former prime minister
asked on his blog. 1MDB said in response that the effective yield was
actually 6.15% and was reasonable considering that these were Malaysia’s
first 30-year notes.
Jho Low
Two months later, the Najib
government quietly took over the TIA and renamed it 1MDB. As the new
company was getting up and running, the well-connected Low laid the
groundwork for 1MDB’s dealings with the Saudis, according to reports in
The Edge and the Sarawak Report. The son of a wealthy Malaysian
businessman, Larry Low, Jho studied at Harrow, an elite London boarding
school. While there, he met Najib’s stepson, Riza Aziz, who was studying
at the London School of Economics and Political Science, and came to
know Riza’s mother, Rosmah, when she visited London, according to a New
York Times report in February. Later, at the Wharton School at the
University of Pennsylvania, he took a semester off to start a company
called Wynton Group, managing US$25 million pooled mostly from his
friends’ families, according to an interview he gave to Malaysia’s Star
newspaper in 2010.
In a similar vein, Low’s role at 1MDB involved
“OPM”—other people’s money, says a former business associate in Kuala
Lumpur. By now, Low had assembled an impressive array of connections. On
Sept 7, 2009, Low met Patrick Mahony, an executive of PetroSaudi
International, in New York, according to a report in The Edge. Tarek
Obaid, a co-founder of PetroSaudi, had introduced them to each other via
e-mail on Aug. 28, the report said. It didn’t take long for 1MDB and
PetroSaudi to cobble together a US$2.5 billion joint venture. Mahony
didn’t respond to e-mailed questions. Obaid couldn’t be reached for
comment.
As it got off the ground, 1MDB worked with more than a
dozen financial institutions, but it forged especially close ties with
Goldman. A helping hand came from Roger Ng, Goldman’s head of Southeast
Asia sales and fixed-income trading, a Malaysian national well-known for
his connections to politicians and tycoons, according to two people who
know him. Leissner, then based in Singapore as Goldman’s co-president
for Southeast Asia, played a key role in expanding the bank’s business
in Malaysia. He declined to comment for this article. Ng, who left
Goldman last year, didn’t respond to phone calls or a text message.
In December 2009, Goldman won a license from
Malaysia’s Securities Commission to set up fund management and corporate
finance advisory operations in the country. “The future outlook for
Malaysia’s capital markets and its asset management industry is very
positive,” Leissner said in a statement released by the commission at
the time. “Through our local presence, we look forward to playing a
larger role in their development.”
For 1MDB, Goldman played multiple roles. In 2012, it
advised the firm on its acquisition of Tanjong Energy Holdings from
Malaysian billionaire Krishnan and domestic power plants from Genting, a
conglomerate. The following year, the bank helped 1MDB purchase the
Jimah Energy Ventures power plant in Selangor, Malaysia, a deal that was
completed in 2014.
The true extent of the trouble at 1MDB didn’t become
apparent until late last year. Scandal aside, 2014 was a difficult year
for Najib and his government. First came
the disappearance of Malaysia Airlines Flight 370 and all 239 people on
board in March. Then, in July, Flight 17, also operated by the
state-owned airline, crashed near Donetsk in strife-torn eastern
Ukraine, possibly after being hit by a surface-to-air missile; all 298
passengers and crew died. It was around that time that the Sarawak
Report and The Edge, under longtime editor Ho Kay Tat, began their
exposés of 1MDB, adding to Najib’s woes.
Clare Rewcastle Brown
The Sarawak Report was founded by Clare Rewcastle
Brown, who was born in Sarawak, a state on the island of Borneo, of
British parents and now runs the site out of London. (Her husband,
Andrew Brown, who recently retired as the head of media relations at EDF
Energy, is the brother of former UK Prime Minister Gordon Brown.)
Earlier this year, the website claimed to have
obtained e-mails and other documentation showing how Jho Low and several
business associates siphoned US$700 million from 1MDB’s venture with
PetroSaudi Holdings, which was registered in the Cayman Islands in the
Caribbean.
Low, who has denied playing any role in 1MDB after the
work he did for the TIA, didn’t respond to requests for an interview or
to e-mailed questions. The government, without giving any details, has
tried to discredit the e-mails as reported by the Sarawak Report, saying
the communications may have been tampered with. Then on July 19, the
Malaysian Communications and Multimedia Commission said it had blocked
the Sarawak Report’s website in Malaysia for publishing content that
could “destabilize the country.” Rewcastle Brown said she won’t be
impeded by the government’s action, describing it as the “latest blow to
media freedom.”
In an unprecedented crackdown, Malaysian authorities
this year have arrested more than 150 journalists, activists, opposition
politicians, and lawyers on sedition charges or under a peaceful
assembly act that strictly regulates public protests. One of Malaysia’s
best-known political cartoonists, who goes by the name Zunar, has been
charged with nine counts of sedition and faces up to 43 years in prison.
Xavier Justo (seated)
On June 22, Thai police arrested a tattooed Swiss
national named Xavier Justo, a former executive at 1MDB investment
partner PetroSaudi International, on the resort island of Koh Samui.
Police said they suspected Justo of trying to extort money from
PetroSaudi and leaking e-mails about the oil company’s dealings with
1MDB. Justo denied the allegations, the Bangkok Post reported.
Adding to a climate of fear and tension, the Malaysian
police launched an investigation into whether government officials,
including central bank personnel, were behind the leaking of documents
that allegedly showed 1MDB money turning up in Najib’s accounts. The
central bank on July 12 denied any impropriety.
As allegations swirl around him, the stakes for Najib
are high. Not only is he prime minister and finance minister; he’s also
president of a political machine, UMNO, that has been in power since
Malaysia’s independence. What’s more, he’s chairman of the Khazanah
Nasional sovereign wealth fund, which had US$29 billion under management
at the end of 2014. “Power is too concentrated to one person,” says
Zaid Ibrahim, a former law minister who built the country’s largest law
firm. He says the total lack of checks and balances in Malaysia has led
to abuse of power.
In the early days of Najib’s rule, Malaysians had more
cause for optimism than now, says Danny Quah, an economics professor at
the LSE. Like many successful Malaysians overseas, Quah has maintained
ties with his native country. He served on Malaysia’s National Economic
Advisory Council from 2009 to 2011, and he still vividly recalls a
day—March 30, 2010—when Najib stood in
front of global investors and promised a “1Malaysia” where all
Malaysians of different races would work together toward one
goal—turning Malaysia into a developed nation by 2020. At the time, Najib had enough popular support to aim high. “Right then, it was a golden opportunity,” Quah says. “It’s a moment that passed.”
Mahathir,
90, shows no signs of letting his erstwhile protégé off the hook.
After a poor showing by UMNO in the March 2008 elections, Prime Minister
Abdullah Ahmad Badawi stepped down the following year and was replaced
by his deputy prime minister, Najib. Over
time, Mahathir said later, he became disillusioned with Najib’s
management of the economy. He said he expressed his doubts first
privately and then publicly.
With the 1MDB scandal gaining momentum, outright war broke out between Mahathir and Najib.Najib,
Mahathir said in June, had crossed the line. “1MDB is the straw that
broke the camel’s back,” said Mahathir, who has repeatedly called for Najib to resign. Najib,
who says he won’t step down, lashed back at Mahathir, known by the
honorific Tun. “The ‘mess’ that Tun refers to is largely of his own
making as a result of his attacks and his echoing of opposition lies and
slander,” Najib wrote on his website.
As words flew between Mahathir and Najib in June, the Malaysian Volunteer Lawyers Association organized a forum to hear from Najib
on 1MDB. It was called Nothing2Hide. Mahathir saw a chance to speak his
mind about 1MDB and the money he said was missing. “I feel obligated to
explain to the people what really happened and why I’ve decided not to
support Najib any longer,” he said to the gathering. “This is not about me or Najib.
It’s about the whole nation because what was lost belonged to all of
us. I am just a spokesperson. Many people have come to me, asking me to
do something.”
About 10 minutes into Mahathir’s speech, uniformed
police moved in and stopped the aging but still spry former prime
minister from speaking. Whatever Najib
thought of the action taken against his mentor-turned-rival may never be
known. Amid police concerns about “public order and national harmony,”
he didn’t show up.
— by Yoolim Lee & Elffie Chew
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