RM2.5bil 1MDB funds channelled to Jho Low's firm

IN THE summer of 2009, a Malaysian nicknamed “the Whale” appeared on the New York nightclub scene. He would travel with a large entourage in a fleet of Cadillacs and his party would spend tens of thousands of dollars a night in the company of socialites such as Paris Hilton.

“The Whale” is said to have celebrated his 28th birthday with a four-day event in Las Vegas that included a party at a pool surrounded by caged lions and tigers. Manhattan was abuzz with questions over his identity and the source of his wealth.

It emerged that the “mystery man” of the nightclubs was the Malaysian tycoon Taek Jho Low, who had been educated at Harrow School and the Wharton School in Pennsylvania. He claimed his success was due to being in the “right place at the right time”.

Low certainly has a wide range of business interests, building up a £650m investment fund that he started at university. He also runs Jynwel Capital, a Hong Kong fund with investments in media, retail, property and commodities. His family is independently wealthy.

There has been speculation, however, over his role at Malaysia’s state investment fund, which the bank Merrill Lynch warned last year had racked up debts of £7.8bn. The fund, 1MDB, is turning into a running sore for Najib Razak, the Malaysian prime minister, who chairs its advisory board, and a potential liability for his country’s balance sheet.

Senior fund officials have previously insisted that the charismatic Low, who is known to be close to the prime minister’s family, has had “zero” involvement in 1MDB.

Arul Kanda, the fund’s executive director, said last month: “Jho Low has no ties with 1MDB and I have not come across any document that linked him to this company.”

However, emails and documents passed to the Malaysian investigative website the Sarawak Report and seen by The Sunday Times expose for the first time the young tycoon’s role as a secret broker for 1MDB.

Najib, 61, who has led the country since 2009, now faces calls for an inquiry into the billions of dollars spent at 1MDB. He may also have to answer questions over why Low’s role at the fund was denied.

The affair adds to political pressure on the prime minister, whose government was warned about a perception of widespread cronyism in a report by the US Department of State in 2010.

It comes amid growing popular discontent over rising living costs, fuelled by the extravagant spending habits of Najib’s wife, Rosmah Mansor. She is seen as out of touch with many ordinary citizens struggling on meagre wages.

The documents reveal how Low played a vital role in one of the fund’s most controversial deals: a £630m investment in a joint venture with the international oil firm PetroSaudi.

The oil firm was founded in 2005 by Tarek Obaid, a Saudi businessman who has been a partner of Renault’s Formula One team.

Emails show Low was pushing the investment, writing in one email: “We need to move fast. We want to sign and pay by sept 09.”

About £630m was provided by 1MDB for a joint venture with PetroSaudi in September 2009, but documents indicate that £440m was then transferred out of the venture.

A proposal document says £385m of these funds were to be used for a Panama investment fund headed by Li Lin Seet, who works with Low at Jynwel Capital. PetroSaudi says it was never implemented.

1MDB — which invested or lent more money to PetroSaudi after this deal — has said it fully recovered all its liabilities from the deal and made a significant profit.

There are questions, however, about who took over 1MDB’s interest and the exact location of the recovered funds, which were initially moved to the Cayman Islands.

In an interview with The Sunday Times, Mahathir bin Mohamad, who was Malaysia’s prime minister for 22 years, called for an investigation. “Somebody must be doing something stupid to part with $700m [£440m] for no very good reason as far as I can see,” he said.

Mahathir said he wanted greater transparency on 1MDB’s funds, including money invested in, or loaned to, PetroSaudi. “They say it is Cayman Islands, and they say they brought it back, and then they said they have not brought it back, so I cannot be sure where the money is,” he said.

There is particular scrutiny over Low’s role because of his links to Najib’s family. Low helped in the making of the film The Wolf of Wall Street — which starred Leonardo DiCaprio and was produced by Riza Aziz, Najib’s stepson.

The documents also show Low was in contact with the prime minister’s aides on at least two issues, including correspondence about Malaysia-Saudi relations.

A source close to Low dismissed claims that he was a secret broker as “without merit”, because he had said this year that he gave his views to 1MDB on various matters. He had not profited personally from the fund, the source said.

A PetroSaudi source said the attacks on 1MDB were “politically motivated” and the fund made £320m profit on the joint venture. The firm consulted Low on the project but he wasn’t paid, the source said.

A 1MDB source said it was always made clear that Low had never been employed or retained by the fund, and that was still the position. All decisions were made by 1MDB management, and criticism of the profitable PetroSaudi venture was “misplaced”, the source said.

The Malaysian government said the prime minister was not involved in the day-to-day operations of 1MDB, which is run by a professional and experienced team. Its accounts were audited by Deloitte.

The government said: “Views expressed by certain quarters concerning 1MDB should be examined in light of political motivation. However, if any wrongdoing is proven, the law will be enforced without exception.”

Article taken from the Sunday Times