Swiss Launch Money Laundering Investigation Into 1MDB

Le Temps, one of Switzerland’s premiere newspapers, has tonight (Friday) received confirmation from the Attorney General’s Office that an official investigation has now been launched into 1MDB.

It is a highly significant move, because it signals that international banking regulators and law enforcers are now engaging in the scandal, which has engulfed Malaysia for several months.

The statement confirms that the Attorney General’s office formally opened an investigation on 14th August into two companies and an unnamed individual, in connection with 1MDB and relating to money laundering of the proceeds of corruption against a foreign country.

Over recent weeks the Prime Minister of Malaysia has moved to close down the country’s own investigations into the matter, leaving many to wonder if 1MDB’s financial irregularities would pass unnoticed.

At the same time he sacked his Deputy Prime Minister, his Attorney General and several members of his cabinet, while also shutting the country’s premiere independent business newspaper and, of course, banned Sarawak Report.

However, with each high-handed move Najib Razak has engendered concern within the international financial community, which regards transparency and due legal process as a crucial pre-cursor to investment.

The ringgit has plunged by a quarter over the past few months and there are now fears of a free-fall if the Prime Minister’s refusal to abide by normal due processes continues.
Whistleblower in Thailand jailed for three years this week for revealing 1MDB’s secrets

Whistleblower, Xavier Justo, jailed for three years in Thailand this week for revealing 1MDB’s secrets

The Swiss press have been alerted to the story by the arrest and apparent vilification of a whistleblower into 1MDB, the Swiss national Xavier Justo.

Justo received a three year sentence in Thailand for allegedly blackmailing PetroSaudi International over his information about their conduct during the highly controversial joint venture with 1MDB, where US$1.19 billion appears to have been siphoned out via a company owned by Najib Razak’s proxy, businessman Jho Low.

Involved in these deals have been RBS Coutts, Zurich, JP Morgan and the Swiss private banks BSI and Falcon, which was bought by the 1MDB joint venture partner from Abu Dhabi, the Aabar sovereign wealth fund.

The Chairman of Aabar was sacked two months ago, following a spate of revelations about 1MDB followed by the CEO, sacked earlier this week.

Altogether, the various moves and declarations by the international finance community over 1MDB-related matters indicate a growing momentum of concern about the multi-billion dollar scandal in Malaysia, where the Prime Minister appears unable to answer the most basic questions.

Next weekend, as the international community has noted, the well renowned Bersih [Clean] movement has scheduled the 4th of a series of peaceful protest marches, calling for a clean up against corruption.

Bersih 4 is specifically directed against Najib Razak’s current failure to explain the arrival of US$681 million into his own bank account, which was believed by investigators to be linked to the 1MDB scandal – before their investigations were closed down

The last such march, held before the 2013 General Election and directed against cheating by the ruling party, rallied over 300,000 people.

Temperatures are said to be rising even higher now, following what was generally regarded as a bought result by the ruling party and this latest evidence of corruption. There are indications that intimidatory tactics against the marchers by ‘counter-groups’ and the police will reach new levels.

Government employees have also been warned they could lose their jobs if they participate in the march, which is a clear violation of their constitutional rights.

The notice to Le Temps from the Swiss Attorney General states:

“Regarding the state of affairs to which your request relates, we confirm that the MPC [Swiss Confederation] opened a criminal case against two 1MDB bodies, dated August 14, 2015, and against Unknown [an individual who is yet to be named] . The procedure is being conducted under the laws concerning the bribery of foreign public officials (art. 322septies CP), dishonest management of public interests (art. 314 CP) and money laundering (Art. 305bis CP). The opening of the criminal action follows two communications from the office for money laundering (MROS).[Translation]

It is the first key sign that the investigation into 1MDB has been globalised into the hands of other implicated regulatory authorities. As Malaysia abdicates its own leading role in the investigation the markets have markedly started to panic, as evidenced by the ongoing collapse of the Ringgit.

Other international regulators are clearly being forced to take action to ensure confidence for investors.

Read more…
Swiss Launch Money Laundering Investigation Into 1MDB !
21 Aug 2015 Sarawak Report

Did 1MDB pay Aabar US$1 billion to terminate options?

In 2012, 1Malaysia Development Bhd (1MDB), using subsidiaries, issued two bonds totalling US$3.5 billion (RM11.55 billion) bonds to finance the acquisition of power assets from Tanjong and the Genting Group.

The subsidiaries were 1MDB Energy Ltd and 1MDB Energy (Langat) Sdn Bhd. The total proceeds after netting off expenses and fees to Goldman Sachs and other intermediaries was US$3.1 billion (RM9.3billion).

The two bonds were co-guaranteed by 1MDB and Abu Dhabi’s International Petroleum Investment Company (Ipic). The Ipic guarantee came at a very heavy price because 1MDB agreed to the following:

1) Ipic got to keep RM4.25 billion – 45% of the net proceeds of RM9.3 billion or 37% of its gross debt of RM11.55 billion – as refundable security for the guarantee.

2) Ipic was given a 10-year option to subscribe for up to 49% of the future listing of the power assets. Ipic transferred the option to its subsidiary Aabar Investments and hence, it is called the Aabar options.

As we have argued many times previously, 1MDB’s style of borrowing is an extremely expensive one. It is ridiculous that a company gets to keep only 37% of the RM11.55 billion it borrowed.

It is like borrowing money from Ah Longs (illegal moneylenders)!

If that was not bad enough, 1MDB also agreed to share 49% of any upside on the power plants it bought via the Aabar options.

Just like the money it poured into its aborted joint-venture with Saudi Petroleum took a few twist and turns, the same appears to have happen with the Aabar options.

In its Full Year March 31, 2014 accounts (which was submitted to the Companies Commission of Malaysia only in November) 1MDB made the following disclosures under the Significant Events Subsequent To The End of The Reporting Period:

First, it said that a substantial sum of the US$1.22 billion (RM4.03 billion) redeemed from Cayman Islands was used for debt servicing, working capital and payments to Aabar as “refundable deposits” pursuant to an agreement to extinguish the options. It did not reveal the amount of the refundable deposits but we can assume it was the bulk of the US$1.22 billion.

Second, it said that in May, 2014 it had taken a bridging loan facility of up to US$250 million to finance the acquisition of the options granted to Aabar Investment.

Third, it was also revealed that on May 22, 2014, 1MDB and Aabar had signed a settlement agreement to terminate the options. No details were given except that the final settlement will depend on the final valuation of the IPO.

Lastly, 1MDB revealed that on September 2, 2014, Aabar had written to inform 1MDB that it did not wish to exercise the options and the company had “agreed to compensate (Aabar) at a consideration agreed under the terms and conditions” of the May 22 settlement agreement.

What 1MDB did not disclose was that on September 1, 2014, a day before it received the notification from Aabar, it took a US$975 million loan from Deutsche Bank. Was it also to pay Aabar?

There are two questions to ask about this chain of events that happened during the May to September period.

1) What was the total amount 1MDB had paid to Aabar? If you add the bridging loan of US$250 million plus a substantial amount of the US$1.22 billion redeemed from Cayman and the US$975 million loan from Deutsche Bank, it is a lot of money that 1MDB raised during that 5-month period. How much went to Aabar?

2) Why was there a need to sign the May 22, 2014 settlement agreement? Was there not such a termination clause under the original option agreement signed in 2012 as is normally the case in such agreements? Or is the May 22 termination agreement a revised settlement agreement?

In the name of transparency, good governance and to clear doubts about the utilisation of the Caymans money and the payment to Aabar, 1MDB must reveal details of the original agreement with Aabar and also the May 22, 2014 settlement agreement.

1MDB must also disclose how much money has been paid to Aabar thus far to terminate the options and justify why it had agreed to the amount and went ahead to pay Aabar given that the IPO of its power assets is facing headwinds.

We can already hear Arul Kanda citing “legal and commercial confidentiality” for not answering questions he wants to avoid. But those are the questions the public want an answer to. – The Edge Malaysia, March 2, 2015.

Source..
Did 1MDB pay Aabar US$1 billion to terminate options?
BY THE EDGE MALAYSIA
2 March 2015

Emails Blow Malaysia’s 1MDB Fund Wide Open

Sarawak Report blog details how deeply a flamboyant financier and friend of PM Najib actually ran the fund

In December of last year, the controversial investment fund 1Malaysia Development Bhd abruptly called in all of its computers, employee laptops and servers and wiped them clean of all emails.
(Read: Controversial Malaysian Investment Fund’s Computer Records Wiped Off)

It was too late. The reason has come embarrassingly clear with a report by Clare Rewcastle Brown, the indefatigable blogger who edits The Sarawak Report. Rewcastle Brown had already obtained thousands of emails and documents before the shutdown, detailing that transactions by the fund were actually run by Taek Jho Low, a close friend of the family of Prime Minister Najib Tun Razak. There were times when the CEO of 1MDB, Shahrol Halmi, and his Malaysian colleagues had no idea what was going on.

Jho Low has repeatedly told the media that he has had nothing to do with 1MDB’s investment activities, and that he has received no money or benefits. But the emails allegedly show that he orchestrated a 2009 joint venture between 1MDB, as the fund is known, and a fledgling oil exploration firm called PetroSaudi International, which was little more than a shell.

Although money provided by 1MDB was putatively going into oil exploration, Sarawak Report’s emails indicate that Jho Low siphoned off US$700 million and channeled the money to a firm he owned called Good Star Ltd. The emails and other documents show that money was then used to purchase UBG bank in Sarawak, owned by the former Chief Minister, Abdul Taib Mahmud, “at a very advantageous price for the chief minister and his family, who had been failing to get a deal on the open market.”

1MDB has denied any money has been lost and in fact on Feb. 21 it claimed that the PetroSaudi JV had turned a profit of US$488 million. 1MDB president Arul Kanda Kandasamy said on 1MDB’s website that that the money it had invested in the venture had been converted into Murabaha notes, an Islamic financing structure.

That assertion remains to be proven. But whether the fund earned money or not, the extent to which a private citizen and friend of the Prime Minister used 1MDB’s influence and apparently in his own business deals is highly irregular.

PetroSaudi, for instance, agreed to act as a “front” for Jho Low on such deals, according to the documents, and it was a subsidiary of PetroSaudi International registered in the Seychelles, which bought UBG, using money siphoned from 1MDB.

The extent to which Jho Low was using 1MD for his own purposes may go beyond just the PetroSaudi deal. Documents on file in London indicate that the young tycoon attempted to use Malaysia’s sovereign credit via 1MDB in his vain attempt to buy three exclusive London hotels including Claridge’s. Lawyers in Los Angeles have charged that money to fund the film The Wolf of Wall Street also may have been guaranteed by 1MDB. That deal was ultimately settled out of court and the lawyers refuse comment.

The revelations are certain to add to the precarious state of Najib’s premiership. As finance minister, he put together the arrangement that uses the Finance Ministry to back 1MDB. He is also its chief economic adviser. He is under intense fire over 1MDB both from the opposition and from former Prime Minister Mahathir Mohamad, who said on Feb. 10 that “something is rotten in Malaysia” and demanded that Najib step down. The prime minister’s popularity has fallen to 44 percent and seems likely to descend further. Revelations about the 2006 death of the late Mongolian translator and party girl Altantuya Shaariibuu are also coming closer to him. His own brothers have published formal statements questioning his comments that the sources of his wealth were his family.

The article, titled “Heist of the Century, displays documents that show an initial meeting took place in New York on Sept. 8, 2009, between Jho Low, then the head of Wynton Capital, a UK-based businessman named Patrick Mahony, who had been introduced a few days earlier by PetroSaudi’s CEO, Tarek Obaid. In addition to being CEO, Obaid is a friend of PetroSaudi’s owner, Prince Turki bin Abdullah, one of the sons of the then King of Saudi Arabia. Mahony worked for the investment group Ashmore, which was funding PetroSaudi’s main operation, an oil well in Argentina.

Also at the meeting were two of Jho Low’s close colleagues, Li Lin Seet and a UBG bank lawyer, Tiffany Heah.In an email written to “Jho, Seet and Tiffany” the following day, Mahony made clear on behalf of PetroSaudi that the company was very willing to become involved in a series of deals proposed by Jho Low, which were expected to involve 1MDB and Petronas, Malaysia’s national energy firm. In that email, Mahony said he also understood that Jho Low wanted “to use PetroSaudi International as a front” for certain deals and he said that “we would be happy to do that.”

1MB officials apparently only became aware of the PetroSaudi transaction about 10 days before the initial billion-dollar deal was signed. The emails show that Jho Low initiated formal written introductions between 1MDB and PetroSaudi just days before the transaction was signed. There is no evidence that the Malaysian fund concluded any due diligence into PetroSaudi at all.

Jho Low repeatedly insinuated that he represented Malaysia’s highest authorities, in this case the “YAB PM” – Najib – directly, in the matter. He focused on playing up PetroSaudi’s owner Prince Turki’s royal connection, insinuating that the negotiations were officially connected to “furthering Saudi-Malaysia bi-lateral ties,” although there was nothing to suggest bilateral ties had anything to do with the matter.

“There is no evidence to suggest that this ‘loan’ was anything apart from an entirely contrived transaction between two arms of PetroSaudi, a company with very little working capital,.” Sarawak Report said. “The US$700 million was repaid by 1MDB alone, as PetroSaudi had brought in “zero cash” into the joint venture and had only committed the valuation of its assets.”

In fact, according to Sarawak Report, “Jho Low crafted the whole Joint Venture deal before either PetroSaudi or 1MDB saw what was in the plan. These same emails provide the equally telling information that the first draft copy of the Joint Venture deal to be negotiated with 1MDB was drawn up by Jho Low’s own office.”

Two days before negotiations were due to start on the billion dollar deal, “that draft was still being eagerly anticipated by Low’s contacts at PetroSaudi,” the story notes. In an email from Mahony on Sept. 21, he said “ETA for first draft of agreement is still in a few hours…?

Mahony suggested that his lawyers and Jho Low’s lawyers should first liaise with each other, before they contacted 1MDB’s lawyers about the content of the proposed JV document being drawn up by Jho Low’s team in New York.

“I also need to get the 1mdb lawyer and my lawyer in touch asap,” Mahony wrote. “I will wait until you send the jva but what i suggest is that when you send me the jva, you introduce me to your lawyers by email and then i will forward the jva to my lawyers and introduce my lawyers to your lawyers. Thanks.”

“The inescapable conclusion is that the jetlagged team, arriving from Malaysia the next day, had acted as little more than onlookers in the drawing up of this ‘joint venture’, for which only they would be putting up any cash, on behalf of the Malaysian public,” the report added. “According to the contract about to be placed on the table in front of them USD$1 billion was due on day one, with further drawing rights available of up to USD$5 billion.”

Read more…
Emails Blow Malaysia’s 1MDB Fund Wide Open
March 1, 2015 – Asia Sentinel

How US$700 million was allegedly siphoned off 1MDB via ‘loan’ for a few days!

Businessman Jho Low orchestrated the 2009 joint venture between 1Malaysia Development Berhad (1MDB) and PetroSaudi International to allegedly siphon off US$700 million from the strategic development fund, whistleblower website Sarawak Report has claimed.

The UK-based website revealed that the 1MDB PetroSaudi joint venture company’s US$700 million loan repayment to PetroSaudi in 2009 was a front and the funds channelled to a firm allegedly owned by Low, called Good Star Limited.

The US$700 million loan repayment provision was part of the joint venture contract between Petro Saudi International and 1MDB, Sarawak Report said, citing documents it had obtained. It also published those documents with its report.

“What that evidence goes on to show is that critical manoeuvres for transferring the USD$700 million ‘loan’ cum ‘premium’ into the control of Jho Low took place straight after the signing of the agreement (between PetroSaudi and 1MDB) on September 29 – that and Jho Low was involved and copied in on every step,” Sarawak Report said.

According to copies of the PetroSaudi loan agreement obtained by Sarawak Report, the US$700 million had been loaned from PetroSaudi Caymans Holdings to the 1MDB PetroSaudi joint venture company on September 25, 2009.

“However, there is no evidence to suggest that this ‘loan’ was anything apart from an entirely contrived transaction between two arms of PetroSaudi, a company with very little working capital.

“Three days later, 1MDB was committed to pay it back in hard currency,” it said.

On September 29, 2009, PetroSaudi CEO Tarek Obaid issued a letter of demand to 1MDB PetroSaudi Limited for US$700 million be credited to account number 11116073, at RBS Coutts Bank Ltd in Zurich, Switzerland.

Sarawak Report claimed that the account was registered under a company called Good Star Limited, which was controlled by Low.

“This means that the money, which was stated as having been paid back to PetroSaudi as part of the joint venture agreement, was in fact signed over by Tarek Obaid to an entirely separate third party, Good Star Limited.”

It added that the US$700 million was repaid by 1MDB alone, as PetroSaudi had brought in “zero cash” into the joint venture and had only committed the valuation of its assets.

Good Star then paid Tarek Obraid a “broker fee of US$85 million” on the same day the letter of demand was written, it said.

Sarawak Report claimed that the entire 1MDB-PetroSaudi joint venture deal had been initiated by Low and his team on September 8, 2009 – less than a month before the deal was signed.

Those involved in the initial meeting were Low, UK businessman Patrick Mahony, and Low’s colleagues Seet Li Lin and lawyer Tiffany Heah.

Mahoney worked for an investment group called Ashmore, which was funding PetroSaudi’s omain operation, while Seet is the chief investment Officer of Good Star Limited, and the vice-president of Low’s company Jynwel Capital, said Sarawak Report.

The website said it managed to contact Seet to ask about his role at Good Star, but he denied knowing anything and then “turned off his phone”.

In an email transaction between Low and Mahony, the latter said he understood Low wanted “to use PetroSaudi International as a front for certain deals” and that “we would be happy to do that”.

Sarawak Report said 1MDB’s CEO, Shahrol Halmi, and his Malaysian colleagues were only involved in the proceedings in September 15, on the initiative of Low, who organised the conference call between the parties.

The website also furnished an email, purportedly written by Shahrol, which it said showed that 1MDB was still in the dark about the actual business of PetroSaudi International, as Shahrol had yet to receive the company’s profile days before signing the joint venture.

On February 21, 2015, 1MDB claimed that its joint venture with PetroSaudi had earned it a profit of US$488 million.

In a statement on the company’s website, 1MDB president Arul Kanda Kandasamy also claimed that the money it had invested in the venture had been converted into Murabaha notes when the plan did not go through.

“In 2009, 1MDB entered into a joint venture with PetroSaudi, which was set up to undertake investments in certain projects.

“Both parties eventually decided not to proceed with the joint venture and our investment was converted into Murabaha notes.

“These Murabaha notes were paid back in full, with 1MDB earning a profit of US$488 million, in 2013,” Arul said in the statement. – March 1, 2015.

…source
Jho Low allegedly siphoned off US$700 million from 1MDB, says website
1 March 2015 – Malaysian Insider

HEIST OF THE CENTURY – The PetroSaudi-1MDB Joint Venture

Together with London’s Sunday Times newspaper, Sarawak Report has completed an in-depth investigation into the trail of the missing billions at the heart of Malaysia’s 1MDB (One Malaysia Development Berhad) financial scandal.

We have obtained access to thousands of documents and emails relating to transactions by 1MDB, including its initial joint venture with the little known oil company PetroSaudi International from 2009.

What the documents establish is that, in spite of copious official denials, the entire joint venture project was conceived, managed and driven through by the Prime Minister’s associate and family friend the party-loving billionaire tycoon, Jho Low.

The documents also prove that the USD$700 million so-called “loan” that was supposedly repaid to PetroSaudi as part of the joint venture agreement, was in fact directed into the Swiss bank account of a company called Good Star, which is controlled by Jho Low.

That money was then partly used to buy out Taib Mahmud’s UBG bank in Sarawak at a very advantageous price for the chief minister and his family, who had been failing to get a deal on the open market.

PetroSaudi had agreed to act as “a front” for Jho Low on such deals, according to the documents, and it was a subsidiary of PetroSaudi International registered in the Seychelles, which bought UBG, using money siphoned from 1MDB.

How Jho Low managed the 1MDB PetroSaudi Joint Venture deal

Among the email exchanges obtained by Sarawak Report are documents from an initial meeting that took place in New York on September 8th 2009, between the then Wynton Capital head, Jho Low and the UK businessman Patrick Mahony, who had been introduced a few days earlier by PetroSaudi’s CEO, Tarek Obaid.

Mahony worked for the investment group Ashmore, which was funding PetroSaudi’s main operation, an oil well in Argentina.

– SR

Read more…
HEIST OF THE CENTURY – How Jho Low Used PetroSaudi As “A Front” To Siphon Billions Out Of 1MDB!
28 February 2015 – SR

Groundbreaking study details Taib’s US$21bil empire

A ground-breaking report released by Swiss-based NGO Bruno Manser Fund (BMF) estimated the assets of Sarawak Chief Minister Abdul Taib Mahmud’s family at US$21 billion (RM64 billion).

The wealth of Taib himself has been put at a whopping US$15 billion (RM46 billion), making him Malaysia’s richest man, outstripping tycoon Robert Kuok who has US$12.5 billion.

The report entitled ‘The Taib Timber Mafia: Facts and Figures on Politically Exposed Persons from Sarawak, Malaysia’ was released today in Brussels to coincide with a visit by the Malaysian Plantation Industries and Commodities Minister Bernard Dompok to the European Commission.

It is the first report that describes in detail the business activities and personal wealth of 20 members of the Taib family in Malaysia, Australia, Canada, Hong Kong, United Kingdom, United States and other countries.

The report aimed to build international pressure against the Sarawak’s first family and provide investigating bodies, journalists, Sarawakians and interested parties with hard evidence on the Taib financial empire.

BMF estimated the combined net worth of 20 Taib family members at close to US$21 billion, spread over 400 companies around the globe – all built through their near complete political and economic control of Sarawak – one of the poorest states in Malaysia – over three decades.

However, the research is restricted to Taib’s family members and does not include the wealth of Taib’s close associates, all of whom have benefitted from the powerful chief minister’s patronage during his almost 31 years in power.

Taib holds three key posts

In particular, the family of the longest-serving chief minister in Malaysia has established monopolies over the granting of logging and plantation concessions, the export of timber, the maintenance of public roads as well as the production and sale of cement, and a number of other construction materials.

“The Taib family’s business outfits, particularly its flagship company Cahya Mata Sarawak (CMS), have also benefitted from untendered public contracts worth hundreds of millions of US dollars,” said BMF.

CMS is the largest private company in the state with net assets totalling RM2.4 billion in 2010.
It has been awarded some of the state’s largest contracts including the RM300 million construction of the state legislative assembly building in Kuching, a contract over the maintenance of all 4,000km-long state roads in Sarawak and a 15-year concession to maintain 643km of federal roads.

The report claimed that the Sarawak state government enjoys total autonomy as to the use of the state’s forest resources and state lands, while Taib has abused his triple positions as chief minister, state finance minister, and planning and resources minister, to award his family members vast timber concessions, palm oil concessions, state contracts and directorships in Sarawak’s largest companies.

“In 2009, his three ministries controlled 49.6 percent of the state’s operating expenditure of RM1.19 billion and 80 percent of the state’s development expenditure of RM3.08 billion, with the other 10 ministers sharing the rest.”

As Sarawak planning and resources minister, the report explained, Taib has ultimate control over the granting of logging concessions in Sarawak that are worth several billion US dollars.

“Already in the late 1980s, family members and clients loyal to Taib were estimated to control over 1.6 million hectares of timber concessions in Sarawak which constitute more than 10 percent of the total land mass of Sarawak”.

All in the family

The report also zoomed in on Taib’s modus operandi as to how these assets were transferred overseas to countries such as Canada (Sakto group of companies), US (Sakti Corporation and related companies), Australia (Sitehost Pty Ltd), UK (Ridgeford Properties), Hong Kong (Richfold Investment Ltd) and to a number of offshore finance centres, in particular the British Virgin Islands.

“While the above-mentioned companies officially name Taib family members as their shareholders or directors, it is believed that many other companies are held through nominees.”

Individuals profiled in the extensive 45-page report include Taib’s brother Onn Mahmud, who is second richest family member with an estimated net worth of US$2 billion, while Taib’s eldest son, Mahmud Abu Bekir Taib, a major player in the Sarawak construction, property and energy business, is ranked third at US$1.5 billion.

Next in line are Taib’s Canada-based socialite daughter Jamilah Taib Murray (US$1 billion), Taib’s brother and timber entrepreneur Tufail Mahmud (US$600 million), sister Raziah Mahmud (US$500 million), daughter Hanifah (US$400 million) and son Sulaiman (US$300 million).

Meanwhile, timber conglomerate Ta Ann founder and Sarawak Energy chairperson Hamed Sepawi, a first cousin of the chief minister, has an estimated wealth of US$175 million.

Faced with mounting criticism, Taib had last year took to the Internet to defend his family’s wealth.

In particular, Taib explained that his daughter Jamilah’s (right) business was initially funded from his income as a federal minister, which his daughter through her business acumen expanded into a global empire.

“Well, my children make money, yes, quite big. I don’t know whether what they said 100 million is correct… in Canada,” he said in a four-minute video posted on YouTube a month before the Sarawak state election last year.

“But it all started (when) I gave money to my daughter. I was resigning from the federal government. I got gratuity, I gave some money to her to start a new business, it thrived.

“It is a property development company. When our town was still small, they had foresight to buy pieces of land and sell them quickly,” he said.

BMF compares Taib’s family with the clans of former Indonesian president Suharto and former Philippines president Ferdinand Marcos – the two families had embezzled between US$15 billion and US$35 billion, and between US$20 billion and US$900 billion respectively.

“We believe our research is showing merely the tip of the iceberg as many (Taib) family assets are likely to be hidden overseas or in offshore districts where information is virtually impossible to obtain,” said the report.

“BMF is therefore calling on anti-corruption and anti-money-laundering authorities worldwide to investigate the Taib family’s business activities.”

source:
“Groundbreaking study details Taib’s US$21bil empire”
Malaysiakini – Sep 19, 2012

Eruption of the dormant forex scandal

THE ghost of Bank Negara Malaysia’s (BNM) epic foreign exchange trading losses, said to have run into tens of billions during the 80s and 90s, has reawakened.

Like a dormant volcano whose time to re-erupt has come, the controversy involving the central bank’s infamous speculative practices blew up with such a shudder last weekend that even Tun Dr Mahathir Mohamad was called to respond.

Mahathir, who was prime minister at the time, commented to reporters that he was not afraid to be investigated. The Opposition can open any file they had on him, he said in response to DAP adviser Lim Kit Siang’s assertion that Pakatan Rakyat, should it take over the federal government, must initiate a royal commission of inquiry into the affair.

Other key figures reportedly implicated are the then finance minister Tun Daim Zainuddin and BNM governor during that period, the late Tan Sri Jaffar Hussein. A fourth person, the then BNM deputy governor, Tan Sri Nor Mohamed Yackop, is now a minister in the Prime Minister’s Department.

Although the issue has been raised before, this time it was perhaps more damning and detailed. This is because the individual who spoke about it at a forum organised by the Penang Institute, a state government think-tank, on Saturday was privy to the internal happenings at BNM until 1994.

Dr Rosli Yaakob was a senior manager during the crucial years when the speculative practices were said to occur, and was even on the panel that prepared and presented the bank’s semi-annual brief. He is currently Negri Sembilan PAS deputy commissioner.

Incidentally, Opposition Leader Datuk Seri Anwar Ibrahim, who was finance minister from 1991 to 1998, also spoke at the forum. Anwar maintained that the matter was kept from him after he assumed the post. He has however been accused of covering up for it, including by Lim – the opposition leader and DAP’s Tanjung MP in the early 90s – who held Anwar personally responsible for the losses.

The problem with this whole affair is that there has been neither an official investigation nor an inquiry into the matter to assuage public confusion and concerns. No one, aside perhaps from the perpetrators, knows how much money, if any, was lost or how this was done.

Rosli’s account, delivered to a packed hall seated in stunned silence, would have raised more curiosity about what could have occurred.

Even the volume of money that was supposedly involved has come into question. Lim has put the losses at about RM30 billion. Rosli, however, pointed out that it was once reported that at the height of the speculation BNM had spent RM270 billion. “This is no small amount,” he said.

According to Rosli, the market norm then was to trade in lots of US$1 million, US$5 million or US$10 million, but that BNM traded in US$50 million lots (up to 5-10 lots per call) and sometimes, a few “yards” (US$1 billion per yard) a day.

Its closest rivals were Japanese fund managers who also traded in lots of US$50 million, but only once or twice a year, he said.

…read more
BNM saga reawakened
6 June 2012 – The Sun

The Perwaja Steel Scandal

Estimated losses: more that RM10 billion

You may have seen online somewhere the long list of scandals in Malaysia that has resulted in the country losing billions and billions of ringgit. Time Magazine quoted an economist at Morgan Stanley in Singapore as saying that the country might have lost as much as US$100 billion since the early 1980s to corruption.

One of these scandals is the Perwaja Steel project which is usually associated with a loss of RM2.56 billion. But it seems like RM10 billion is a more likely figure. In fact, Mahathir himself had admitted publicly in 2002 that Perwaja lost RM10 billion in a dialogue with Malaysians in London where he also admitted that there were possible misappropriation of funds and mismanagement in Perwaja.

Perwaja Steel started in 1982 as a joint venture between the government-owned Heavy Industries Corporation and the Japanese company Nippon Steel Corporation. This was supposed to be a showcase project in Mahathir’s push for industrialization. A steel plant costing RM1 billion was built in Terengganu to supply the domestic needs for steel products.

However, Perwaja encountered production problems and was saddled with large debts. Since the borrowings were in yen – which appreciated significantly at that time – interest payments were getting higher. In 1987 Nippon Steel pulled out of the project. Mahathir then brought in his friend Eric Chia in 1988 to run Perwaja and to turn it around. He was given full authority to do what was necessary to reverse Perwaja’s performance and reported directly to Mahathir.

Another RM2 billion was pumped into Perwaja with government funding and loans from Bank Bumiputra (RM860 million) and EPF (RM130 million). New facilities were built in Terengganu and in Kedah. Eric Chia helmed Perwaja for seven years.

Initially, he seemed to have succeeded in turning around Perwaja but after he resigned abruptly in 1995 it became clear that that was not the case. Total losses had increased to RM2.49 billion from RM1 billion when Eric Chia took over. Perwaja was crippled by additional debts amounting to RM5.7 billion.

The new management of Perwaja prepared an internal report where it claimed the following among others:

– inaccurate accounting records
– unauthorised contracts amounting to hundreds of millions of ringgit
– alleged misappropriation of funds
– dubious maintenance contracts amounting to RM292 million (including a contract amount of RM200,000 per month to a company for gardening, cleaning and vehicle maintenance)
– award of RM957 million contract to companies of a long time associate of Eric Chia

In 1999, Anwar made a police report which stated that “He (Eric Chia) in fact repeatedly claimed that his actions had the support and under the directions of Prime Minister Dato Seri Dr. Mahathir. And this is further substantiated with letters written by the Prime Minister himself. With the so-called mandate, the Board was sidelined, tender procedures were blatantly ignored and there were quesitonable, ‘unsatisfactory’ payments made to certain parties.”

After many years of inaction by the ACA and the police, Eric Chia was finally charged for dishonestly authorizing (not pocketing) a payment of RM76 million (0.076 billion) in 2004. This only happened after Mahathir stepped down as PM and Badawi took over. RM76 million is a lot of money but it is miniscule compared to the total loss estimated to be more than RM10 billion. Eventually, Eric Chia was acquitted by the courts in 2007.

The following sums up quite well this costly Perwaja misadventure,

“Perwaja looked like no more than a shining example of a politically conceived, commercially questionable and poorly executed enterprise that predictably failed. Despite lavish funding, a robust economy much of the time and protection from competing imports in the form of both tariffs and quotas, the company was never able to produce steel profitably. It suffered from chronic operating problems and a crushing debt load, including stiff foreign-exchange losses on heavy borrowing abroad. Even after the government decided to swallow RM9.9 billion in accumulated losses and privatize Perwaja in 1996, it continued to flounder.

Yet there was a more sinister side to Perwaja that guaranteed it an exalted place in the pantheon of Malaysian financial scandals. An unknown portion of the RM15 billion or more that the company consumed was ripped off in various rackets and ruses. Although both internal and external reports confirmed that the company was bled white, almost nothing was done to bring the culprits to justice and recover the funds.” – Barry Wain

Sources:

1. Barry Wain (2009) “Malaysian Maverick – Mahathir Mohamad in turbulent times”

2. Lim Kit Siang (2002), “DAP calls for Royal Commission of Inquiry into RM10 billion Perwaja scandal with former ACA director-general Zaki Husin appointed to assist the inquiry to ensure that Malaysia does not get into the Guinness Book of Records in having the most heinous mega scandals without criminals”

The forex scandal in early 90s

Estimated losss: As high as RM30 billion!

Some of you may have heard of the case of Nick Leeson whose exploits as a financial trader caused the spectacular collapse of the British bank Barings in 1995. He was based in Singapore and was making unauthorized speculative trades on the Japanese stock prices and interest rates. Unfortunately for him, the Kobe earthquake struck and caused the Asian markets to plunge resulting in Leeson and the bank losing more than US$1 billion. Barings could not sustain such a hugh loss and was declared insolvent. Leeson was eventually jailed 4 years for fraud and forgery in Singapore.

The case above illustrates the high risks involved in trading in financial instruments. Large profits can be made but monumental losses can result if the trades go sour.

A few years earlier in 1992-1993, Malaysia’s very own Bank Negara was also involved in risky forex trading which landed it in serious trouble and resulted in a loss estimated to be as high as RM30 billion. It is not clear exactly when such activities started but bank was supposed to have the most sophisticated trading rooms in the world which impressed Mahathir who was the PM then when he toured the trading rooms. He had given approval for Bank Negara to continue its speculative currency trading after he was informed about it.

Bank Negara’s forex trading activities were well-known at that time and a source of concern to banks across Asia. “It became the most awesome currency trader in the world” said the author of the book “Vandals’ Crown: How Rebel Currency Traders Overthrew the World’s Central Banks.” On some days, it traded US$1 billion to US$5 billion which is very unusual. Even the Bank of Japan rarely traded more than US$1 billion and only when it had wanted to intervene in the foreign exchange market to protect its currency. Central banks normally enter the forex market only to influence its own currency rate.

However, Bank Negara was trading in other currencies and was profiting from their movements. In other words, it had become a profit centre for the government using the country’s reserves to speculate in the currency market. Surely, that is not the role of a central bank. Why is Bank Negara undertaking such profit-making activities putting the country’s reserves at great risk?

Just like in the Nick Leeson’s case, it just needed an unfavorable event to cause monumental losses. Bank Negara was holding large positions betting on the pound sterling to go up. However, Britain withdrew from the European Exchange Rate Mechanism causing the sterling to collapse. This resulted in losses estimated to be between RM16 billion and RM30 billion in just 2 years in 1992-1993.

Can you imagine how much is RM30 billion? If you strike the first prize in the lottery draw of RM3 million – every single draw of the year and every year for 80 years you will get near to that astronomical figure!

Up to this day, a full account and disclosure of the forex fiasco has not been forthcoming despite the persistent efforts of Lim Kit Siang in bringing up this issue in parliament on many occasions. The following is his favourite quote from the Vandal’s Crown by Gregory J. Millman:

“Using all the resources a central bank commands – privileged information, unlimited credit, regulatory power, and more – Malaysia’s Bank Negara became the most feared trader in the currency markets. By trading for profit, Bank Negara committed apostasy against the creed of central banking. Instead of working to ensure global financial stability, Bank Negara repeatedly shoved huge sums of money into the most vulnerable market situations in order to destabilize exchange rates for its own profit” (p.226)

“(Bank) Negara operated behind a thick veil of secrecy. The bank seldom spoke publicly about its controversial trading activities. Yet it was increasingly clear to foreign exchange traders that Bank Negara’s operations in the foreign exchange markets went far beyond simple self-defense. It became the most awesome currency trader in the world.” (p. 227)

“(Bank) Negara’s market manipulation was so egregrious that one American central banker said, ‘If they tried this on any organized exchange in the world, they’d go to jail.’ However, in the unregulated international currency markets, there were neither police nor jailers. The only rule was the rough justice of the vandals, and it was this rule that eventually brought (Bank) Negara down.

“In 1992, (Bank) Negara took on a large pound sterling position, apparently expecting Britain to maintain the discipline required by the European Exchange Rate Mechanism. It was a bad economic and political judgement. (Bank) Negara lost approximately $3.6 billion when Britain withdrew from the ERM, letting sterling collapse. The next year, (Bank) Negara lost an additional $2.2 billion. By 1994, Bank Negara was technically insolvent and had to be bailed out by an infusion of fresh money from Malaysia’s finance ministry.” (p.229)

When will the country get the whole story of this biggest financial scandal in its history? Specifically, when will we get answers to some of these questions:

Why was Bank Negara speculating in the risky forex market to make profits?

Was it a proper policy for a central bank to use country’s reserves to make profits?

Who was reponsible for authorising such activities?

What were the limits on how much of the bank reserves can be used for currency speculation? Were these limits adhered to?

Was the cabinet aware that the country’s reserves were used for such risky speculation?

Wasn’t there a mechanism to monitor the currency trading?

Why wasn’t serious actions taken against those responsible for such huge losses?

Past Scandals – The Maminco-Makuwasa Affair

Estimated losses: RM 1.6 Billion

Malaysia used to be the world’s leading tin producer accounting for 31% of the world’s output. It was a major contributor to the country’s economy providing employment for more than 40,000 people.

In 1985 the world tin market crashed with the price plunging by 50%. Many tin mines in Malaysia had to close as it was no longer economical to operate the tin mines. One of the factors that contributed to the collapse of the tin market is the ill-fated attempt by the Malaysian government to corner the tin market and to prop up the tin price.

This is the Maminco scandal that is usually found at the top of the lists of scandals and bail-outs plaguing Malaysia since Mahathir became the PM. This is probably because it was the earliest scandal occurring immediately after Mahathir became the PM in 1981. Although not the largest loss in terms of value, it still caused a loss estimated to be RM1.6 billion or more.

In this crooked scheme, a RM2 company Maminco Sdn. Bhd. was set up and was used to secretly buy tin future contracts and physical tin in order to push up prices on the London Metal Exchange. To finance its covert activities, Maminco obtained financing from Bank Bumiputra – naturally. At one point, this RM2 company was borrowing astronomical amounts from the bank – as much as RM1.5 billion.

Initially, they succeeded in pushing up the tin price artifically. But the higher prices stimulated increased tin production and resulted in the US releasing its strategic stockpile. The tin price could not be maintained at the artificially high level for long and eventually it collapsed.

Undertaking this Maminco scheme is already bad enough. But instead of admitting their mistake, Mahathir and his merry band cooked up another scheme to hide the losses incurred by Maminco from the Malaysian public. Another RM2 company called Makuwasa was set up.

The idea was new shares reserved for bumiputras allocated to EPF were diverted to Makuwasa at par value! Can you believe this? These cheaply acquired shares could then be sold for a profit at market price! Instant profits made by Makuwasa can then be used to cover the Maminco’s losses. Effectively, Makuwasa is used to raid the savings of Malaysians to help pay for Maminco’s losses!

In 1986 Mahathir publicly admitted that Makuwasa was created to recoup the government’s losses from the Maminco debacle and to repay its loans to Bank Bumiputra.

W T F