Tuesday, October 13, 2015

How The Culprits Split The Loot From 1MDB

Raking In The Profits From Malaysia!

Raking In The Profits From Malaysia!

12 Oct 2015

Reproduced with permission

Mahony flew to Thailand to stage Justo's arrest
Mahony flew to Thailand to stage Justo’s arrest

In May of this year an angry and desperate strategy was put into play by the conspirators who had taken billions out of Malaysia’s 1MDB development fund.

Patrick Mahony, a Director of PetroSaudi International, flew over to Bangkok to lay accusations of blackmail against a former fellow Director, Xavier Justo, who had moved to Thailand.

It was the first step in a carefully executed plan to try to seize back the initiative in response to exposures based on evidence provided by Justo, which had opened up a dangerous series of official investigations against PetroSaudi and 1MDB.

We will bring more of what Mahony then did to his former colleague below.

Meanwhile, Sarawak Report has obtained further evidence showing exactly how Mr Mahony himself had benefitted to the tune of tens of millions of dollars within days of helping his collaborator Jho Low siphon US$700 million out of 1MDB.

And we can show how three days after that he became the secret buyer of a large and expensive house in one of the swankiest parts of London.


27 Ladbroke Square

No 27 - bought with 1MDB development money!
No 27 – bought with 1MDB development money!

According to public records, 27 Ladbroke Square in Notting Hill Gate, a five story house with a large back garden looking out over one of the capital’s most sought after private gardens, was purchased for a publicly undisclosed sum in early January 2010.

The Land Register informs us that it belongs to an anonymous company in the British Virgin Islands with a Post Box address.

In this respect it forms part of a recent and growing phenomenon.

London has started to team with anonymous foreign property concerns, as wealthy off-shore entities have started to buy up great chunks of the capital for prices that have driven ordinary British buyers out of the London market.

Malaysians may be interested to know that the biggest investors in London in the year preceding the 2013 election were in fact Malaysians themselves, followed by Singaporeans, who spent more than the British themselves on property in their own capital city.

The BVI company Mika 1 is the "owner" of 27 Ladbroke Square
The BVI company Mika 1 is the “owner” of 27 Ladbroke Square

However, thanks to Xavier Justo’s evidence from the PetroSaudi database, Sarawak Report is able to identify the person who had bought 27 Ladbroke Square and exactly how much it cost – a whopping £6.15 million (RM39 million).

The buyer was indeed Patrick Mahony and he had put down his offer on the super-expensive new home with the posh agent Savills exactly three days after receiving his cut from 1MDB’s US$700 million payment into Jho Low’s company Good Star Limited.

29th September 1MDB pays US$700 million into Jho Low's Good Star account - 23rd October Patrick is putting down on a house... what went on inbetween?
29th September 1MDB pays US$700 million into Jho Low’s Good Star account – 
23rd October Patrick is putting down on a house… what passed in between?

In a number of communications reviewed by Sarawak Report Patrick Mahony confirmed his beneficial interest in 27 Ladbroke Square, dealing with lawyers (on the subject of minimising tax on the property); estate agents (whom he needed to prove his hidden ownership to); his Swiss bankers (of course); accountants and off-shore trust advisors and a variety of designers and decorators whom he brought in to upgrade the property further once he had purchased it.

His correspondence shows that he finally acquired the property on 18th December 2009 through a complex arrangement, using a series of off-shore trusts, plainly in order to minimise his tax liabilities on the Malaysian millions he had acquired.

An off-shore company in Guernsey, named Mika 2 purchased and then sub-sold the property to a related company in BVI named Mika 1, which became the registered owner through a trust, whilst Mahony engaged with a string of lawyers and accountants to battle hated stamp duties and an income tax bill, which he feared could cost him £2.48 million.

One of these advisors warned that planned tactics to avoid disclosure to the revenue could produce a high risk of incurring discovery and severe legal penalties:
It seems to me that this course has a high risk of challenge …. disclosure effectively would mean risking liability…. 
From my perspective,  I would be concerned that were you to do so there would be a significant risk of discovery and of greater liability on your part and of that of the trust…. I am also conscious that GT had a liability cap of £2 million… I know the Income Tax liability exceeds that as it is but further costs on enquiry would compound the issue. … the advice GT [Grant Thornton London Accountants] were providing was in relation to a SDLT [Stamp Duty Land Tax] scheme to save some £250000 whereas their actions have given rise to a potential liability of £2.5 million.” [Advice to Mahony from his Jersey accountant at Rawlinson-Hunter]

So much tax to pay for London's prized vistas... unless you can avoid it!
So much unwanted tax to pay for London’s prized vistas like Ladbroke Square … 
unless you can avoid it! 

This was how Mahony later explained the complicated nature of 
his ownership in a frank exchange with a third party agent,
who needed confirmation that he was indeed the owner of the property:
“the property I own on Ladbroke Square belongs to a company, which in turn belongs to a trust. I am the beneficiary of that trust but I am not the direct owner of the property for reasons I’m sure you’ll be familiar with” [Patrick Mahony]

So handy to distance your ownership through an off-shore trust!
So handy to distance your ownership through an off-shore trust!

So where did the money come from to fund Mahony’s sudden London property splash just days after the 1MDB PetroSaudi deal?


Money trail – how US$33m from 1MDB went to Patrick Mahony

Sarawak Report and Malaysia’s business paper The Edge have separately documented how on the day of the signing of the joint venture between 1MDB and PetroSaudi, the vast majority of the investment -$700 million of Malaysia’s public money – was passed into Jho Low’s company Good Star Limited’s Zurich account, under the guise of a ‘loan repayment’ to PetroSaudi’s parent company.

We have also documented how on the following day Good Star issued an US$85 million “broker fee” to the PetroSaudi Director Tarek Obaid through Obaid’s JP Morgan account in Zurich.

"Brokering services"
“Brokering services”

Ironically, the “brokering service” Tarek Obaid is alleged to have performed by Jho Low was supposedly for raising money from Saudi Arabia to invest in Malaysia.

Yet, as everyone now knows, not one ringgit was raised from Saudi Arabia for this scheme: the only money raised was from 1MDB and that had gone straight out of Malaysia with not a shred of local investment – and into the clutches of Jho Low.

The Edge Newspaper has provided a handy chart to illustrate where this money went next.

It shows that the US$85 million “broker fee” arrived in Tarek’s JP Morgan Swisse account on October 5th; then on 20th October US$33 million (RM140 million) was transferred from the same account to Tarek’s friend and collaborator at PetroSaudi, Patrick Mahony, who also had an account at the same Swiss branch of this major American bank.
Mahony's share of the "broker fee" - nice
Mahony’s share of the “broker fee” – nice 

Three days later Mahoney committed to buy the new house at 27 
Ladbroke Square – his undoubted reward for his part in the 
successful heist of Malaysia’s public money.

Follow the green line - $85 million went to Tarek then US$33 million on to Mahony
Follow the green line – $85 million went to Tarek then US$33 million on to Mahony

Given that JP Morgan Suisse were also handling the account for the 1MDB Joint Venture, which received US$300 million in the same week, might one have not thought eyebrows would have been raised sufficiently to provoke an investigation?

After all, more than a quarter of that amount was paid in brokerage fees to two connected individuals, using accounts in their very same bank. It is understood that Swiss and US financial regulators are indeed investigating the matter with JP Morgan as part of on-going investigations into 1MDB.

Prince Turki subsequently achieved the lucrative post of Governor of Rhyad. However, the new King side-lined him from the post the day he took over.
Prince Turki subsequently achieved the lucrative post of Governor of Riyadh. However, the new King side-lined him from the post the day he took over in January this year.

Meanwhile, another beneficiary of the deal was Tarek Obaid’s key partner and the actual owner of PetroSaudi, Prince Turki, who was the 7th son of the then King of Saudi Arabia.  The connection had facilitated the project to be dressed up as a state to state joint investment venture by Jho Low, which it was not.

Turki got US$10 million for lending his name to the deal in that initial October pay out, followed by later payments adding up to a total of US$67 million.

Despite the image of a rich Saudi Prince, Sarawak Report has been reliably informed that Turki, prior to this windfall, had lacked the freedom of personal wealth and was reliant on family funds.

He was therefore very pleased to have benefitted from Malaysia’s development money with so much independent spending income and we have learnt that there was much subsequent partying at Las Vegas for all the young men concerned.

Crooks line up - Tarek and Prince Turki and Jho Low line up with the Minister of Finance and his family on a yacht hired to impress as the joint venture plan is hatched
Crooks line up – Tarek (2nd right), Prince Turki (2nd left) and Jho Low line up with the Minister of Finance and his family as the joint venture plan is hatched in July 2009


Mahony’s revenge

The complex nature of Patrick Mahony’s off-shore house purchase is meanwhile made plain through the 1MDB money trail by the transfers that floated between the various companies designed to distance Mr Mahony from the property and the tax man.

Circular ownership to dodge the tax issue!
Circular ownership to dodge the tax issue!

This is how ordinary home-owners get tax clobbered, whilst those who have got rich by stealing the money of poor countries are able to lord it up in London and pretend they don’t officially own the properties they do.

Patrick Mahony is a UK citizen and yet he poses as an off-shore, non-domicile concern when it comes to declaring the house he owns.

No wonder he was fuming at Xavier Justo for spilling the beans about the PetroSaudi deal and the delicate situation regarding his fancy new house!

It is not hard to imagine how he was ready for revenge as he stormed out to Bangkok (naturally first class) to nail Justo and ‘discredit’ the evidence provided by Sarawak Report, The Edge and the Sunday Times about the crime that had benefitted him so royally.

After all, he too had been caught acting unwisely on the party circuit as he celebrated on his ill-gotten gains.

Given Jho Low a run for his money over Paris Hilton? - Mahony was reported to be shacking up with 'Hollywood wildchild' Lindsay Lohan by gossip columns last year
Given Jho Low a run for his money over Paris Hilton? – Mahony was reported to be shacking up with ‘Hollywood wildchild’ Lindsay Lohan by gossip columns last year


Criminalising Justo – PetroSaudi’s plan for getting off the hook

When Mahony got to Bangkok he reported to the police that Justo had taken company documents and demanded money in return for not publishing the contents.

He was able to provide three year old emails containing threats of exposure by Justo, who claimed he had not been paid the full severance he had been promised (by then Justo would have learnt just how much fellow directors Mahony and Tarek as well as Prince Turki had all received from Malaysia’s money).

Mahony also told police that there had been a further meeting in a Bangkok hotel last October, during which he alleged Justo had repeated blackmail threats and demands.  Sources close to Justo’s family have said these elaborations were not true, because Justo did not leave his home in Kho Samui that month.

Staged arrest as Justo is presented to UMNO's photographers
Staged arrest as Justo is presented to UMNO’s photographers

However, Mahony was clearly bent on bringing a case and he evidently possessed unusual clout and influence in Thailand over this distant spat between foreigners regarding a foreign company.

This was, of course, thanks to the powerful and vocal support of Thailand’s bordering neighbour, the Prime Minister of Malaysia, who has also betrayed a strong desire to criminalise Justo and suppress the evidence over 1MDB.

From the moment of Justo’s arrest, therefore, the next stage in this desperate strategy immediately came into play.

Reporters and photographers from UMNO controlled New Straits Times had been flown into Bangkok to record the event and then informed the Malaysian public that because of Justo’s arrest none of the documents retrieved from PetroSaudi could be considered trustworthy.

After over three months of total silence and zero rebuttal, this move against Justo signalled the first attempt to try to deny the truth of the allegations over 1MDB.

Why Patrick Mahony had not simply immediately sued Sarawak Report and printed the genuine documents, instead of adopting this complex strategy, can perhaps be surmised.

Instead, the coordinated if belated PR plan went full steam ahead through June; first to criminalise Justo, then discredit his evidence by virtue of a controlled media within Malaysia.

In this way PetroSaudi and 1MDB plainly hoped to change the climate of local opinion and start to counter-attack politically, without the danger of bringing matters to court.

And there was a further plank to the strategy, which has involved a number of expensive western companies for hire.

Bryan Lord - Another paid operator of Patrick Mahony's is treated as an independent voice by 1MDB!
PGI’s Bryan Lord – Another paid operator of Patrick Mahony’s is treated as an independent voice by 1MDB!

Mahony had brought with him to Bangkok a team of so-called ‘cyber experts’ from a UK surveillance company called PGI (Protection Group International).

These paid up British operatives were on hand to brief the UMNO newspaper journalists who had been flown over to cover the story of Justo’s arrest and they made unsubstantiated claims that there was evidence of potential ‘tampering’ by Sarawak Report of the documents.

We debunked those claims.

However the accusations were trumpeted as if they were independent analysis by Malaysian government ministers and, of course, 1MDB, whose CEO Arul Kanda was still relying on the slur last week, without providing the slightest evidence.


Scotland Yard Detectives!

Sarawak Report has also gained powerful evidence that the carefully coordinated and executed plan against Justo contained another extraordinary element.

People close to Justo told this blog during the very first days of the Swiss national’s detention in Bangkok that he had been visited in his prison cell by two men introduced to him as ‘Scotland Yard detectives‘.

Plain clothes UK officers allegedly visited Justo in jail!
Plain clothes UK officers allegedly visited Justo in jail!

Friends and family of Justo were told that these British ‘officials’ had offered to help him turn “Queen’s Evidence” against PetroSaudi, so long as he provided them with the all information he had and was willing to make a “small confession” about his angry emails to Patrick Mahony.

The UK team could not get him off completely, Justo’s family were told, but the confession would secure a minimal punishment, just a few days more in the jail.

It turned out to be a trap, of course.

There were no British detectives in Bangkok, only Patrick Mahony and his hired team from PGI. Once Justo had directed investigators to his hidden files and had made a confession without lawyers present, he fell increasingly into the clutches of the very people who had denounced him.

Several more ‘confessions’ were soon extracted (all without a lawyer) from Justo over the coming days, based on the material now in the hands of the Thai police.

Justo was told, according to people close to his family, that at least with this cooperation – his confessions and some all important allegations against those he had passed the material to – he would soon be out of jail.

In the event, he was shocked to receive a three year sentence from the court, based on his own confessions made without a lawyer on the advice of his detective friends.

Tarek Obaid - Mahony's key collaborator with Jho Low on the 1MDB PetroSaudi heist
Tarek Obaid – Mahony’s key collaborator with Jho Low on the 1MDB PetroSaudi heist – broker fee US$85 million

Sarawak Report has learnt that Patrick Mahony then visited Justo in jail and staged a ‘reunion between old friends’ with the man he had thus outwitted.

Justo was left with just one option, now he was convicted and behind bars, he was told, which was to accept PetroSaudi’s help and to work with them to get a successful appeal.

The prisoner, who had been running out of money in the months before his arrest, has now obtained the services of a highly expensive legal team in Switzerland and Thailand and has also a western public relations company, which is managing the publicity around the case.

That publicity has been focused on allowing selected media limited interviews with Justo, during which the Swiss former Director of PetroSaudi has taken to suggesting that Sarawak Report ‘might have tampered’ with his documents and that he had never intended to be ‘part of a conspiracy to topple a democratically elected Malaysian Prime Minister’, etc etc.

Sadly, Justo looks unlikely to receive freedom soon through such cooperation. PetroSaudi and the Malaysian Government can hardly risk the release of this key witness, unless they are convinced he will accept their price for silence.

Like Sirul and others who have taken the fall for incidents close to the Prime Minister of Malaysia, he is far safer for them locked up in jail.

Sarawak Report

Monday, October 12, 2015

1MDB Caught In Its Own Web Of LIES

Sarawak Report awaits 1MDB Arul Kanda’s suit for libel over our allegedly ‘unsubstantiated’ reports.

In his latest press release he claims that our PetroSaudi evidence is ‘unfounded’ and ‘possibly doctored’, while admitting that our copies of 1MDB Board minutes were accurate.

Forced to admit to the 1MDB minutes, but still claiming our PetroSaudi documents are ‘unfounded’ and possibly doctored?!

If any of the documents which we have produced about the joint venture deal between 1MDB and PetroSaudi are “possibly doctored” as he ventures to suggest, it would, of course, be the easiest thing in the world for Mr Kanda to produce the evidence from his own records and explain the truth to a UK court.

Likewise, if our allegations were “unfounded”, why has the only remaining institution in Malaysia that retains a shred of credibility in the eyes of the world, Bank Negara Malaysia, backed our findings down to the very last dollar?

We have detailed how US$1 billion + US$500 million + US$330 million (= US$1.83 billion) were channelled from 1MDB into a fraudulent deal with PetroSaudi, where most of the money was diverted into the Zurich account of the company Good Star Limited belonging to its official ‘Advisor’ Jho Low.

See for the first time the document (which Mr Kanda is welcome to dispute) that proves the official nature of Jho Low’s role at the Terengganu/1MDB Development Fund, which he has so emphatically denied for so long:

Jho Low was formally appointed as an Advisor while the 1MDB PetroSaudi deal was being negotiated

The Terengganu Investment Authority changed its name to 1MDB half way through the Petro-Saudi deal on September 18th 2009, which Jho Low managed from beginning to end, despite his repeated claims that he had nothing to do with 1MDB after May 2009.

PetroSaudi’s lawyer from White & Case noted the date in an email (which Mr Kanda is welcome to dispute)

Despite his denials Jho Low was an official advisor during the period of the deal

Last week, of course, Bank Negara confirmed our findings on the purloined US$1.83 billion by demanding this exact sum of money back and baldly stating that it had recommended criminal proceedings against 1MDB for allowing the PetroSaudi scam to proceed:
“The Bank concluded that permissions required under the ECA [Exchange Control Act] for 1MDB’s investments abroad were obtained based on inaccurate or without complete disclosure of material information relevant to the Bank’s assessment of 1MDB’s applications.
Therefore, the Bank has revoked three permissions granted to 1MDB under the ECA for investments abroad totalling USD1.83 billion and also issued a direction under the Financial Services Act 2013 to 1MDB to repatriate the amount of USD1.83 billion to Malaysia and submit a plan to the Bank for this purpose”.[Bank Negara Statement]
Despite this plain speaking by Bank Negara, Arul Kanda still attempts to say that our allegations are “unfounded” and that our evidence is “possibly doctored” — whilst not suing us.

He also refers to one our several cross-referenced sources as a “convicted criminal”, whilst conveniently neglecting to mention that this Swiss national, Xavier Justo, was a former senior director of 1MDB’s own joint venture partner PetroSaudi and that he was convicted (in Thailand) for attempting to blackmail his fellow PetroSaudi directors, using evidence about their role in the 1MDB billion dollar scam.

Mr Arul Kanda is welcome to sue Sarawak Report on the basis that Justo was convicted of blackmail using a trove of fictitious evidence that just happens to tie up with a mass of other proven information from numerous other sources.

Meanwhile, we are are happy to concur with the opposition MP Tony Pua that Kanda, through his string of conflicting statements and changing stories, has proved himself to be a serial, if highly unconvincing, liar.


How 1MDB Cheated Bank Negara

Through PetroSaudi’s own emails Sarawak Report has obtained the Letter of Permission from Bank Negara to 1MDB’s initial request to export a billion dollars into the alleged joint venture in September 2009.

PetroSaudi, 1MDB and Bank Negara are welcome to contest the authenticity of this and other documents, which we are now releasing.

Meanwhile, we suggest that this letter shows exactly why the bank is now saying that it was seriously and deliberately mislead by 1MDB and why it is demanding the money back and wants to issue criminal proceedings.

The letter was originally written in Malay, then PetroSaudi received a certified English translation.

If our reproduction here has been “tampered” or “doctored” in any way, then of course anyone from the Bank Negara, 1MDB or PetroSaudi itself will be very well-placed to sue Sarawak Report for misrepresentation and publish the correct version in the meantime:

Original letter of approval in Malay

[For the full Malay and English versions of the BNM letter see the base of this story].

This letter of authorisation, which was sent by the Director of the Foreign Exchange Administration Department to 1MDB’s then Executive Director, Mr Tang Keng Chee, grants permission for the payment of the initial US$1 billion on the basis that amongst other provisions:
“PetroJV will utilize the equity funds totaling USD 2.5 billion from its shareholders to fund the investment in the energy, agriculture, real estate and tourism sectors in Malaysia and overseas;
The said funds in the sum of USD 2.5 billion will be placed in PetroJV’s account with Banca della Svizzera Italiana SA, Geneva pending investments in future projects;
In other words, the letter makes plain that BMN was of the clear understanding that 1MDB was providing 40% of a cash injection into a joint fund, which would be combined with a US$1.5 billion cash investment by PetroSaudi, designed to fund a variety of projects, including investments in Malaysia.

That understanding reflected 1MDB’s own press releases of the time (since noticeably removed from its site):

“PetroSaudi will contribute $1.5 billion”

As is now known, PetroSaudi in the event contributed no cash to the deal and the majority of the billion dollars injected by 1MDB was not paid into the joint venture account, but into Jho Low’s own company Good Star’s account at RBS Coutts in Zurich. Bank Negara Malaysia was therefore misled, just like the public.

Investigation documents produced by Bank Negara (below) show that repeated later queries about how the money was being invested were ignored and put off by 1MDB, which instead went on to borrow a further US$500 million and US$330 million on similar false pretences, which likewise disappeared mainly into Jho Low’s account at Good Star.

BNM investigation summary shows how US$500 million was supposed to be invested in a French energy company — Instead it was used to buy out UBG
The entire US$330 million meant to “promote foreign direct investment into Malaysia” went to Jho Low’s Good Star account

Bank Negara’s investigation shows when it tried to follow up on the payments they were given the brush-off by 1MDB or faced extraordinary delays and partial responses.

No response to requests for information — proposed projects did not eventuate — money missing….

It is plainly for this reason that BMN wants all the 1MDB PetroSaudi money returned and has requested for criminal proceedings to be opened. The previous Attorney General Gani Patail had started drawing up charge sheets for prosecutions related to 1MDB.

However, as Malaysia knows, Najib responded with an executive coup — he replaced the Head of Special Branch, who then sent a team of officers to apprehend Gani Patail as he arrived at his office on Monday 27th July. Patail was informed that he was to retire immediately on ‘health grounds’ without entering his office to collect his things.

It is unconstitutional for the Prime Minister to fire an Attorney General and it is unconstitutional for him to personally hand-pick a successor.

Ed Morse, banker and commodities pundit

However, this is exactly what Najib has done and new his hand-picked AG, Apandi Ali, is now refusing to act upon Bank Negara’s recommendation to prosecute 1MDB.

So, when Arul Kanda continues to issue sanctimonious press releases saying all is well with 1MDB and that Sarawak Report is ‘doctoring’ documents. Is he relying on the facts or just the strong arm tactics of his boss?


Fraudulent valuation of PetroSaudi

A key element of the criminal case against 1MDB is the astonishing and wilfully negligent failure of the board and directors of this public company to obtain an independent valuation of its proposed joint venture partner PetroSaudi, introduced by the PM’s appointed ‘advisor’ Jho Low.

Instead of placing cash as advertised to BNM and the public into the so-called joint venture, it emerged during the course of the two week lightening negotiation period that PetroSaudi was merely injecting ‘assets’ in the form of a subsidiary company (PetroSaudi International (Cayman) that allegedly owned valuable oil concessions in Turkemenistan.

Handy visual created by UK lawyers White & Case — the ‘injection’ came with $1.5 bn in shares and a supposed $700 m ‘shareholder loan’

However, PetroSaudi did not own the Turkmenistan oil field, it belonged to a Canadian company called Buried Hill instead. Furthermore, the concession was valueless to the extent that it is located in a disputed region of the Caspian Sea, making it currently impossible to legalise the ownership.

That didn’t stop PetroSaudi claiming the ownership and issuing a fictitious $700 million ‘shareholder loan’ as part of the supposed asset transfer to the joint venture company, which two days later it would demand back in hard cash!

PSI Director Patrick Mahony advises his colleague — instead of saying we are negotiating an interest in the oil field, let’s say we own it!!

To supposedly cover its obligations during the checking period on the deal (conducted at lightening speed) the 1MDB Board, directed by Shahrol Halmi, agreed to accept a valuation of this PetroSaudi International (Cayman) subsidiary from an American banker, who was recommended by none other than PetroSaudi Director Patrick Mahony himself, a banker called Ed Morse.

Morse was a prominent former politician and is currently Commodities Head of Citigroup, but in 2009 he was out of work, having lost his job with Lehman Brothers. He was also a close contact of Patrick Mahony and Tarek Obaid and the men were in regular touch before and after the 1MDB deal.

It was Mahony who hired Morse to value PetroSaudi International (Cayman) — he then passed it on to Shahrol Halmi as if it were an independent valuation!

The fact that this was only a window dressing exercise to please the auditors is further made clear by the fact that the Malaysian end of this dodgy deal only received Ed Morse’s document the day AFTER the deal had already been signed on 29th September 2009.

Shahrol Halmi still waiting for the valuation report on the day the deal was signed

Further correspondence shows that Morse derived all of his information for his “independent report” from a document sent to him by Mahony himself just before he wrote it up.

He admits as much in his own report:
“The analyses, opinions and conclusions presented in this report are based on our best economic judgments on the data that were made available to us by the managements of PetroSaudi International Limited and 1MDB PetroSaudi Limited” [Ed Morse report]
If Morse had checked out any of the data provided by PetroSaudi, he would have realised that they did not own the Turkmenistan oil field and that an Argentine concession was mainly funded with borrowed funds. Instead he summarised after the event:

Morse valued the PSI assets at US$3 billion

Morse was offered US$50,000 for this re-jigged version of PetroSaudi’s own figures, which was in the event bumped up to double by Patrick Mahony, presumably as a thanks for getting such a massive evaluation job done in just two days!

Laughably, the 1MDB Board and management accepted this so-called ‘injection of assets’ purely in the form of the transfer of PetroSaudi’s subsidiary company in the Caymans. There was no legal transfer of any genuine ownership of that company’s supposed assets, for example the alleged Turkmenistan oil concession.


Fraudulent transfer

As if such blatant and wilful negligence by the Board and management of a public company were not enough to prompt Bank Negara’s criminal case against 1MDB, the matter of course gets worse.

Bank Negara was specifically informed that all the US$1 billion being paid into the PetroSaudi venture was going to the joint venture company itself. Instead, the conspirators behind the deal injected a fictitious US$700 million ‘shareholder’ paper ‘loan’ into the equation on the 25th of September, just 3 days before the signing of the deal.

They then requested the money be paid directly back to PetroSaudi by 1MDB in cold hard cash on the day of the loan. This ‘repayment’ was dressed up as a consideration for the huge extra value of the supposed assets of the injected Cayman subsidiary, which Morse had put at US$3 billion, but were actually fictitious, unchecked and legally unsecured.

It gets worse, because of course as we all know the US$700 million did not even get paid to PetroSauidi, it got paid directly to a company owned by Jho Low called Good Star Limited, incorporated in the Seychelles.

There is a mound of evidence to show that PetroSaudi, in particular Patrick Mahony, deliberately lied to 1MDB on this point, claiming that Good Star was a PetroSaudi subsidiary.

Straight lie — This 1116073 account belonged to Jho Low’s Good Star Limited, not PetroSaudi

The company has continued to make this claim and lie in recent weeks in various statements seeking to imply that the money went to PetroSaudi instead of Jho Low:
“In a statement to The New York Times this week, 1MDB said that Good Star was owned by PetroSaudi and noted that PetroSaudi had confirmed that 1MDB said it had provided information about these transactions to the Malaysian authorities that are investigating the sovereign fund.”[NYT 18/6/15]
Shahrol Halmi also knew full well that the money was being ‘paid back’ not to PetroSaudi but to Good Star, as his emails make plain. If he had checked the beneficial ownership of Good Star he would have realised it belonged to Jho Low and that the company was not part of the ownership structure of PetroSaudi.

Halmi confirmed to the bank that the beneficial owner of the account which received the $700m was not PetroSaudi but Good Star Limited — belonging to Jho Low

Mr Arul Kanda is of course welcome to say that these documents, which are also in the hands of international regulators and other news organisations have been ‘doctored’ and ‘tampered’ by Sarawak Report.

He should take us to court and compare his copies with ours and explain why it is that all the surrounding evidence about the 1MDB PetroSaudi affair ties in nicely with our allegations, while for his part he cannot stick to the same answer two days running.

Malay Version of the Bank Negara Letter of Permission:

Page 2

English translation:



29 September 2009

Mr Tang Keng Chee 
Executive Director 
1Malaysia Development Berhad (848230V) 
Level 8, Menara IMC, 
No.8, Jalan Sultan Ismail, 
50250 Kuala Lumpur.



We refer to the 1Malaysia Development Berhad application (1MDB). 

2. Permission is given to 1MDB to remit funds in the sum of USD1 billion for the purpose of obtaining 40% shareholding in 1MDB Petrosaudi Limited, British Virgin Islands (PetroJV). The reference number of the said investment is IO95174.

3. For the purpose of simplifying the statistical compilation of the balance payments by the Central Bank of Malaysia-

(a) 1MDB has to disclose the information required by the local licensed bank (commercial bank, Islamic bank or local investment bank) for convenience in remitting the investment funds which is in excess of RM 200, 000 on behalf of 1MDB; and

(b) The Malaysian Central Bank’s Department of Statistics will contact 1MDB with regard to a quarterly report in respect of 1MDB’s assets and liabilities to be submitted to the Central Bank of Malaysia.

4. We take note that:
(a) PetroJV is a joint venture company held 40:60 by 1MDB and its joint venture partner, Petrosaudi Holdings (Cayman) Ltd, Cayman Islands;

(b) PetroJV will utilize the equity funds totaling USD 2.5 billion from its shareholders to fund the investment in the energy, agriculture, real estate and tourism sectors in Malaysia and overseas;

(c) The said funds in the sum of USD 2.5 billion will be placed in PetroJV’s account with Banca della Svizzera Italiana SA, Geneva pending investments in future projects;

(d) 1MDB will fund the investment in the sum of USD 1 billion with the acquisition of “Islamic Medium Term Notes” which were issued in May 2009; and

(e) The remittance of such funds for the said investment will be done via a foreign exchange of the funds in Ringgit to the relevant foreign currency with a local licensed bank. In this connection, 1MDB will make the exchanges in stages to ensure order and smoothness in the local foreign currency market. 

5. In the event that 1MDB does not make any remittance of funds for its investment in the period of 12 months from the date of this letter, this approval will be rendered cancelled and 1MDB would be required to obtain permission from us prior to the remittance of such funds.

6. In the event that 1MDB is bound by any value protection contract to manage currency exposure risks for its investments, the contract has to be:-

(a) executed with a local licensed bank; and

(b) terminated by 1MDB when the said investment is sold or has come to
an end.

Yours faithfully,
On behalf of Foreign Exchange Officer
(Wan Hanisah Wan Ibrahim)
Director Foreign Exchange Administration

Originally published at www.sarawakreport.org.

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