This article first appeared in The Edge Malaysia Weekly on September 23, 2024 - September 29, 2024
ON Aug 28, 2024, the Swiss Federal Criminal Court convicted Swiss-Saudi Tarek Obaid and Swiss-British national Patrick Mahony for embezzling more than US$1.8 billion from 1MDB. Obaid swindled at least US$805 million and Mahony more than US$37 million, the court found.
They were both convicted of fraud, criminal mismanagement and money laundering.
Obaid was sentenced to seven years in prison, while Mahony received a sentence of six years. The conviction can be challenged on appeal and the prosecution’s request for their immediate detention in custody was denied by the court.
The defence argued that no fraud took place. “There is no injury in this operation. This is exactly what is wanted” by the partners, according to the defence. In other words, Tarek and Mahoney claimed that they were innocent parties, doing what was requested by their joint-venture partner 1MDB.
A review of the facts, the communications, the actions of the respective parties, and the money trail shows that what Tarek and Mahony represented in court were absolute lies.
The evidence is all there — that they were indeed both perpetrators and collaborators from the very inception of the plan to steal from 1MDB. Worse, the heist at 1MDB was only the first phase of their grand plan, which, if they had succeeded, included stealing from Petronas, the Employees Provident Fund, MISC Bhd and Lembaga Tabung Haji.
This explains why once we got hold of the evidence via whistle blower Xavier Justo in February 2015, we went all out to publish the emails and documents. The crooks had to be stopped before they bankrupted our country. And the only way to do that was to expose their plan.
We had no political agenda. Our only agenda was to stop more and more billions of our money from being stolen by this bunch of criminals — which included the key culprit Jho Low, his sidekicks and the many spin doctors who were in his pocket.
The JV partner for Tarek and Mahony’s company PetroSaudi International was 1MDB, not Jho Low, who never had any position at 1MDB although he was calling the shots. And Tarek and Mahony were collaborating with Jho Low to steal from 1MDB. By the time 1MDB CEO Shahrol Azral Ibrahim Halmi was brought into the picture, the plan to steal from 1MDB was already hatched. In other words, Tarek and Mahony never acted at the request of 1MDB, but instead that of their collaborative partner in crime, Jho Low.
As for the role of Datuk Seri Najib Razak, as prime minister, finance minister and adviser to 1MDB, the evidence we had showed that Najib was unaware of the theft perpetuated by PetroSaudi and Jho Low, at least until the end of 2010, when the first US$1.5 billion (from the RM5 billion bonds raised in September 2009) were stolen. The money trail showed that all these proceeds went to Jho Low and Tarek. (See Charts 1 and 2.). None of the RM1.5 billion went to Najib.
Our conclusion is based on the email communications of the various parties, which were obtained from Justo as outlined below.
1. Aug 27, 2009: Tarek introduced Jho Low to Mahony via email.
2. Sept 7, 2009: Jho Low met Mahony at the Time Warner Building in New York with Seet Li Lin and Tiffany Heah.
3. Sept 10, 2009: Jho Low emailed Tarek, Mahony and Seet: “We need to move fast. We want to sign and pay by September 09.”
4. Sept 11, 2009: Mahony emailed Jho Low, Seet and Tiffany and copied Tarek, with an attachment introducing PetroSaudi International.
A second email from Mahony to Jho, Seet and Heah and copying Tarek provided a summary of their discussion and what they could work together on. The main points in the four-page notes were:
a) Set up a JV company where 1MDB contributes cash and PetroSaudi injects the Argentinian assets at around US$50 million to US$75 million and the Turkmenistan asset at around US$700 million to US$1.5 billion, doing the deal with the Canadian company that currently owns the asset in Turkmenistan (this acknowledges that PetroSaudi does not own it).
(b) 1MDB was only step 1 of the proposed transactions. Petronas was to come in later, providing funding to PetroSaudi to develop their upstream oil and gas assets … and “over time, Petronas could buy the JV and both PetroSaudi and 1MDB would make a big return on their initial investment”.
c) “ … we know there are deals you are looking at where you may want to use PetroSaudi as a front, we would be happy to do that,” wrote Mahony, clearly indicating that PetroSaudi was willing to facilitate fake transactions and money laundering for Jho Low.
5. Sept 15, 2009: Seet emailed Tarek, Mahony, Jho Low and Heah with additional details to the proposal from Mahony earlier. That 1MDB would inject US$1 billion into the JV Co, of which US$300 million would be left in the JV Co and US$700 million would be paid out. He termed this “TOTAL OVERPAY”.
6. Sept 15, 2009: A conference call was held between Mahony, Jho Low, Seet and Heah.
7. Sept 15, 2009: Seet emailed Mahony, Tarek, Jho Low and Heah after the conference call with the following objectives to be met:
a) Signing of JV agreement by Sept 30, 2009.
b) First tranche of Malaysian investment to be US$1 billion.
c) US$280 million would remain in the JV company.
d) US$720 million would be moved via PetroSaudi.
e) 1MDB must hold 49% or less of the JV Co.
The US$720 million would be structured as a (fake) loan repayment to PetroSaudi. Valuation of the assets to be injected into the JV by PetroSaudi will be “worked backwards to produce the right valuation”.
8. Sept 18, 2009: Jho Low introduced Tarek and Mahony to Shahrol Halmi, the CEO of 1MDB. Jho Low informed Shahrol that the signing of the JV was to be done by Sept 28, 2009. In other words, the deal was already done and, as CEO, Shahrol was there only to execute.
9. Sept 20, 2009: Shahrol emailed Mahony for the list of assets to be injected into the JV by PetroSaudi.
10. Sept 21, 2009: Mahony replied to Shahrol, Jho Low, Tarek and copied Casey Tang (executive director of 1MDB) and Robert Ho (head of communications at 1MDB) that PetroSaudi was NOT ready to provide 1MDB with the list of assets to be injected into the JV company.
11. Sept 22, 2009: Shahrol sent a draft of the JV agreement between 1MDB and PetroSaudi to Mahony, copied Tarek, Tang and Kelvin Tan (director of investments at 1MDB). That draft agreement came from Heah, who was acting for Jho Low, and was at the time employed as legal counsel at UBG Bhd (an entity that had nothing to do with 1MDB but where Jho Low was a major shareholder).
12. Sept 28, 2009: JV agreement between 1MDB and PetroSaudi was signed.
Sept 29, 2009: Edward Morse submitted his valuation report for the Turkmenistan Serdar project at US$3.518 billion. This asset was PetroSaudi’s contribution to the JV but was in fact not owned by PetroSaudi but by Buried Hill Exploration, an unrelated Canadian company. And although 1MDB had the right to appoint an independent valuer, it did not. Edward Morse was appointed by PetroSaudi, and paid a hefty fee to fake a desktop valuation over a few days.
13. Sept 29, 2009: 1MDB-PSI, the JV Co, demanded the repayment of US$700 million (the fake loan) by Sept 30, 2009, in a letter executed by Tarek, as a director of the JV Co, 1MDB-PSI. This fake loan was created on Sept 25, 2009 — purportedly from PetroSaudi Holdings (Cayman), a company that belongs to Tarek, to the JV Co 1MDB-PSI. Note that the JV Co was only incorporated on Sept 18, 2009. Tarek was a fake rich Arab, who could not even secure the Amex Black Centurion card that he craved, much less have US$700 million to loan to the JV Co.
It was demanded that this US$700 million fake loan be repaid by 1MDB directly, on behalf of the JV Co, as part of 1MDB’s subscription as per the JV agreement crafted by Jho Low, Heah, Mahony and Tarek.
1MDB was instructed by Tarek to pay to RBS Coutts Bank Ltd (account No 544-7-44876) for further crediting to Account No 11116073. In an email from Jonathan Yong of White & Case representing PetroSaudi to Brian Chia of Wong & Partners representing 1MDB, it indicated that the bank account was in the name of PetroSaudi International Ltd. Brian Chia questioned why the name of the recipient (PetroSaudi International Ltd) was different from the name on the loan document (PetroSaudi Holdings (Cayman) Ltd). Mahony confirmed they were effectively the SAME company. Mahony and Tarek were therefore direct conspirators in this US$700 million theft and money laundering to Jho Low through Good Star and his benefactors, sharing US$85 million of this loot as “brokerage fee”.
14. Sept 30, 2009: The US$1 billion was remitted by 1MDB through Deutsche Bank Malaysia. See Chart 1 on the money trails, where the bulk of the money ended up in entities belonging to Jho Low and Tarek.
Seet wrote on his Facebook account the same day: “I feel the earth moved under my feet”.
15. Oct 1, 2009: The investigation and regulatory risk officers of RBS Coutts in Zurich asked Deutsche Bank Malaysia for the full name of the final beneficial owner of Account No 11116073.
16. Oct 2, 2009: Jacqueline Ho of Deutsche Bank Malaysia emailed Shahrol and Tang of 1MDB for the name and address of the beneficial owner of Account No 11116073. Tang forwarded the same email to Jho Low.
Subsequently, presumably after getting the answer from Jho Low, Shahrol replied to Deutsche Bank Malaysia, “Jac, please use this address — GOOD STAR LIMITED. P.O. Box 1239, Offshore Incorporated Centre, Victoria, Mahe, Republic of Seychelles.”
So, it was Good Star, not PetroSaudi International Ltd, that was the owner of the bank account. Mahony lied. In any case, PetroSaudi International Ltd (Seychelles) was not part of the PSI group but only served as a front for Jho Low, as agreed by Tarek and Mahony back on Sept 11, 2009. Good Star was a “bearer share” company. The CIO was Seet, Jho Low’s sidekick and employed by his company Jynwel Capital in Hong Kong.
17. Oct 7, 2009: Shahrol, as CEO of 1MDB, emailed Mahony asking for their JV partner PetroSaudi’s company profile. According to Shahrol, “It would greatly help us out in the BOD meeting this Saturday.” This was nine days after 1MDB had already paid out US$1 billion.
Mahony forwarded the email to Jho Low, who responded, “Don’t need to send. Don’t worry, will handle them.”
18. Aug 7, 2010: Mahony authored an email to Tarek, who was going to meet Najib, under the subject matter: Malaysia Discussion Tomorrow. In it, he listed the points he had discussed with Jho Low and what Mahony thought the PM should be told by Tarek:
i) (Next) US$500m ready to be sent out by 1MDB, pending Bank Negara approval, which can be pushed faster by the PM.
ii) Another US$500m by end of September. The banks will lend only if a large land is transferred to 1MDB.
iii) Jho agreed 1MDB will take a US$500m loss in the PetroSaudi investment, and another US$300-400m for UBG.
“This means we really have a hole of $1b to cover.”
iv) “I wouldn’t discuss the $500m write-off with the PM or any loss at his point (this is Jho’s thoughts only for now but it makes sense) because I think the PM thinks we are making good investments. So I think we promote the JV and all the great things we can do with it but make it clear we need the funds soon and that delays are costing us — therefore we would urge the PM to do everything in his power to make sure we have the full $1b as soon as possible.”
Also, EPF: ready to invest US$250m in real estate.
On Petronas: Mahony told Tarek, “I discussed doing a big deal with Jho to plug the hole and come up with that $1b that will make us be able to dissolve the JV with 1MDB. Things to discuss with PM on this are we need direct access to Petronas.”
19. Sept 14, 2010: 1MDB remitted another US$500 million to the JV Co, 1MDB-Petrosaudi Ltd (BVI). All these monies went either to the entities belonging to Tarek or Jho Low. US$260 million that went through Tarek ended up in Javace Sdn Bhd, which together with Majestic Masterpiece Sdn Bhd (a company controlled by a shell company, Abu Dhabi Kuwait Investment Corporation, and owned by Good Star), used these funds to privatise UBG Bhd, all for the benefit of Jho Low. (See Chart 2.)
Conclusion
What is clear from the above is that up to this point, that is, end-2010, Najib Razak was unaware that the cash injected by 1MDB into the JV company 1MDB-PSI had been stolen by Jho Low and Tarek (as shown in our two charts). Jho Low and Tarek collaborated to mislead and lie to Najib that 1MDB was making good investments when they knew the money had been lost. And up to this point, the money trail shows none went to Najib himself.
But, clearly, at some stage after the end of 2010, Najib must have found out, at least part of the truth, if not the whole truth. When? We do not know.
The Edge started writing about the troubles at 1MDB from 2013 and, by 2015, we had presented overwhelming evidence including dates, money trails, bank accounts and even the communications and the reasons for these payments, clearly indicating fraud had taken place.
One of the questions that we are often asked is why were Jho Low, Tarek and their co-conspirators so blatant in their stealing? Any reasonable person would conclude that just siphoning off the money and having hardly any real assets to account for it would surely be easily discovered. They were audacious. They thought they would be protected by a sitting PM. And we believe they were relying on a cover-up plan, as we have highlighted, using their own words in their internal emails.
They were going to steal from even bigger entities in Malaysia than 1MDB: Petronas, EPF, MISC and Lembaga Tabung Haji to cover up the losses at 1MDB and walk away with what they had stolen and more.
This is why we did what we did, starting in 2013/14 by publishing a series of articles questioning the affairs of 1MDB. And then in 2015, after getting hold of the Justo documents, we did the exposés about the scheme to scam 1MDB. We wanted it to be stopped to prevent further plundering of our money. We also wanted the criminals to be prosecuted. There were many of them. Some have been charged, convicted and jailed. But Jho Low is still at large, and still funding spin doctors to discredit those who exposed the crimes and to portray him as merely an intermediary/enabler, when he was the puppet master.
Jho Low stole US$1.0 billion from the US$1.8 billion 1MDB/PSI transactions. And in the trial of ex-Goldman Sachs banker Roger Ng in the US, FBI agent Eric Van Dorn testified that Jho Low stole US$1.42 billion from the three 1MDB bonds totalling US$6.5 billion that Goldman helped to raise. That is a whopping US$2.42 billion or more than half the US$4.5 billion the US Department of Justice said was stolen from 1MDB. Not bad for someone who was only an intermediary/enabler. And definitely enough to fund his spin doctors.
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