Billion Dollar Whale

by Tom Wright

  Here was Low’s chance. In Abu Dhabi, Low had observed firsthand the huge amounts of money that sovereign wealth funds control, and he saw an opportunity to broker a deal. Since Low’s Middle East tour, Khaldoon Al Mubarak, the chief executive of Mubadala, had grown in prestige. Buoyed by sky-high oil prices, Mubadala had taken sizable minority stakes in firms like Ferrari and Advanced Micro Devices, and Al Mubarak controlled a multi-billion-dollar empire.

  Low’s main contact in Abu Dhabi remained Yousef Al Otaiba, the political adviser to the emirate’s crown prince. On June 17, 2007, Low wrote an email to Otaiba with details of the plans for the Iskandar development, and suggested Mubadala could invest. He then arranged for Khazanah executives to fly to Abu Dhabi, where he set up meetings with Otaiba and others.

  “Otaiba’s name card is the only one you need in Abu Dhabi,” Low joked as he introduced the emirati to Khazanah executives.

  Low was punctilious, stage-managing meetings and phone calls between Mubadala and Khazanah, and sending around emails ahead of time with subject lines like “sequence of events.” He also acted as if the deal would go off the table if both sides didn’t pounce now. Situating himself at the nexus of the dealmaking, Low’s behavior served to deepen the impression that he could deliver powerful Middle Eastern contacts.

  Low’s ability to bring Mubadala to the table marked a revival after the mess of the failed condominium deal. He latched onto the opportunity it presented to build his political contacts in Malaysia. He already knew Deputy Prime Minister Najib’s brother and his stepson, and he set about getting close to Najib and Rosmah themselves. In 2007, Low formed an offshore company for Rosmah and Najib to help pay for their daughter’s expenses while studying at Georgetown.

  The Iskandar land project, with a big investment from the Middle East, offered Low a chance to show his worth. The young Malaysian told the politician about the deal, and offered for Najib to take credit for it—all without having to do the legwork. The Iskandar project, right on Singapore’s doorstep, would burnish Najib’s credentials as a doer, a politician who could attract investment and finally propel Malaysia into the ranks of developed nations.

  As Rosmah Mansor took the microphone, she beamed at the crowd. Clad in colorful traditional Malay silks, the wife of the deputy prime minister was enjoying playing host. The guests, soft drinks in hand, milled around the huge stateroom of Rosmah and Najib’s official residence, an impersonal, cavernous building, with a pointed red-tiled roof and floor-to-ceiling windows that offered a sweeping view of gardens bordered by a man-made lake. Outside a tropical downpour threatened to break out. At the back of the room, scurrying around, making sure everyone was having a good time and meeting the right people, was Jho Low.

  That night, in late August 2007, marked a new turn for Najib and Rosmah—and they had the young Malaysian to thank for it. The guests had assembled at Najib’s residence in the new city of Putrajaya, just outside Kuala Lumpur. Malaysia had moved the government there in the 1990s, hoping to develop a global technology hub. An impressive sight of modern skyscrapers and Islamic-inspired domed edifices set around a huge lake, Putrajaya had never attracted sufficient capital or companies and felt somewhat forlorn, its multilane highways largely empty.

  Inside the residence, however, the mood was celebratory. The party was to mark the deal for Mubadala and the Kuwait Finance House to take a stake in the Iskandar land project. “I’d like to thank Jho Low for bringing Middle Eastern investment to Malaysia,” Rosmah told the room. Then, accompanied by a live band, she began to sing a number of ballads, as the bemused delegation from Abu Dhabi looked on.

  Afterwards, guests waited in line as Najib introduced Mubadala’s chief executive around the room. Wearing a headdress, and with a confident yet polite demeanor, Al Mubarak had added another investment to his growing empire, all thanks to Low. The next morning, Mubadala signed a contract to invest half a billion dollars in the Johor project of five-star hotels, residences, and a “golf village.”

  For Low, the deal was a seminal moment. His ability to source Middle Eastern money put him in good stead with Najib and Rosmah, reinforcing his claims to hold sway in the Arab world. The couple was fascinated by the Gulf, where rulers enjoyed lives of exceptional luxury. In parallel, Low was making other efforts to ensure he became enmeshed with the family. A few weeks earlier he had flown to London for the high school graduation party of Nooryana Najib, Najib and Rosmah’s daughter, who was leaving the exclusive Sevenoaks School to study at Georgetown in the United States.

  But there was a problem. Low had expected to make serious money for himself from the deal, and he was incensed when Khazanah turned down his request to be paid a broker fee. Run by professionals, the fund was too clean for Low’s purposes. Going forward, he really needed to control his own pot of investment money. To do so, Low prepared to dive deeply into the world of offshore finance.

  Chapter 5

  A Nice Toy

  Washington, DC, August 2008

  In the fall of 2008, Otaiba’s business partner, a Jordanian named Shaher Awartani, wrote him an email containing some very welcome news. The pair was about to make around $10 million through a deal that Low had set up in Malaysia. Perhaps worried about too many direct interactions with this Malaysian broker, Otaiba relied on Awartani to communicate with Low. Yet the Malaysian was starting to prove a very lucrative connection.

  “Great news. It’s nice to see our efforts finally paying off,” Otaiba wrote back.

  Soon after, Awartani suggested buying a Ferrari after what Otaiba described as a “transfer from Jho.”

  “I think we each deserve to buy a nice toy in celebration, what do you think? The 458 ITALIA maybe?” Awartani wrote in an email to Otaiba. The ambassador responded that such ostentatious consumption in Abu Dhabi “will just attract unnecessary attention.”

  Otaiba had reason to keep his dealings with Low under wraps. A few months earlier, he had become the UAE’s ambassador to the United States, fast establishing himself as one of Washington’s most prominent diplomats. His dinner parties, at the ambassador’s palatial residence on the Virginia bank of the Potomac River, catered by celebrity chefs such as Wolfgang Puck, attracted White House staffers, members of Congress, and top cable-news hosts. Sometimes, the ambassador invited guests down to his man cave—a basement area with a huge flat-screen television—to watch basketball. Accompanied by his glamorous wife, Abeer, an Egyptian-born civil engineer, Otaiba seemed to attend every social event in the capital. With his Western ways, and Abu Dhabi’s support of the fight against militant Islam, the ambassador was a popular figure, whether at cocktail parties or propounding his views on Morning Joe.

  But Otaiba, only in his midthirties, had a hidden side, a business life, one which he kept away from the limelight. The ambassador had been right to bet on Jho Low. His association with the Malaysian looked like it would make him exceptionally rich.

  Denied a broker fee in the Iskandar land deal, Low had cast around for another way to profit. He had started out trying to be a classic deal maker, angling to earn a fee for bringing Mubadala into the investment. But he had been blocked. To get the payoff he believed he deserved, and to repay Ambassador Otaiba, Low would do whatever it took.

  He came up with a convoluted yet brilliant scheme. Malaysia was abuzz over Mubadala’s plans for the giant Iskandar project. With blueprints calling for new roads, homes, malls, and industrial developments, builders would be jockeying to win lucrative contracts. At this time, Low heard about two Malaysian construction companies that were for sale. Perhaps he could buy them cheaply, and win contracts on the Iskandar development? To finance the multi-million-dollar purchase price, Low needed more loans. But he was still a nobody in the eyes of banks, a low-level businessman with a poor track record. To burnish his image and get his hands on the banks’ money, he once again turned to powerful friends.

  As a vehicle to make the purchase, Low set up a British Virgin Islands entity called the Abu Dhabi-Kuwai
t-Malaysia Investment Company and gave free shares to Ambassador Otaiba and minor aristocrats from Kuwait and Malaysia. He was creating the impression that prominent individuals were behind the company. With such illustrious backing now in place, Low had no trouble persuading Malaysian banks to lend tens of millions of dollars. He used some of the debt to fund the investment group’s acquisition of the construction companies. At the same time, a subsidiary of Wynton, Low’s company, took out further loans to finance the purchase of a minority stake in the Iskandar land project alongside Mubadala. Instead of receiving a broker fee, Low became a co-investor.

  He then set about creating a fiction that major Middle Eastern sovereign wealth funds also were involved in the purchase of the construction companies. If Low could make it appear as if his personal ventures were backed by powerful Middle Eastern funds, he could attract even more money. To create the illusion, he turned to the opaque world of offshore finance. Low knew about offshore financial centers from his father, Larry, who had a myriad of overseas accounts. It was normal for rich Asians, fearing instability at home, or just to evade taxes, to set up offshore accounts in secretive jurisdictions like the British Virgin Islands and the Cayman Islands.

  The “offshore” designation typically refers to jurisdictions whose financial systems are much larger than their domestic economies; in other words, the banking system exists purely for nonresidents to stash cash, unlike international financial centers in London and New York that also service local citizens and companies. In recent years, offshore centers have come under pressure to share information on their clients. But many of these centers, reliant on annual fees from the thousands of companies seeking a cloak of secrecy, remain safe harbors for money launderers and other criminals to wash cash and avoid taxes. One recent estimate puts the money stashed in offshore financial centers since 1970 at $32 trillion—a figure equal to the combined economies of the United States and China—with hundreds of billions lost in tax revenues.

  The now twenty-six-year-old Low was already mastering this hidden realm of the global economy. He would have known that the Cayman Islands, home to branches of U.S. banks and hedge funds, had improved its information sharing with Washington. The British Virgin Islands in the Caribbean, however, had a no-questions-asked approach to company incorporation, and was where he had set up Wynton. (In 2007, his sister Low May-Lin became a solicitor of the Supreme Court of the British Virgin Islands.) And tiny Seychelles, in the Indian Ocean, had the advantage of not seeming to care who owned its shell companies.

  Most importantly, Low had experienced the ease of setting up an offshore account—almost anyone could do it. For only a few thousand dollars, a corporate-services firm like U.S.-headquartered Trident Trust or Mossack Fonseca of Panama would open an account or form a company, and deal with all the paperwork. (The Panama Papers, a leak in 2016 of hundreds of thousands of Mossack Fonseca client records going back to the 1970s, showed the extent of the use of offshore accounts by the global elite, from the family of Chinese president Xi Jinping to actress Emma Watson.)

  Without this secrecy, the scam that was about to unfold would have been impossible. For the next step of his scheme, Low set up two shell companies in the Seychelles. The firms—ADIA Investment Corporation and KIA Investment Corporation—appeared, given their names, to be related to the Abu Dhabi Investment Authority, or ADIA, and Kuwait Investment Authority, or KIA, two of the most famous, multi-billion-dollar sovereign wealth funds in the world. But the look-alike companies were purely Low’s creation, with no links to Abu Dhabi or Kuwait.

  In setting up ADIA Investment Corporation, Low experimented with another financial trick that he would add to his repertoire. The company issued just one unregistered share, valued at $1, and it was controlled by whoever physically held the stock certificate. These “bearer shares” were banned in many jurisdictions, including Great Britain and the United States—Nevada and Wyoming in 2007 became the last states to abolish their use—because they allowed owners of companies to hide behind layers of secrecy and made it nearly impossible for regulators to determine the owner of an asset at a given point in time. Seeking to find tax cheats in the early 2000s, the United States started to pressure offshore centers to hand over details of the beneficial owners of companies and accounts. Even the British Virgin Islands had recently outlawed the practice of bearer shares. But in the Seychelles, Low learned, they were still permitted.

  Next, Low had these look-alike offshore companies take minority stakes in the Malaysian construction firms. It now would appear to any prospective business partner doing due diligence that royals from Kuwait and Malaysia, as well as Ambassador Otaiba, and two major sovereign wealth funds, were Low’s partners in plans to develop the Iskandar project.

  With this elaborate structure in place, Low went fishing. He needed a mark, a rich but financially naive businessman who would buy the companies and land from his supposedly illustrious investment group for a high price. He found one in Taib Mahmud, the seventy-one-year-old chief minister of Sarawak, a remote, jungle-covered Malaysian state on Borneo Island, separated from the rest of the country by hundreds of miles of sea. Short and elfish, with silver-gray hair, Taib was one of Malaysia’s richest individuals—the product of decades in businesses such as logging and palm-oil plantations that had led to the deforestation of his state. A wily and long-serving politician, Taib dressed in white suits, drove a white Rolls-Royce, and owned a white grand piano, which had once belonged to Liberace. He was not, however, a skilled financier.

  The chief minister had come to hear of Low, who was touting Mubadala’s ambitions to invest more widely in Malaysia after the Iskandar deal. Taib was keen for investment to build palm-oil refineries and other energy projects in Sarawak. Low held out the possibility of huge Middle Eastern outlays. But in the meantime, Low persuaded Taib to buy the construction companies and the Iskandar land.

  A few months later, Wynton, Low’s company, completed the sale of its stake in the Iskandar land to UBG, a holding company controlled by Chief Minister Taib, in return for cash and shares. The deal made Low the largest shareholder of UBG. He crowed to friends that the sale had netted a $110 million profit for Wynton by selling to Taib at a significant markup. The Malaysian had made his first killing, and he traded in his E-series Mercedes for a black-colored Ferrari, taking his new toy for nighttime joy rides around Kuala Lumpur.

  But there were problems on the horizon. Low’s haul was staggering, and Taib, who still held a stake in UBG, would be furious when he found out the premium he had paid. Otaiba, too, started to hear talk of these huge profits that Low had reaped and worried that he was only being fed scraps. It was Otaiba, after all, who had lent his name to this deal, embellishing the fiction that Abu Dhabi officially was involved.

  “Our friend Jho may be shafting us on the Iskandar Development region issue,” Awartani wrote to Otaiba. “My opinion is we may be getting just a bone to keep us happy and [quiet].”

  On U.S. nightly cable news, Otaiba had a charming demeanor as he explained Middle East affairs to American audiences, but, used to wielding power, he could be stony in private, and Low’s perceived double-dealing infuriated him. He viewed Low as a useful contact, one who offered access to potentially lucrative deals in Malaysia, but it was the Malaysian who ultimately needed him—and his high-level contacts in Abu Dhabi—far more than he relied on Low.

  “He needs to understand VERY clearly that he can’t do much without us knowing,” Otaiba replied to Awartani, urging him to confront Low. “Personally, I prefer the direct approach cuz it will scare him a bit.”

  Even his partners were starting to distrust Low. But at that moment, he had finally hit a gusher of cash, all without holding down a regular job. He was twenty-seven years old—only three years out of college. While most of his Wharton classmates were grappling with the turmoil engulfing Wall Street and the world financial system in late 2008, Low was already sitting on a fortune that most of his finance industry classmates from
Wharton could only dream of. Without producing anything, Low had shown an unusual ability to navigate the chambers of power and persuade investors by holding out the promise of large returns. He had made money for Otaiba and his other influential sponsors, strengthening his web of contacts. Not all the cash was really his—he’d have to figure out a way to get some money back to Taib—but Low was starting to develop a deal-making reputation.

  He was no longer a nobody, but an investor with a track record who was now a fixture at events—business meetings but also society gatherings—held by Kuala Lumpur’s elite. It was this precocious renown that landed him on the radar screen of an ambitious banker at Wall Street’s most powerful financial institution.

  Chapter 6

  Doctor Leissner, I Presume

  The Great Wall of China, June 2006

  Waiters bustled around Chinese banquet tables, which had been set up under a tent at the Great Wall near Beijing for a celebration with a very special guest of honor. Moments later, Lloyd Blankfein, the aggressive former trader who recently had been named chief executive of Goldman Sachs Group, arrived with an entourage of senior American and Chinese bankers. Blankfein was the new king of Wall Street, and Goldman was holding a symbolic global board meeting on the Great Wall, a sign of the importance of China—and Asia more broadly—for the powerful bank.

  Hank Paulson, who had just left the chief executive role, had steered Goldman deep into China, where it made money advising the Communist government on how to privatize companies and became one of the first foreign banks to set up a local securities joint venture. Paulson had quit weeks earlier to become President George W. Bush’s Treasury secretary, and Blankfein was keen to keep the focus turned on Asia. The region remained somewhat of a backwater. Wall Street banks still earned well over half of their profit in the United States, raising capital for clients, advising on mergers and acquisitions, and selling profitable derivative products, not to mention making hefty bets with their own money, including on the teetering housing market. Ahead of the financial crisis, Asia accounted for only around a tenth of Wall Street’s profits, of which China was a major driver.