Billion Dollar Whale

by Tom Wright

  By 2006, however, the winds were shifting. The board meeting on the Great Wall was largely a symbolic affair, but as the attendees looked out from their perch down over the plains toward Beijing, the talk was tinged with optimism about the future of Asia. There was growing interest in the region, as China’s economy, churning out toys, clothes, machine parts, and other manufactured goods for the United States and Europe, grew at double-digit rates. Southeast Asian neighbors like Malaysia, which supplied China with raw materials, were registering their own solid economic expansions of more than 5 percent annually. Goldman’s honchos began telling staff they had better chances of promotion if they moved to Asia, a sweetener to get employees to uproot their families from New York and London and relocate to Hong Kong or Singapore.

  In early 2009, Tim Leissner, a rising star at Goldman in Asia, stepped out of a car at the Istana Negara in Kuala Lumpur. With mustard-colored domes, the imposing hillside official residence of Malaysia’s king evoked an Indian maharaja’s palace. It was an incongruous location for Leissner, a thirty-nine-year-old German, to be holding a meeting. Six foot three tall and dashing, Leissner, head of investment banking in Southeast Asia, had spent a decade generating new business for Goldman throughout the region.

  Today’s meeting was different. After flying in from his base in Hong Kong, Leissner went to purchase a songkok, a traditional Malay hat, a piece of headgear that was de rigueur when meeting Malaysia’s king. He was there to talk with the sultan of Terengganu, Mizan Zainal Abidin, one of the country’s nine hereditary princes, who at the time was also king of Malaysia under a system that rotates the crown among the sultans. Mizan often received guests in ceremonial Malay attire—a headdress made from folded embroidered silk, a short golden-threaded sarong over black pants, with a kris dagger tucked into a waistband—but for this meeting he was dressed in a Western business suit.

  Typically Leissner would scout for deals in Malaysia by maintaining close ties with chief executives and politicians. The country’s economy was a minnow compared to China, where Goldman was focusing most of its attention in Asia, but Leissner had spent almost a decade building connections in Malaysia, and Goldman had started to make respectable money advising on deals. Sometimes he would rely on middlemen, politically connected Malaysian brokers, who took a fee for making introductions, a normal practice in Asia. This meeting had been organized by Jho Low, who was only twenty-seven years old but seemed extremely well connected.

  Leissner had met Low through Roger Ng, a well-connected local banker at Goldman, and the young Malaysian registered an unfavorable first impression. Low seemed like a striver, someone who tried to set up deals and take a cut without doing the legwork or risking any money of his own. Leissner told friends that he considered Low a “dodgy” character. Still, Low had investment ideas, and the Goldman banker was ambitious and hungry for the next big thing. Low had told Leissner about the sultan’s plans to set up an investment fund to manage his state’s oil and gas wealth. The sultan, Low had said, wanted to hire Goldman.

  A good talker, Leissner knew how to charm Asian dignitaries, and he hit it off with the sultan. By the end of the meeting, Goldman had clinched a contract to advise on the formation of the new fund, which was to be known as the Terengganu Investment Authority. Goldman’s fee for setting up the authority was a paltry $300,000—a sum barely worth getting out of bed for, by Wall Street’s standards. But Leissner knew how to play the long game. The Terengganu deal was the beginning of a line of business that in short order would earn hundreds of millions of dollars for Goldman. Suddenly, the one-time backwater of Malaysia would become one of Goldman’s biggest profit centers anywhere in the world.

  Growing up in the northern German town of Wolfsburg, close to Hanover, Leissner led a privileged childhood as the middle of three brothers. His father was a senior executive with Volkswagen, which is based in the town, and he attended a local high school, playing tennis most afternoons at a private club from the age of ten. In the summers, the family would send him to exclusive training camps in Europe and the United States, where he hit with star players such as Steffi Graf.

  When he was seventeen, Leissner spent a year as an exchange student at the private Millbrook School in upstate New York. His host family considered him reserved, a trait they took to be typically German, but he quickly dove into his new American life. He played basketball and wide receiver for the football team. The local newspaper described his “slew of life’s gifts” that included “confidence, intelligence, looks, affluence and athletic talent.” The sports coach praised him as the most coachable student he had ever taught and a “great role player.” He attracted women easily, almost without trying, and had a tennis-playing American girlfriend.

  The trip gave Leissner a taste for life abroad. After college in Germany he headed to the States—to the University of Hartford in Connecticut for an MBA. The class was filled with international students, and he met a French woman of Iranian descent. They moved to London and married, and Leissner joined J.P. Morgan as an associate, the lowest level of banker. He was hungry for success, and despite his gifts there were signs of a willingness to cut corners.

  In 1993, while employed at J.P. Morgan, Leissner acquired a doctorate in business administration from the University of Somerset. The college, which closed down a few years later, was known for selling degrees for a few thousand dollars, especially to Americans looking to burnish their credentials with a certificate from a serious-sounding British institution. Leissner began using the title “Dr.” at speaking engagements and soon after he secured a promotion to vice president at J.P. Morgan.

  While in London, he was involved in a deal to finance a power plant in Indonesia, and the work got him interested in Asia. His marriage was falling apart, and by 1997 he moved to Hong Kong, where he had secured a job with Lehman Brothers.

  In the 1990s Hong Kong was a city in flux. The territory of 7 million, situated on mountainous islands and part of the Chinese mainland, had become a playground for expatriate financiers. Asian economies like Thailand and South Korea had been through a decade of heady growth, and bankers worked long hours, partied in the bars and fleshpots of Wanchai, the city’s entertainment district, and took jaunts to Hong Kong’s outer islands in private yachts on the weekends.

  By 1997, however, the party atmosphere was souring. After 156 years of colonial rule, Britain was handing Hong Kong back to China. The Asian financial crisis was in full swing, the result of years of reckless borrowing to finance investments in property and other risky sectors. It was a typical financial bubble, and when speculators like George Soros attacked the region’s overvalued currencies, angering Malaysia’s then prime minister, Mahathir Mohamad, foreign banks were forced to book losses on loans that went bad.

  For a financier like Leissner, there was an upside to all that volatility. Among foreign bankers, Asia had developed a reputation as a place to turbocharge a Wall Street career. Competition out in Hong Kong and Singapore was less fierce, and bankers were given more latitude to make big financial trades. In 1995 a rogue trader at Britain’s Barings Bank named Nick Leeson made unauthorized bets on Japanese stocks that led to the bank’s collapse. But as Leissner was arriving, activity in capital markets—the raising of money through selling stocks and bonds—was drying up thanks to the crisis. Lehman wasn’t too exposed, though, and it began to advise the region’s cash-strapped governments on a wave of privatizations to raise money.

  Hong Kong–based bankers often kept a blistering pace, traveling nonstop around the region, and Leissner was no exception. On one deal, he worked alongside Goldman bankers to help a state-owned Thai petroleum company sell a chunk of shares. The bankers worked eighteen-hour days, finishing at 2 a.m. and partying in Bangkok’s notorious bars for a couple more hours before starting over. The crisis forged close links between the Wall Street bankers who had chosen the less crowded field of Asia to further their careers. Leissner’s work ethic impressed Goldman, considered top of the pi
le of global banks, and he was offered a job. He accepted.

  Shortly after Leissner joined, Goldman moved its Asian headquarters into gleaming new offices in Hong Kong’s Cheung Kong Center, a seventy-floor skyscraper with breathtaking views of the Peak, a mountain that towers over the central financial district, and Victoria Harbor, a busy sea channel separating Hong Kong island from the mainland. One floor had meeting rooms adorned with multi-million-dollar Chinese art, including ancient calligraphy and ink drawings of mist-shrouded mountains. An antique terra-cotta horse donated by Li Ka-shing, the Hong Kong billionaire who owned the building, stood inside the reception area.

  At Goldman, Leissner met and fell in love with Judy Chan, a junior analyst at the bank, and they married after the German banker’s divorce from his first wife. Chan was from an Indonesian-Chinese family that had made a fortune in coal mining—and the first of many connected women that Leissner would court. The wedding ceremony at a luxury Hong Kong hotel featured suckling pigs with flashing lights in their eye sockets. The couple had two daughters together, but he was rarely at home. As an executive director in the mergers and acquisitions division, Leissner practically lived on planes, incessantly looking for deals on which Goldman could advise or offer financing.

  After a few lean years, as Asia picked itself up from the crisis, Leissner began to strike gold. In 2002, Goldman sold shares for a Malaysian cell phone company owned by Ananda Krishnan, a billionaire whom Leissner had gotten to know. The $800 million IPO was the largest offering in Asia that year, and Leissner was promoted to managing director. The following year, he helped bring in another Krishnan-related deal, this time selling IPO shares for a satellite-television company called Astro. Then, in May 2006, Leissner beat out other banks to snag a role advising on Malaysia’s largest-ever corporate takeover, a $2 billion deal for a local power company. Goldman’s fee on the deal, $9 million, was respectable, even by U.S. norms, and much fatter than run-of-the-mill Malaysian payouts.

  Goldman colleagues noticed how Leissner had an uncanny ability to make clients feel like they had a deep, personal connection with him. He was a relationship banker, skilled at reeling in important executives through a kind of personal magnetism, rather than a “structuring guy,” one of the mathematical whizzes who priced and sold complex derivative products.

  Since coming to Asia, Leissner had deepened his connections, especially in Malaysia. He was funny and animated, speaking in German-accented English, and a consummate networker who told people what they wanted to hear. He would sit next to clients in the boardroom rather than across the table. At one society wedding in Kuala Lumpur, he spent the entire dinner out of his seat, making the rounds of the hotel ballroom.

  “He loved clients and he loved deals,” said Joe Stevens, a senior banker who worked with him at Goldman.

  As Goldman Sachs ramped up its Asia business under Hank Paulson and now Lloyd Blankfein, Tim Leissner was a beneficiary. In October 2006, he made partner, one of 115 staff that year to be invited into Goldman’s inner sanctum. The bank kept the partner pool to only a few hundred people, or no more than 2 percent of its thirty thousand full-time employees, and those anointed were personally called by Blankfein. The honor came with a pay bump, to a base salary of almost $1 million, and access to larger bonuses and proprietary investments—deals that Goldman’s top bankers reserved for themselves. Leissner had begun to make real money for Goldman in Malaysia, and he was reaping the benefits of the bank’s Asia focus. Of those who made partner in 2006, more than a fifth were from the region, out of whack with the fees generated there. It was a signal from Blankfein that Goldman saw a bright future.

  But there were whispers about Leissner. Some Goldman bankers greeted him with, “Dr. Leissner, I presume,” an ironic allusion to his questionable academic credentials. And there was his string of affairs, which struck some colleagues as unprofessional. He didn’t so much engage in one-night stands as fall in love easily, floating from one serious relationship to another. He had begun a romantic liaison with the chief financial officer of Astro during negotiations for the IPO. The relationship, which was not hidden, led rival bankers to complain to Astro’s chief executive that it gave Goldman an unfair advantage. After an internal complaint, Goldman launched an investigation. But Leissner denied any involvement with the woman, and Goldman dropped the matter.

  He also was prone to go off the reservation. As a junior banker, he would overstep his authority. “He never operated within boundaries. He would offer clients, and get permission later. It was tolerated because he brought in deals,” said one Goldman banker who worked with him. In one deal that caused concern, Leissner gave a written assurance to the chief executive of Maybank, a large Malaysian commercial bank, that Goldman would underwrite a $1 billion rights issue, meaning it would pledge its own capital to buy up the shares and later sell them into the market. But he didn’t inform his bosses in Hong Kong, despite the huge risks involved. Another time, Goldman cut Leissner’s pay for passing information outside the company without authorization. It was a warning sign, but Leissner was making money for Goldman and the bank took no further action.

  Leissner took little notice of the admonishments—this was Asia, the Wild West of capitalism, after all—and, seemingly as long as the profits kept rolling in, Goldman bosses in the region allowed him a very long leash. In 2009 that led Leissner to an upstart Malaysian businessman named Jho Low.

  In early 2009, after the triumph of his Iskandar land deal, Low was looking for the next big thing. He’d built a quick reputation in Malaysia as a deal maker, but, as always, Low was keenly aware of how his success stacked up on a global stage. Low had observed the power and status of Khaldoon Al Mubarak of Mubadala, who ran the emirati sovereign wealth fund. A fund like that had billions of dollars in investments, not mere millions. Why, Jho Low wondered, couldn’t he put together a sovereign wealth fund of his own—one based in Malaysia? But where could he find the initial funds?

  Traditional sovereign wealth funds invest oil profits, and so Low honed in on the Malaysian state of Terengganu, which was rich in offshore oil and gas fields.

  Malaysia’s nine hereditary Malay royal families, each ruling a different state, coexisted with the nation’s elected officials. These sultans had wide-ranging political powers, in some cases including control of local state revenues, creating ample opportunity for corruption. How Low settled upon Mizan Zainal Abidin, the sultan of Terengganu, was typical of his ability to spot opportunities, moving from one deal to the next.

  The sultan, who had been educated in the United Kingdom, was from a conservative Islamic family. While some royals in Malaysia are entitled and lazy, he was considered to be smart. Low had met Mizan’s sister, who sat on the board of the construction companies, and had used that connection to offer the sultan free shares in the Abu-Dhabi-Kuwait-Malaysia Investment Company. This was the entity which had generated massive profits by flipping the construction firms.

  After this initial success, Low now suggested a more ambitious investment plan to Mizan. Why didn’t the sultan set up a sovereign wealth fund, based on Abu Dhabi’s Mubadala, which borrowed money against the state’s oil wealth? Low said he knew bankers at Goldman who could advise and tap global investors, creating a huge war chest for the state to fund development.

  To buy legitimacy, Low also needed the involvement of Goldman, and Leissner, despite his initial concerns about the young Malaysian, was eager for the business. Low soon arranged for Leissner and Roger Ng, the local Goldman banker, to meet Mizan and accompanied them to the palace in Kuala Lumpur.

  Within months of the meeting with the sultan, after which Goldman became an adviser, Low was sending bankers emails that referred to them informally as “Bro” and discussing ways to portray the fund in Malaysia’s media. Low’s official role at the fund, which began operations in February 2009, was as adviser, but in reality he controlled the show, and he hired a handful of people he knew as staff. Emails between Low and Leissner referre
d to the endeavor as Project Tiara.

  Low talked Mizan into allowing the fund to issue $1.4 billion in Islamic bonds—structured to avoid violating Islamic rules against charging interest—backed by the state’s future oil receipts. But as the fund was preparing to raise the money, in May 2009, the sultan got cold feet. Low was rushing to get the deal through, but without a clear investment plan. Mizan saw no reason for such alacrity, especially as the fund didn’t even have a full management team in place. His representative on the board ordered a delay in the fund-raising, but Low took no notice, and pushed for the bonds to go through.

  But now Mizan, fearful of gambling away the state’s oil wealth, threatened to shut down the whole thing. Mizan’s reticence was further fueled by rumors in banking circles that Low had siphoned away some of the bond money, and the sultan scotched Low’s plans before they even got off the ground.

  Low was on the cusp of transforming into a powerful figure, the kind of young fund manager he had watched up close in the Middle East, deploying billions of dollars in investments. But now he was seemingly back to square one, with Mizan ordering the fund be shuttered. He quickly had to figure out what to do. At that moment, he got the luckiest break of his career so far.

  For years, Najib Razak had been groomed for the nation’s highest office. With his recognizable family name, and years of government service, many Malaysians assumed one day he would become prime minister. The ruling UMNO party was in crisis. In the 2008 elections, its coalition had barely held onto power. Ethnic Indian and Chinese Malaysians, sick of living as second-class citizens, voted in droves for the opposition. To revive its flagging fortunes, the party turned to the heir of the Razak political dynasty. In April 2009, Najib became Malaysia’s sixth prime minister, as if laying claim to a birthright.