Billion Dollar Whale

by Tom Wright

  Suddenly, Low’s cultivation of Najib and his wife was paying dividends. Overnight, the ambitious Malaysian had the ear of the most powerful man in the country. And Najib needed a pot of money to help restore his party’s popularity. Low moved fast to cash in and save his stillborn investment fund.

  Chapter 7

  Saudi “Royalty” (The First Heist)

  Aboard the Alfa Nero, French Riviera, August 2009

  As he took in the opulence of the Alfa Nero, cruising off the coast of Monaco in the French Riviera, Prime Minister Najib Razak was under the impression the yacht belonged to a son of Saudi Arabia’s king, Abdullah Abdulaziz Al Saud. With a movie theater and a huge swimming pool that transformed into a helipad, the 269-foot boat, estimated to be worth $190 million, was an impressive sight.

  In the stateroom, with comfy sofas and a view out to the Mediterranean, Najib was greeted by the purported owner, His Royal Highness, Prince Turki Bin Abdullah. Wearing a white baseball cap and matching blue linen pants and shirt, Prince Turki, a broadly built thirty-seven-year-old with a mustache and stubble, gave off a relaxed air. A former Saudi Air Force pilot, who had begun to dabble in business, he jovially clasped Najib by the hand.

  Casually dressed in a short-sleeved white shirt, the prime minister laughed as he handed Prince Turki a gift in a green box. Najib’s wife, Rosmah, in a black-and-white leopard-print shirt, who had joined the trip accompanied by their two children, smiled and joked with their host. Rosmah looked thrilled to be in the presence of Saudi royalty, especially in such an intimate setting. Respecting Islamic tradition, the guests drank fresh juices. A photographer snapped pictures of the meeting. Najib and Prince Turki then sat, each perched on the end of a sofa, to discuss ways in which Malaysia and Saudi Arabia could foster deeper economic ties.

  On the periphery of the group, also dressed casually in a green polo shirt, stood Jho Low. Only he knew what this meeting was really about.

  In the few months since Najib became prime minister, he and Low had spoken frequently. Low had convinced Malaysia’s new leader to focus on the Middle East. He’d already delivered Abu Dhabi financing for the Iskandar land project, and now Low held out the prospect of access to Saudi’s inordinate wealth. Aged only twenty-seven, the young Malaysian had managed to persuade Najib and, just as important, Rosmah, that he held the key to future Middle East investment.

  In the first few weeks of the new administration, Low acted as an unofficial aide to Najib, helping the prime minister organize a visit to the Middle East. Najib had grand ambitions to turn Malaysia into a developed nation within a few years, and for that he would need a major source of capital. Low persuaded him it would come from Arab nations. Najib and Rosmah, accompanied by Low, toured the Middle East, meeting King Abdullah in Saudi Arabia and Crown Prince Sheikh Mohammed Bin Zayed Al Nahyan of Abu Dhabi. To many onlookers, Low seemed to be an official emissary for Najib, such was his proximity to the prime minister, and some businesspeople who met Low on the trip mistook him for a minister of investment.

  In Abu Dhabi, after a dinner with the crown prince at the sumptuous Emirates Palace hotel, Najib announced the formation of a new Malaysian sovereign wealth fund to be called 1Malaysia Development Berhad, or 1MDB. The 1MDB fund was simply the Terengganu Investment Authority, which had recently raised $1.4 billion in Islamic bonds, transformed into a federal entity. The 1MDB fund would be responsible for repaying the bonds.

  Once Najib came to power, Low convinced him to take over the fund, broaden its remit, and look for Middle East backing. From here on, the sultan washed his hands of the whole affair.

  Low had pulled on his connections with Ambassador Otaiba to help fast-track Najib’s meeting with the crown prince and to obtain a pledge from Abu Dhabi, however vague, to invest in Malaysian projects alongside the fund.

  The 1MDB fund was supposed to invest in green energy and tourism to create high-quality jobs for all Malaysians, whether of Malay, Indian, or Chinese heritage, hence the slogan “1Malaysia.” The fund, Low promised the prime minister, would suck in money from the Middle East and borrow more from global markets. But he had another selling point, one which Najib, who was ambitious, found extremely attractive: Why not also use the fund as a political-financing vehicle? Profits from 1MDB would fill a war chest that Najib could use to pay off political supporters and voters, restoring UMNO’s popularity, Low promised.

  On the surface, such spending by 1MDB would be packaged as “corporate social responsibility,” to borrow a phrase from the corporate world. The fund’s charitable arm would award scholarships and build affordable housing in areas where UMNO needed votes. On top of that, Low told Najib that Middle Eastern nations, through their investments in the fund, would come to see Malaysia as a coveted ally in Asia, and also back Najib’s administration with a flow of political donations.

  Was this young businessman, barely out of school and with a pretty short track record, really able to deliver Arab investment? He seemed well connected, but would these powerful Middle Eastern kingdoms pour billions of dollars into the 1MDB fund just because Low wanted it to be so? Why did they need him as a broker? Low was doing his all to give the impression that he was indispensable, and the meeting with Prince Turki on the Alfa Nero in August was meant to deepen that feeling.

  Unbeknownst to Najib and Rosmah, it was a setup, a facade of officialdom, aimed at making the prime minister and his wife feel they were getting close to Saudi Arabia’s royal family. Luckily for Low, Najib wasn’t one to scratch the surface too deeply. After a lifetime of enjoying the perks afforded to a leading Malaysian politician—the VIP limousines, hotel suites, and yachts—he didn’t ask many questions at all.

  In truth, Prince Turki was a new contact of Low’s rather than an official emissary of Saudi Arabia. Many people think of Saudi princes as having almost unlimited funds, but Prince Turki faced a precarious future. His father, King Abdullah, was around ninety and had twenty children, and it was uncertain Prince Turki would remain close to power once his father died. After his military career, he’d tried his hand at business but had achieved little success. In the early 2000s, Prince Turki set up PetroSaudi International, an oil exploration firm, in an attempt to leverage his royal connections. The idea was that PetroSaudi, nominally based in Al Khobar, a Saudi city, would win oil-exploration rights in foreign countries that were keen to get close to Saudi Arabia.

  Like many minor aristocrats, Prince Turki was trading off his name, and PetroSaudi was little more than a shell, with negligible business to speak of. The company’s success was constrained by the laid-back approach of Turki and his partner, Tarek Obaid, a thirty-three-year-old Saudi financier. The son of a Saudi banker who moved his family to Geneva, Obaid had a round face, bushy eyebrows, and a stubbly beard. His father had made and lost a fortune wheeling and dealing alongside prominent Saudi families, including the ruling Al Sauds.

  Obaid attended international school in Geneva before Georgetown in Washington, and spoke fluent French and English, as well as Arabic. After studying, he had worked in finance, including for a small Swiss private bank, where he was considered lazy by some coworkers. As chief executive of PetroSaudi, whose operations were run out of a nondescript Geneva office building, Obaid played at being a Saudi royal, allowing his bankers in Geneva to refer to him as “Sheikh”—a designation for royals or religious clerics—though he was of common stock. The young Saudi liked to drink heavily and party in Geneva’s nightclubs, and it had aged him prematurely. He also was a hypochondriac, perpetually complaining of phantom illnesses.

  Prince Turki was just the kind of figure Jho Low was seeking out: a bona fide Saudi royal to dazzle the newly installed Prime Minister Najib, but one whose need for cash made him malleable. Low recently had befriended the prince and Obaid through a thirty-nine-year-old Eritrean-American called Sahle Ghebreyesus. In a former life, Ghebreyesus owned Lamu, a high-end African restaurant in Manhattan that attracted minor celebrities and bankers. The business had shuttered a
nd, to build himself back up, he began doing favors for some of his former customers—arranging private jets, getting reservations at sought-after restaurants, and fulfilling other whims of the superrich.

  Before long, he found a new calling: concierge for millionaire Middle Easterners who traveled to the West to enjoy the company of models, alcohol, and other vices not easily available at home. He would arrange boats and hotels, and make reservations.

  This line of work brought Ghebreyesus into contact with Prince Turki. He also came to know Low, whose parties had grown in size since Wharton, fueled by the money he made on the Iskandar deal.

  Low wanted to shore up his budding relationship with Najib, and he relied on Ghebreyesus to see to the details. In August 2009, he asked Ghebreyesus to arrange a sumptuous vacation for Najib and Rosmah and their children off the coast of France aboard the RM Elegant, a superyacht which came with fifteen staterooms and an Art Deco–style dining room.

  At the same time, Prince Turki and his entourage chartered the Alfa Nero at more than $500,000 a week. Low’s plan was to bring Najib and his family together with the prince, again making it appear like he could order up Saudi royalty on a whim. As planned, Najib and his family boarded the Alfa Nero and met Turki.

  On the boat, Prince Turki and Najib began discussing the possibility of PetroSaudi partnering with the new 1MDB fund. After the meeting, Low and Tarek Obaid seized on the interest Najib had shown, quickly hammering out a rough outline of how a partnership might work. Only a matter of days after the meeting on the Alfa Nero, Prince Turki wrote Najib on official Saudi government letterhead, proposing “a potential business combination.” With his missive, dated August 28, he included a proposal from Chief Executive Obaid outlining a business venture. The plan, according to Obaid, was for PetroSaudi to put its oil assets—supposedly rights to develop fields in Turkmenistan and Argentina worth $2.5 billion—into a joint venture.

  1MDB, meanwhile, would contribute $1 billion in cash—tapping some of the money it had sitting in its bank account in Malaysia.

  Chapter 8

  Hitting a Gold Mine

  New York, September 2009

  From the thirty-fifth-floor lobby of the Mandarin Oriental on Columbus Circle, Patrick Mahony took in panoramic views across the green canopy of Central Park. Located in one of the two towers of the Time Warner Center, the hotel’s sleek lounge, with floor-to-ceiling windows and a cream-and-marble-themed interior, was the kind of place Mahony was used to inhabiting. The Mandarin was a favorite of Jho Low, who liked to be close to a good Asian meal, and he’d arranged to meet Mahony in the lounge.

  The British banker worked for Ashmore, a British investment fund, but he also had taken on a role at PetroSaudi as director of investments. After his meeting with Prince Turki on the yacht, Prime Minister Najib had agreed to the outline of the deal presented by Obaid, Turki’s business partner at PetroSaudi, and Mahony and Low were at the Mandarin to get the ball rolling.

  Handsome, with hair swept back to just above his shirt collar, Mahony had a reputation for being smart but cold, often taking a peremptory tone in business dealings, first as a banker at Goldman Sachs and later at Ashmore. Older bankers who came across Mahony, dressed in tailor-cut suits and full of bluster, found the thirty-two-year-old talented and ambitious, if a bit pretentious. He liked to email banker friends about expensive watches. When his niece cheated at cards, Mahony joked that she shared his genes. A product of the rootless global elite, he communicated with Obaid in a mixture of English and French. In English, he spoke with a transatlantic accent common among deracinated Anglophones.

  Born in 1977, Mahony met Tarek Obaid at the international school they attended in Geneva. In 2009, Obaid persuaded his ambitious friend to join PetroSaudi, and Mahony jumped at the chance of a position of power in a smaller firm. Mahony’s role at PetroSaudi was to work on a plan to ramp up PetroSaudi’s business. Quickly he became the driving force behind the company, enticing Richard Haythornthwaite, a well-known former BP executive who was chairman of MasterCard International, to come on board to run the oil-and-gas business. In 2008, PetroSaudi had bought the rights to fields in Argentina and reached an agreement with a Canadian company to develop a potentially huge offshore field in Turkmenistan. Now, this Malaysian businessman called Jho Low was promising to bring $1 billion in sovereign money into a deal.

  Mahony knew little about Low before their meeting at the Mandarin, occurring less than two weeks after Obaid had written to Najib suggesting the joint venture, but—with the prospect of a giant deal in the making—he made it a priority. In the hotel lounge the pair sketched the contours of a plan. PetroSaudi would put in its oil assets, with the 1MDB fund contributing $1 billion in funds. On the surface, the idea was to use the money to explore for oil. But Low sensed there was an opportunity to make a financial killing, and he left the meeting in the Mandarin Oriental ecstatic. Soon after, he emailed his father, mother, brother, and sister, with whom he often shared details of his deal making.

  “Just closed the deal with petrosaudi—looks like we have hit a goldmin[e],” Low wrote.

  With a billion-dollar deal in the works, it was time for 1MDB to staff up. Prime Minister Najib himself held the highest position as chairman of the board of advisers, with power to appoint board members and veto decisions. The fund appointed Shahrol Halmi, a former consultant at Accenture in Malaysia, as chief executive. Other hires included Casey Tang, a finance director at a Malaysian retailer, who became an executive director, and Jasmine Loo, a smart Malaysian lawyer, as legal counsel.

  One name was missing from the list of positions, however: Jho Low. Low decided to take no official role, but in truth, he was behind every decision. Najib had given Low a free hand to run the fund, and Low had stuffed it with his associates. Tang and Loo were among the Malaysians Low had gotten to know while doing deals after returning from Wharton. Plucked from relative obscurity, Shahrol would soon show he could be relied on to blindly follow orders. With staff in place, things began to move quickly.

  Just days after the Mandarin Oriental meeting between Mahony and Low, a larger group assembled in Geneva. Obaid, Low, Mahony, and Seet Li Lin, Low’s Wharton school friend who worked for Wynton, met for breakfast in Geneva near the lake at the center of the city. The small city for years had been accepting fugitives, at one time Protestants escaping persecution from the Catholic Inquisition—and, more recently, financiers from the world over, looking to stash their wealth in property and private bank accounts.

  Before the Geneva meeting Low had sent an email to his inner circle, ordering them to “move fast” to get the joint venture off the ground. After breakfast, Low took out his BlackBerry and connected Obaid with Shahrol Halmi by email. Although the two heads of the organizations had never met, Low informed them both the joint venture was on track, making it clear who was boss, while insisting he remain in the background.

  “I trust all of you can now officially communicate and don’t need to cc me for proper governance purposes,” wrote Low, who also began to ask his inner circle to destroy emails after reading them. Without a formal position at 1MDB, Low didn’t want compliance issues with banks or lawyers.

  Shahrol replied to Low’s email asking for more information about PetroSaudi, and Mahony appeared to try and cover for the paucity of business.

  “PSI is very press shy and usually never announces our investments (one of the main reasons governments like to work with us),” he wrote.

  He attached a presentation, which he said “should give you a sense of what we are about,” but it included no detailed information about the size of the firm’s assets.

  After the group left the breakfast in Geneva, the participants wasted no time in setting up the joint venture. Mahony emailed PetroSaudi’s bank, BSI, a small Swiss private bank, to start the process of arranging a business account for the new entity. Low went to meet BSI staff in Geneva, and Mahony explained to the bankers how the new venture would soon be receiving $1 billion fro
m a Malaysian fund, and Low would be taking a cut as a fee for helping put the deal together—just as he had attempted to do, but without success, during the Mubadala investment in Malaysia.

  Yet again, however, Low was thwarted. BSI balked at such a strange arrangement, and turned down the account request. “I don’t like the transaction at all! In particular the role and involvement of Mr. Low Taek Jho ‘looks and feels’ very [suspicious] to me,” one BSI banker wrote in an email to colleagues.

  Even at this early stage, any competent bank official could sense something was off. Bankers are supposed to catch wrongdoing and report it to authorities. But this self-policing system doesn’t work. Turned down by one institution, financiers can simply shop around until they find someone willing to assist them. After facing problems with BSI, Mahony turned to his private bank, J.P. Morgan (Suisse). J.P. Morgan agreed to open an account, seemingly asking few questions about why a sovereign wealth fund needed a relationship with a Swiss private bank.

  If the Swiss bankers had asked Low and Mahony more about their intentions—and the pair had told the truth—what would they have said? Perhaps in the beginning Low and the PetroSaudi principals meant only to take broker fees for setting up 1MDB with PetroSaudi—a questionable practice which nevertheless is common in emerging markets. Or maybe they planned to invest what they saw as government money—not anyone’s personal piggy bank—making returns and putting the cash back. What’s for sure is that Low was improvising, searching out ways to make money at each twist and turn, and the scope of his endeavors would soon broaden considerably.