Billion Dollar Whale

by Tom Wright

  Earlier in the evening, Hilton had partied at TAO nightclub in the complex, cutting a tiered birthday cake that advertised her new line in shoes. It was a typical public-private performance for the heiress, part family celebration and part promotion in front of the cameras. The after-party downstairs was more intimate, the portion that wasn’t curated for the paparazzi. There, in a private gambling room, Low surprised her with a very generous birthday present: a Cartier watch. As if that was insufficient, he then handed her the $250,000 in gambling chips and asked her to join him at the baccarat table.

  Jho Low’s party crew had begun to assemble. Apart from the celebrities, there were models. Some of these women had fallen in with the group at Las Vegas or New York clubs; some knew the nightclub owners Tepperberg and Strauss, while others were recruited through their managers and agents. Some were only teenagers. Joey McFarland was on hand, of course, and so were Low’s rich Middle Eastern and Asian buddies from college, like Al Wazzan and Seet Li Lin.

  “in vegas, bring a jacket cos its raining cristal haha!” Seet wrote on Facebook, posting a picture of himself with a jeroboam of the champagne.

  As the gambling at Hilton’s birthday heated up, the partygoers—Low’s Asian clique, minor celebrities from shows like The Hills, models, and other rich kids—leaned into the table. These were wealthy folk, many of whom had grown up privileged in Orange County or Santa Monica and formed the core of LA’s rich set, but they had never seen anyone quite like Low. He was putting down bigger and bigger bets, hundreds of thousands of dollars on single hands.

  Then, in a cascade of bad luck, taking all of ten minutes, he lost $2 million. The stunned entourage couldn’t compute the way he parted with money—seemingly without breaking a sweat—and some began to whisper about this guy, and how he acted like the cash wasn’t his own.

  Rumors swirled. He’s an arms dealer. He’s connected to a foreign leader. He’s some kind of overseas royalty. As the next magnum of Cristal arrived, or someone handed out thousands of dollars in chips, questions about Low’s provenance flickered momentarily and then faded away.

  For all his carefree spending, Low knew that the money wasn’t all his to fritter away. In these early stages, he began to focus on how to reward his allies—foremost among them Abu Dhabi executives and the family of Prime Minister Najib Razak—and start building a business that would generate profits. He needed to find a way to sustain his new life.

  Chapter 12

  How to Spend a Billion

  Los Angeles, December 2009

  Low was looking for edge. His company, Wynton, was making a $45 million all-cash bid for the L’Ermitage hotel—a $500-a-night, 117-room luxury establishment just off the Sunset Strip in Beverly Hills. But he faced a rival offer from Ian Schrager, the U.S. hotel investor, and Low was looking for a way to swing the deal in his favor. He turned to Mubadala, the Abu Dhabi fund.

  Low wrote the executive director of Mubadala’s real estate division, asking if anyone at the fund could put in a good word for him with the seller, Tom Barrack Jr., the U.S. real estate billionaire. Khaldoon Al Mubarak, the chief executive of Mubadala, promised to get Ambassador Otaiba to help.

  In an email to Barrack Jr., Otaiba put the official weight of Abu Dhabi behind Low’s offer, although he did not mention the Malaysian.

  “I’m contacting you today to endorse this bid both as the UAE ambassador but also as someone who understands that the full weight of a major investment entity is behind this project,” he wrote.

  Barrack Jr. replied cordially, noting he had met Otaiba’s father thirty years earlier, while a young lawyer. “Mubadala and Al Mubarak are first class investors and we are honored at their interest,” he wrote, promising to see what he could do. The bid went Low’s way.

  The success of Low was by now important to Abu Dhabi on multiple fronts. Mubadala had recently acquired Viceroy Hotel Group, a hotel-management company, and Low had offered to buy the L’Ermitage and then rebrand it as a Viceroy Hotel. Ambassador Otaiba had made money from his dealings with Low on the Iskandar land project in Malaysia, and he hoped to get in on more deals.

  Low knew the scheme would falter unless the money he’d taken was put to work, and he set out to construct a business empire. Years ago, the power of Al Mubarak at Mubadala had inspired Low, and pushed him to create his own sovereign wealth fund. Now the Malaysian, armed with hundreds of millions of dollars, was able to do deals with Mubadala on an equal footing. Al Mubarak did not seem to care where Low was getting his money.

  To pay for the L’Ermitage, Low set up a trust account at Shearman & Sterling in the name of Wynton Group, and the law firm represented the company in the purchase. He then sent money into the trust from his Good Star account, the one which had received $700 million in 1MDB cash. Low noted on bank documents that the money was for “STAKE V. H.” He was using his tie-up with Viceroy Hotels to give legitimacy to the huge movement of funds. He had made his first major investment, an initial step to build a reputation as a businessman.

  As he partied and bought assets, Low needed to pay back the people who had made all this possible: the family of Malaysian Prime Minister Najib Razak. Just as he had misrepresented Prince Turki as an official Saudi envoy, Low was careful to keep the full scope of his actions from Najib. But in return for the long leash Najib had given him, Low needed to make his patron happy.

  From the early days of his scheme, Low made sure not to leave the first couple out of the profits. From the IOLTA accounts at Shearman & Sterling, he sent $3 million to Rose Trading, a Hong Kong–based jewelry trading firm that supplied Rosmah. It was only the start of tens of millions of dollars of jewelry that Low would procure for Rosmah, and soon Najib also would begin receiving spoils in the form of political funding.

  Beginning in 2010, Low also acquired multi-million-dollar luxury homes in London, Los Angeles, and New York, making them available to Najib and his family. A Low-controlled shell firm acquired a condominium in New York’s Park Laurel building, just off Central Park West, for $36 million. But it was Riza Aziz, Rosmah’s son, who made the 7,700-square-foot duplex, with floor-to-ceiling windows, his home in New York.

  The seller’s agent was Raphael De Niro, the son of Robert De Niro (who himself would soon get to know Low and Prime Minister Najib Razak). The younger De Niro worked for high-end property firm Douglas Elliman Real Estate, which, like all U.S. brokers handling hundreds of millions of dollars in property transactions each year—as well as lawyers involved in real estate deals—was not required under American laws to conduct due diligence of clients’ finances. In fact, De Niro didn’t even need to know the ultimate buyer of a property, and Low purported to be representing Malaysia’s prime minister or other rich buyers as he toured apartments and mansions.

  By 2010, faceless shell companies, many of them based offshore, accounted for more than half of the hundreds of billions of dollars in high-end U.S. property sales each year—an arrangement that was wholly legal under U.S. law—and Low was becoming adept at hiding his involvement. The agreement to buy the Park Laurel apartment, for instance, was signed by one Low-controlled firm, although it then assigned its rights to another British Virgin Islands–based shell company, which later changed its name.

  A Seychelles-incorporated shell company controlled by Low purchased a $17.5-million mansion at 912 North Hillcrest in Beverly Hills in May 2010 as a place for Riza to stay on the West Coast. Known as Pyramid House, for a gold leaf–covered pyramid surrounded by a water feature in the entrance hall, the 11,573-square-foot residence had the feeling of a tropical villa, with a lap pool and semi-open rooms with sweeping views over Los Angeles. While the home underwent a major renovation, Riza often stayed in the L’Ermitage while in Los Angeles. Low, through another entity he controlled, bought an imposing redbrick townhouse for 17 million pounds in the upmarket Belgravia district of London. It was not far from Harrods, one of Rosmah’s favorite shops, and the Najib family would stay there on regular trips to the city. />
  Low was acting as a front for the Najib clan, and eventually Riza would become the owner of all three properties—in London, Los Angeles, and New York—purchasing them from Low with more money stolen from 1MDB. The Malaysian was well on his way to repaying his debt to Najib for allowing him to run the fund. The prime minister did not pry about the origins of the money for these luxurious homes. The involvement of Low, who on paper was behind the purchases, allowed Najib to deny any knowledge of the funds’ provenance. He was a figure who permitted the prime minister to keep his hands clean.

  Despite purchasing this string of homes, Low began to travel obsessively around the globe, a schedule that fit his inability to focus on the present moment. In a typical three-week period, Low would spend a few days in Kuala Lumpur to meet Prime Minister Najib, and return home for a visit in Penang, before moving on to Singapore and Hong Kong. From there, he’d fly to Shanghai, where he had connections through his grandfather’s Chinese clan, before boarding a plane to Abu Dhabi. After a quick trip to London and Paris, perhaps with an excursion to Zurich to explain a weird transfer to Swiss bankers, he’d move on to New York, before finally landing in Los Angeles, and making a gambling trip to Vegas. The tour finished, Low would fly across the Pacific to start all over again. It was a frenetic schedule that most people could not endure.

  Tired of leasing planes, Low plunked down $35 million to purchase a Bombardier Global 5000 private aircraft, drawing on the funds at Shearman & Sterling. He lived on the jet more than the many homes he was in the process of acquiring. Outfitted with a bed and mini-office, complete with fax machine and Wi-Fi, he did much of his work from the Bombardier, or tapping away at all hours on his phones while in hotels and restaurants, rather than putting in regular office hours. During busy periods, Low worked until dawn to close a deal, but then missed meetings the next day.

  It was an extraordinary life, but Low’s demure bearing gave a different impression to those people who met him only fleetingly.

  “He seemed like a pretty ordinary fellow,” said Joseph Cayre, the billionaire real estate investor who sold him the Bombardier.

  Low’s scheme was succeeding in fooling many in the United States. Back home, though, the stewards of 1MDB wanted to know what was going on.

  Chapter 13

  Where’s Our Money?

  Kuala Lumpur, Malaysia, October 2009

  On October 3, 2009, the atmosphere was fraught at a specially convened meeting of 1MDB’s board, just as Low and his entourage were drawing attention to themselves in Vegas. The fund had been set up in such a hurry that it did not yet have its own permanent offices. So for this meeting, on a cloudy, humid Saturday, the board gathered in the Royale Bintang Hotel, a four-star hotel in the Mutiara Damansara neighborhood near Kuala Lumpur. Sitting around a table in the executive center, the members of the group supposed to be overseeing the operations of the fund were not happy.

  Most disconcerted among them was Mohammed Bakke Salleh, a respected businessman whom Prime Minister Najib Razak had chosen as chairman of the board. Bakke was the epitome of a buttoned-up chartered accountant; he had gotten his training after a degree at the London School of Economics. He dressed in dark suits, often with the same red tie, and wore wire-rimmed spectacles, his bald head framed by graying hair at the side and a neatly trimmed beard, also gray. But his appearance belied a tenacious side, and he had fought his way up the ranks to head Malaysia’s largest state-owned agribusiness company. In a land of deep corruption, Bakke had a reputation for doing things by the book, and in the board meeting he was furious.

  Why in the hell, he wanted to know, had 1MDB sent $700 million to another company and not the joint venture with PetroSaudi, as the board had agreed? Shahrol Halmi, the fund’s chief executive, tried to reassure Bakke that the money had gone to repay a loan to PetroSaudi. Shahrol was a down-to-earth leader, a geek who enjoyed tech gadgets and cars and was liked by colleagues. Unlike many top executives at 1MDB, Shahrol wasn’t a Low associate, but he quickly became addicted to the jet-setting lifestyle. There is no indication he received any payoff, but his life changed in an instant as he went from toiling on IT projects at Accenture to running a multi-billion-dollar fund. Thankful for such a change of station and believing he was carrying out Najib’s wishes, he hewed closely to the stories told to him by Low and others, in this case that PetroSaudi was owed the money.

  Bakke wasn’t so easily duped. Why hadn’t the board been informed of this debt in the first place? he demanded. There was no answer. The chairman ordered PetroSaudi to return the money, so it could be invested in the joint venture as agreed.

  “The substantial investment of US$1 billion should have merited a more thorough thought and due diligence process,” the board recorded blandly in the official minutes from the meeting.

  Unbeknownst to the group, the money in question was, as they spoke, being poured into nightclubs, gambling, mansions, and more; it just couldn’t be returned like that.

  Weeks later, Bakke demanded an independent audit of the oil assets that PetroSaudi was supposed to have put into the joint venture. Keen not to open a can of worms, Low persuaded Najib, as head of the board of advisers, to rule there would be no second valuation of the assets. Disgusted by how he had become entangled in such a mess, Bakke resigned without fanfare from the board a few days later. Another director also wanted to step down, but Najib urged him to hold off for a few weeks, lest it appear the board was suffering an exodus, and he finally left in January.

  Low, who hadn’t expected such a pushback, scrambled to stop further dissension. After the board had raised concerns, 1MDB’s management wrote Patrick Mahony, PetroSaudi’s head of investment, to ask for more details. Mahony must have been nervous, because PetroSaudi had conducted scant business before 1MDB came along, and he emailed Low to ask if he should send details.

  “No I wouldn’t even bother sending it. Keep it simple. I want to give the board as little information as possible until PM clears the air,” Low responded.

  The prime minister knew 1MDB was secretly fueling his political machinations and was not as legitimate as it appeared. He was allowing an untested twenty-eight-year-old to secretly run operations, lured into the scheme by Low’s promises the fund would enhance relationships with the Middle East and bring in investment. For years, Najib’s family had used government service to line their own pockets, and Low’s involvement in buying jewels for Rosmah and properties for Riza Aziz was more of the same. For these reasons, Najib gave Low a wide berth and remained willfully ignorant about what the young Malaysian was up to, even as reports about his spending in New York reached Malaysia and respected businessmen like Bakke sounded the alarm.

  To keep the prime minister’s trust, Low set about organizing another state visit to Saudi Arabia in January 2010. Ahead of the visit, he sent an email to the Obaids to stage-manage the trip, asking that Saudi royals use words like “personal,” “trust,” “friendship,” and “bond” in discussions with Najib and Rosmah. Saudi authorities did better than that, conferring the kingdom’s top civilian award on Najib during his visit. It was the kind of honor that went a long way with the prime minister, and it showed that Low had deep connections.

  The visit handed Low the ammunition he needed to silence the few 1MDB board members who were continuing to complain in meetings about the missing funds. He told one member that asking too many questions about the deal with PetroSaudi, which he described as a state company, could upset bilateral relations with Saudi Arabia. “We can’t insult Saudi Arabia. The PM just got a 21-gun salute on his visit,” Low said. The board member backed off.

  Low met board members regularly for coffee and let them know he was the prime minister’s representative dealing with 1MDB matters. It was vague, and Low’s lack of official title was mysterious, but those on the board understood his power came from the top. To many, the blurry contours of his role made him seem even more powerful, and that was something he exploited. To ensure no further scrutiny of
his actions, Low solidified his control over the board. To replace one of the vacated seats, he persuaded Najib to appoint a Malaysian Chinese from Penang who was a business partner of his father’s. Lodin Wok Kamaruddin, a UMNO party loyalist who was close to Najib, became the new chairman. Low had seen to it that the board was now dominated by Najib loyalists. To put it another way, there was basically no independent oversight of the prime minister, Low, and his allies in 1MDB’s management.

  With its management hiccups cleared up, 1MDB started to look more legitimate. From its new offices on the eighth floor of Menara IMC, a gleaming skyscraper near the Petronas Towers in Kuala Lumpur, the 1MDB fund’s management went about building a business. Chief Executive Shahrol oversaw the hiring of a group of around ten young Malaysians with Ivy League degrees, who were enticed into the job by competitive salaries and the promise of billions of dollars in financing. The pitch was that 1MDB would be a modern kind of fund, like Mubadala in the Middle East, and would transform Malaysia by building new industries, especially green technology. An early plan was to develop a renewable energy corridor in Sarawak, with investment from China and the Middle East, and the young employees set about drawing up presentations and investment plans.

  “We genuinely thought that helping a sovereign fund in its start-up stage was a great way to make a difference for the country,” said one early staff member.

  Working for a big sovereign wealth fund was a prestigious endeavor. But it didn’t take long for disillusionment to set in among many of the new hires. The plans for the green-energy business failed to gain traction, and it became clear that none of the senior management had experience running an investment fund. It was as if the bosses didn’t really care about the longer-term projects, instead convening in their offices on a mezzanine floor, rarely communicating with regular employees. Everyone knew that Jho Low was the chief decision maker at the fund, but he was almost never around, and for some reason management asked staff to refer to him by a code name, “UC.” A joke started going around that it stood for “unsavory character.”