Billion Dollar Whale

by Tom Wright

  The KFC was popular, but nobody really drank the champagne, preferring to spray it around the room, as if they had finally had their fill after years. “Only JL can manage this for double countdowns 2013,” Chavayos boasted.

  Jamie Foxx, who by now had known Low for three years, was no stranger to outrageous parties. He’d been there for Low’s birthday in Las Vegas only two months earlier. But even he was excited by the self-gratification of the past few days. He told British talk show host Jonathan Ross about the party, but like almost everyone who knew Low well, he kept the Malaysian’s name out of the story, sensing he didn’t need the publicity.

  “I got a friend, you know he got some money, and he flew me, Leonardo DiCaprio, Jonah Hill and some other cats, and we flew to Australia right. And we did the countdown in Australia, then jumped back on a plane and then did the countdown in Vegas. That’s crazy! That was nuts!”

  Chapter 29

  Mystique of the Orient

  Singapore, November 2012

  Low’s focus on partying might have made him appear carefree, but his attitude belied turmoil behind the scenes. Just days after his birthday extravaganza in Las Vegas, Jho Low faced a roadblock. He was trying to send $110 million from his BSI account in Singapore to a trust he controlled at another bank, Rothschild in Zurich, to finance the purchase of a mansion on Oriole Drive in the Bird Streets area of the Hollywood Hills. After the Saudi sheikh rejected Low’s offer for the Nimes property, Low had agreed to pay $39 million for a Mexican-style home, double the previous record for a house in the Hollywood Hills, a trendy enclave near Red Granite’s Sunset Strip offices and close to DiCaprio’s place. Low planned to spend millions more to tear down the older home and construct a white-themed modernistic mansion, with eighteen thousand square feet of living space, two swimming pools, and a go-cart track in the basement.

  But compliance executives at the Swiss bank BSI—finally—were causing problems. Ahead of the intended transfer, Low’s BSI account had received the money from Good Star, his Seychelles company, before he sent it to his father, Larry, who then routed it back to Low, all within the same day. As with his purchase of the Time Warner penthouse, the purpose of these circuitous transactions was to make Rothschild bankers believe Low had received the money from his father. By then putting it into a trust at Rothschild, Low was attempting to make it appear as if the Bird Streets mansion was part of the Low family’s estate, held in trust for future generations. He did the same with many assets.

  BSI’s compliance department could see behind the scenes. In an email, a banker charged with rooting out fraud at BSI wrote to Yak Yew Chee and other senior managers that the frenetic movement of cash—from Good Star, to Low, to his father, and back to Low—was “nebulous to say the least and not acceptable in Compliance’s view.” The family wealth story was facing some scrutiny.

  Low was determined to find a way around the compliance officers, whose concerns had been relayed to him by Yak. In the predawn hours of the night, he began to type furiously. In an email to BSI management, Low explained that the money he wanted to transfer to Switzerland originally had been a gift he sent to his father. The money, Low explained, was a mark of respect to his elders—a cornerstone of Confucianism. “When good wealth creation is generated, as a matter of cultural respect and good fortune that arises from respect, we always give our parents the proceeds. This is part of our custom and culture.” In the email, Low explained that, per custom, it was up to the elders in question to decide what to do with the gift.

  “In this case, my father receives it as a token of gesture, respect and appreciation and decides to give it back to me for me to then subsequently provide a portion for the benefit of my family trust.”

  He then chided the Swiss bankers for their cultural naïveté: “I hope this clarifies as this is culturally sensitive and it would be taboo and bad luck otherwise and our family is very particular about respect of the elderly and being appreciative to family.”

  This bastardized picture of Chinese culture in no way adequately explained the need for such shady transfers. But Low had another card to play—he knew BSI had become dependent on his business and, faced with the prospect of losing it, would go to lengths to keep the money flowing. “I hope I do not need to keep explaining the same matter over and over again as our time is better spent generating wealth so that the AUM [Assets Under Management] in BSI Bank can be increased as opposed to providing answers for questions which have already been provided for previously. I fully understand and respect the requirement of compliance, but one should not be over burdening your customers [especially] when they have been addressed in the past.” At 2.10 a.m. on November 7, Low clicked send, firing off the email to a number of top BSI managers in Singapore.

  Ordinary folk often get questioned by their banks for small transfers of money. But billionaires are not ordinary. By this point, Low already was by far the biggest client that BSI had anywhere in the world, and he was making a lot of people in the bank richer than they ever could have hoped. He was referred to as “Big Boss” in the bank’s Singapore offices, and senior BSI executives would join him for parties in Las Vegas and on yachts. The bank’s senior executives would do all they could to keep Low’s business.

  Within days of Low’s email, BSI’s top executives approved the $110 million transfer. “Intra family transfers are not always going to be logical,” a senior BSI banker wrote in response to the compliance officer’s concerns.

  Days later, though, bankers at Rothschild, where the money ended up, wanted more details about the origins of so much cash. Low realized they would not be as easy to fool as BSI, and so, on November 20, he wrote Yak requesting he send a letter to a senior Rothschild banker vouching for the source of funds. Low himself drew up the letter, which stressed BSI had known the Low family for years and had “extensive compliance procedures.” The contents made it appear the money came from Larry Low, even though the original source of funds was Good Star and 1MDB.

  By this time, Yak was entirely in Low’s pocket. He had begun to let other clients drop, and spent 90 percent of his time on Low’s account, following him around the world on private jets and attending his yacht parties. As Yak seemingly became addicted to the money and jet-set lifestyle, Low was able to get him to do almost anything he asked. Alarmed, a female subordinate of Yak’s advised him to ensure proper compliance procedures were met.

  “If you guys are so scared, then don’t be private bankers. Private bankers must take some risks. If not, go back and breast-feed your children,” he retorted angrily.

  Yak secretly signed and sent the letter to Rothschild on BSI’s official letterhead, without getting approval from his managers and legal department, as dictated by the bank’s compliance procedures. The letter assuaged any concerns Rothschild’s bankers had harbored. Low, it appeared, was succeeding in blotting out the past and, with Yak’s help, embellishing the story that he had grown up with billions. But Yak had stepped over the gray line that in private banking divides the merely unseemly from the illegal. It was a misstep for which Yak would pay, and a sign of the risks Low was running.

  As the fear of detection consumed him, Low’s attempts at subterfuge could appear almost comical. He set up a Gmail account under the name of Eric Tan, his associate known as “Fat Eric,” and began to use it, trying to hide his involvement in deals. When he wanted to open an account with the Aabar-controlled Falcon Bank, Low used the “Eric Tan” Gmail to set up an appointment with a Swiss banker in Kuala Lumpur. The banker, the head of Falcon’s Singapore office, flew to Kuala Lumpur to meet Tan, but was picked up at night from the lobby of his hotel by Low. The Malaysian took the banker to a residence, where he revealed his true identity, but asked him to continue to refer to him as Eric Tan in public and email exchanges. Low began to use the “Eric Tan” Gmail address for most correspondence, and many of the shell companies and bank accounts from this point on—like Blackstone—would be opened by the real Eric Tan, who hung around mai
nly for the partying and the payoffs, likely unaware of the risks he was taking on Low’s behalf.

  What was Low thinking? Like Yak, he seemed to have crossed another line. Beyond shady transfers and misrepresentation of business deals, he had now taken to conducting business behind a false name and even misrepresenting his identity in person. Low’s behavior might seem like evidence of desperation, but he had proven himself a survivor. He’d overcome the early challenges to his scheme from 1MDB board members, and the fighting with PetroSaudi, as well as questions from auditors and the media attention on his partying. He was acquiring companies, financing films, and building on the image of a successful businessman. But there was never any rest; just getting the money moving was a constant battle. And now he had another debt to pay: He had to get Najib reelected.

  Chapter 30

  “681 American Pies” (The Third Heist)

  Penang, Malaysia, April 2013

  On a sweltering day in George Town, the capital of Penang, an island off the northwest coast of Malaysia, onlookers in the historic district would have been treated to a curious sight. Back home to help campaign for Malaysia’s upcoming national elections, Jho Low was building up a sweat peddling Busta Rhymes around in a rickshaw. In another rickshaw, a friend was taking care of Swizz Beatz. Dressed in baggy cargo pants and desert boots, with a gold chain, Busta Rhymes took in the attractions of Low’s hometown, including the Edwardian Baroque arcades of the early twentieth-century City Hall, before heading to a local canteen with his entourage for a lunch of Penang kway teow noodles and sodas—the kind of down-to-earth food Low liked. By the time he got to lunch, the Malaysian was tired and his blue “1Malaysia” polo shirt was covered in sweat patches.

  The next day, Busta Rhymes performed in concert, alongside Swizz Beatz and Redfoo of the music duo LMFAO, at a local Chinese-language school. The crowd of eighty thousand people, all wearing free 1MALAYSIA T-shirts, had gotten the tickets to the show for a nominal donation. Low had organized and financed the concert, occuring just two weeks before Malaysia’s general election. It wasn’t a coincidence. The “1Malaysia” concept was Prime Minister Najib’s banner initiative meant to attract Malaysians of all ethnicities.

  “There were no political speeches,” Low lamely told a television interview. “There was obviously the push by both the organizers and some of the entertainers, of course, for unity, peace, and prosperity.”

  These were the last-gasp efforts by Low to swing the elections in Penang, a state which had turned to the opposition in the previous polls and was a prime focus of Najib’s campaigning. To win back the state would be the ultimate coup for the prime minister. Low made arrangements for local restaurants, festooned in 1MALAYSIA banners, to hand out free food for weeks. The 1Malaysia Penang Welfare Club, set up by Low, paid for South Korean pop star Psy, whose song “Gangnam Style” was a surprise global hit, to give another concert. The club also took over a ballroom and gave out checks for hundreds of thousands of dollars each to local charities. The 1MDB fund, meanwhile, spent $400 million buying up land in Penang, and vowed to build ten thousand affordable homes.

  But despite the huge expenditures, Najib remained stubbornly unpopular in Penang. At the Psy concert, the prime minister went on stage as a warm-up, asking the concertgoers whether they were ready for the South Korean singer.

  “Yes,” they screamed back. Then he asked whether the crowd was ready for his coalition to take back power in the state.

  “No,” they roared.

  Low’s gambit had backfired.

  Najib was panicking, and he was making a fool of himself. Anwar Ibrahim, the former deputy prime minister who had just been released from jail after serving several years in prison for sodomy, was on the rise. A gifted speaker, Anwar was leading a coalition of opposition parties, and polls showed he might win the election on May 5. Najib was desperate not to go down in the history books as the first UMNO leader to be cast from office, so he turned to Low for money.

  For over three years, Najib and his wife, Rosmah, gave Low cover to run 1MDB, without asking questions. His wife enjoyed her jewelry and mansions, and his stepson had become a movie mogul. Now Najib needed his own gusher of cash to avoid catastrophe. Low knew he had to deliver money to Najib, but the problem was that much of it was tied up in other endeavors. On top of that, Anwar in February had published his election manifesto. One campaign pledge was particularly distressing to Low. The opposition leader wanted to know the purpose of 1MDB, which had little to show for $7 billion in debt. If elected, Anwar promised, he would close down the fund.

  To ensure that didn’t happen, Low set about raising even more money. Once more, he relied on Goldman Sachs.

  The World Economic Forum, held each year in the Swiss ski village of Davos, is a microcosm of elite networks that span the globe, attracting world leaders, Wall Street titans, and chief executives of Fortune 500 companies. The events, in which panels of experts debate high-minded topics like radical Islam or the “democratic deficit” in front of audiences, is only the public face of Davos. In rooms open only to the chosen few with special white VIP passes—the highest in a color-graded hierarchy—the real deal making occurs.

  In late January, Michael Evans, a Goldman vice chairman in New York overseeing “growth markets,” had an important person to see on the sidelines of Davos: the prime minister of Malaysia. Evans’s audience was with Prime Minister Najib, brokered by Tim Leissner—just the kind of meeting between a Wall Street banker and a world leader that was typical at the event in the Swiss Alps. In public appearances at Davos, Najib was in his element, deepening the impression of Malaysia as a beacon of democracy in the Islamic world, and himself as an urbane technocrat.

  “We have to take care of the young people, we have to give them jobs,” he told Fareed Zakaria of CNN during an interview on the sidelines of Davos.

  But here, with Evans and Leissner, Najib had a strikingly different agenda. After pleasantries with the two bankers, Najib brought up the role Goldman had played selling bonds for 1MDB in 2012, and asked if the bank was willing to do so again, getting the money to the fund quickly and quietly, just like before. Goldman’s top management, advised by Leissner, had been expecting more 1MDB business. But Najib’s demand, less than three months since the fund last tapped the market for almost $1.75 billion, was almost too good to be true.

  The prime minister said the fund wanted to raise a further $3 billion. Such a staggering sum would mean another major payday for Goldman.

  To explain the need for speed, Najib said he had an opportunity to partner with Aabar, the Abu Dhabi fund, to build a new financial center in Kuala Lumpur, to be named the Tun Razak Exchange, after his father. The hope, he said, was to make Kuala Lumpur one of the foremost banking centers in Asia. The Abu Dhabi fund was to put in another $3 billion, the prime minister went on.

  Of course, Goldman would be more than willing to help out, Evans replied. Normally, Wall Street banks send in bankers armed with proposals—documents laying out structuring, yields, potential investors—but here Goldman appeared to have won the mandate through a casual conversation. When David Ryan, the bank’s Asia president, heard about this, he was suspicious. But again, Gary Cohn and Mark Schwartz, the new Asia chairman above Ryan, were supportive. The wheels of Project Catalyze were set in motion.

  In March, Goldman was ready to buy the entire $3 billion bond from 1MDB, but there was a hiccup. The fund wanted to deposit the money in a Swiss bank account at BSI. Goldman’s lawyer on the deal, a Singapore-based employee of Linklaters named Kevin Wong, pointed out in an email that it was unusual to use such a small private bank for a $3 billion deposit.

  In the end, Goldman shrugged off Wong’s concerns. It wasn’t as though BSI was on any blacklist for money laundering. In a presentation for 1MDB and Aabar, Goldman set forth what it understood its client’s key objectives to be in the deal making. They included “maintenance of confidentiality during execution” and “speed.” In other words, this was to
be a fast and secret deal—although no one at 1MDB ever bothered to explain why these conditions were necessary. Indeed, Goldman’s prospectus for the bond even stressed to would-be investors that the 1MDB-Aabar joint venture company didn’t even yet have a well-defined business plan.

  By now, Goldman had established a track record for this kind of transaction, and on March 19, the Hong Kong PFI desk, as with the earlier two issuances, bought the $3 billion bond in its entirety. This time, Prime Minister Najib, who also headed the Finance Ministry, signed a letter of support for the bond, meaning Malaysia’s government promised to repay the debt in the event of a default. For the firm’s work, Goldman made just short of $300 million in profits. In total, over just twelve months, the bank had earned nearly $600 million from selling three bonds for the 1MDB fund—two hundred times the typical fee. This amount of profit was too implausible to go unnoticed.

  As Goldman was finalizing the bond in March 2013, Jho Low sent a BlackBerry message to Joanna Yu, an employee at AmBank in Kuala Lumpur, warning her that “681 American pies” would soon be arriving from overseas into an account known as “AMPRIVATE BANKING—MR.” The account, beneficially owned by Najib Razak, was a secret whose existence was known only to Low and a few key executives in AmBank, a Malaysian bank. Low ordered Yu to inform her colleagues that “PM” did not want his name, address, or identity card number to appear on the transaction. Low knew his actions at this juncture, so close to elections, involved a heightened level of risk.

  Access to the account “shld be restricted n tracked so if someone took pic n access the a/c we will know,” Low wrote.

  The worst outcome, he added, was Malaysia’s opposition getting hold of this information and leaking it. To hide the impact of a transaction this large, Low and Yu discussed ways to break it up into tranches so as to lessen the impact on the ringgit, Malaysia’s currency.