by Tom Wright
Back in October, Kerr had divorced actor Orlando Bloom, with whom she had a three-year-old son, and her tumultuous personal life was constant fodder for the tabloids. Her parents back in Gunnedah gave an interview to Australian television, bemoaning how their daughter had forgotten them and needed to come home to learn how to milk cows and ride horses. In the first months of 2014, Kerr would spend a chunk of time in New York, and almost every occasion she stepped out, a paparazzo would click her image. But despite the scrutiny, she managed to conceal a blossoming, and unexpected, romance with Low.
On February 2, the Malaysian invited her to watch Super Bowl XLVIII at the MetLife Stadium in New Jersey—it was her first—and she attended along with Riza Aziz and McFarland. Model Kate Upton and Katie Holmes, who were in another box, stopped by. Gossip columns noted Kerr was there to watch the Seattle Seahawks pull off the biggest upset in modern football history, defeating the Denver Broncos, but Low’s presence went unnoticed.
In the ensuing days, Low set about wooing her in the only way he knew how. He texted Lorraine Schwartz, telling her he wanted a necklace with a heart-shaped diamond, costing between $1 and $2 million, noting that “[s]ize matters.” The diamond necklace, inscribed with “MK,” cost $1.3 million, and Low gave it to the model as a present for Valentine’s Day, financing it with money washed through both the Park Lane and Coastal Energy deals.
Even to close friends, Low would say he was only “helping Miranda out,” and to keep the relationship secret, the pair would go out accompanied by Kerr’s agent, Kristal Fox. A few weeks later, however—at a party for Kerr’s thirty-first birthday—it would have been difficult to overlook Low’s romantic intentions. Low hired out a venue on Chelsea Piers in New York for a nineties-themed party and flew in Salt-N-Pepa, Mark Morrison, and Vanilla Ice to perform. As usual, Jamie Foxx was on hand to emcee, and DiCaprio, Bloom, and Swizz Beatz were among the hundred or so invitees.
For the weekend of festivities, Low had the Topaz, Sheikh Mansour’s yacht, moored in the Hudson River, and bedecked with customized Miami-style glamor lighting and hundreds of balloons. After the partying, a helicopter flew Low, Kerr, and her Australian friends to Atlantic City for more gambling at the baccarat tables. It was like the old times, back during Low’s Wharton days, although now he traveled by helicopter, not limousine, and he no longer cared whether Ivanka Trump would accept his invitation.
As he was wooing Kerr, Low also had to keep Rosmah Mansor sated, and in January 2014 he texted Lorraine Schwartz to see if she was in Los Angeles. The jeweler was in town and made haste to the Hotel Bel-Air, laden with luminescent diamond bangles and necklaces. Schwartz drove into the hotel, an exclusive Spanish mission–style retreat favored by Hollywood stars, set in twelve acres of gardens in the heart of Beverly Hills. Rosmah had checked into a plush suite with deep carpets and, after dinner with Schwartz and Low, she invited them up.
Schwartz unfurled her wares onto a table and Rosmah began to pick out items. She pointed at one eighteen-carat white gold diamond-studded bangle, and Schwartz set it aside. It cost $52,000, but Rosmah was only getting started. With the ease of a professional shopper, the first lady quickly picked out twenty-seven bracelets and necklaces. No one talks money in these elite circles, and it took a few months for the bill to arrive at Blackrock, Low’s company. The total was $1.3 million—quite a moderate spending spree by Rosmah’s standards. Low took care of the invoice, and he also picked up the $300,000 tab that Rosmah ran up at the Bel-Air hotel during her week’s stay.
Between April 2013 and September 2014, Low used the Blackrock account to purchase $200 million in jewelry from across the globe: Las Vegas, New York, Hong Kong, Dubai. Even more portable than art, diamonds are extremely hard to track. The Financial Action Task Force, in a 2013 report, warned that money launderers and terrorists used the diamond industry as a conduit for illicit cash. In the United States, retailers like Lorraine Schwartz, or dealers in raw and cut stones, were under no legal obligation to conduct due diligence on clients. Even better, jewels could be transported without having to send money through financial institutions.
Not all the jewelry went to important figures like Rosmah. On one occasion, Low was in Las Vegas when he found out it was the birthday of a young Asian-Canadian model, a hanger-on in his group. On the way to dinner, Low spontaneously ducked into a Cartier store and came back out with a watch, passing it to her without any fanfare as a last-minute gift. The watch cost $80,000. But it was Rosmah on whom Low showered the biggest diamonds. Imelda Marcos had her shoe collection, at least 1,220 pairs left behind when she and her husband were driven out of the Philippines in 1986 by the “People Power Revolution.” Rosmah would be known for her Birkin bags and jewelry, hundreds of millions of dollars of rings, necklaces, and pendants, arranged in specially made drawers at her residence in Kuala Lumpur.
From the outside, Low appeared to be accumulating prestige, and he no longer had to situate himself between formidable people—the ones who knew the secrets of how the world really works. He had become one of them in his own right. Dating a supermodel, he was pursuing deals and drawing the Malaysian prime minister and his wife ever closer. Those who hung around him, at the Super Bowl or over a dinner, still gossiped about his money. It was vaguely known he had links to Malaysia’s prime minister, and it was taken as normal that such a relationship in a faraway Asian country could entail riches.
Anyone who was paying close attention, however, might have noticed an extra degree of restlessness amid Low’s frenzied, globe-trotting schedule. As he whipped out his phone, excusing himself from a dinner or party, only he could see the obstacles that were piling up in his inbox, threatening to upend his scheme.
Chapter 38
Losing Control
Kuala Lumpur, Malaysia, March 2014
The 1MDB board of directors started their afternoon meeting with a recitation of the first seven verses from the Qur’an, known as the Al-Fatiha, for the crew and passengers of MH370, the Malaysia Airlines Boeing 777-200 jet that had gone missing in early March over the South China Sea. The plane, with 239 crew and passengers on board, was flying from Kuala Lumpur to Beijing, but just an hour after takeoff the pilot stopped making contact with air traffic control and, moments later, the plane disappeared from civil aviation radar screens.
In the weeks since, Beijing’s official media had slammed Malaysia for leading a chaotic search effort, first focusing efforts on the South China Sea, north of Malaysia, before military radar showed the aircraft had gone missing over the Andaman Sea, to the west of the country. Failure to locate the plane debris, added to chaotic daily briefings, spotlighted the incompetence of Malaysia’s government and was an embarrassment for Najib.
The board of directors intoned the Islamic verses but talk soon turned to another pressing matter at hand. Tan Theng Hooi, the managing partner in Malaysia for Deloitte Touche, had been invited to speak, and he brought some distressing news. Only weeks earlier, Deloitte had become 1MDB’s third auditor and the fund’s management was exerting huge pressure for a quick sign-off on the accounts for the year to March 31, 2013, which had been delayed by months.
Just as Deloitte was poring over the accounts, though, the firm’s Southeast Asia regional headquarters in Singapore began to receive numerous emails and letters alleging financial reporting fraud at 1MDB. The complaints, Tan said, had touched on a number of issues, from 1MDB’s claims to have $2.3 billion invested in an unknown fund in the Cayman Islands, to its overpayment for power plants, and a mismatch between its huge debt and minimal assets. An accountant with thirty years’ experience, Tan appeared very keen to get rid of the problem.
“These allegations are not new and no evidence had been provided to Deloitte to substantiate these allegations. Deloitte was therefore unable to pursue the matter,” he told the board.
One of the letters came from Tony Pua, a forty-one-year-old opposition politician, who quietly had been following the 1MDB issue for a few years. Unlike many politi
cians, Pua had a deep grasp of business; in a previous life he founded a technology company, before selling out to enter politics in 2008, winning a parliamentary seat the following year in a satellite town of Kuala Lumpur. Whip-smart, with a degree in philosophy, politics, and economics from Oxford University, Pua unsettled time-serving UMNO politicians, who were not used to his piercing questions and mastery of financial concepts. Unable to suffer fools, Pua, an ethnic Chinese Malaysian with spiky graying hair and a quick-fire delivery, was universally disliked in the ruling party.
He became intrigued by 1MDB in 2010, when KPMG had written an “emphasis of matter” about the fund’s investment in PetroSaudi. Such arcane terms meant nothing to most folks, but Pua knew it signaled the accountants had concerns about 1MDB. He sat on the Public Accounts Committee of the Parliament, which was charged with overseeing state spending, and so agitated for the committee to investigate, but the chairman, an UMNO politician, had dragged his heels. By 2014, though, with articles in the Edge pointing out the fishy Cayman Islands fund investment, Pua had more firepower.
1MDB fired KPMG in January after the auditing firm had been unable to confirm the $2.3 billion the Malaysian fund claimed to have in the Cayman Islands was really worth that much—or whether it actually existed. Back in 2012, the 1MDB fund had sold its interest in a PetroSaudi subsidiary that owned the two oil drill ships to a company controlled by Hong Kong financier Lobo Lee. Instead of cash, 1MDB had received payment of $2.3 billion in the form of “units” in a newly formed Cayman Islands fund. It was a fictional transaction aimed at covering up the money that Low and others had taken from 1MDB in 2009.
Yeo Jiawei of BSI had misled KPMG that the Cayman Islands investment was backed by cash—not just shady “units.” But the transaction just didn’t seem right to the U.S. auditing firm. Refusing to sign off on the accounts, KPMG was dumped, just as 1MDB had fired Ernst & Young before it. Eager to build its business in Malaysia, Deloitte signed on.
KPMG’s removal was a roadblock for Low, who needed an auditor to quickly rubber-stamp 1MDB’s accounts. With $10 billion in debt and only $20 million in cash, the fund was in dire straits, hemorrhaging tens of millions of dollars a month, but Low had a game plan. The 1MDB energy unit was planning to list its shares on Malaysia’s stock exchange. Hopefully big global institutional investors would snap up the shares, given Asia’s economic outlook was still brighter than the West’s, and the IPO would net $5 billion or more.
It was an optimistic assessment, but one that was crucial to keeping the scheme going, providing Low with the money he desperately needed to hide the fund’s losses. Major banks, including Goldman Sachs and Deutsche, were feeding the optimism, telling 1MDB there would be ample appetite from global investors, keen themselves to win the mandate to advise on the IPO. Even an amount lower than $5 billion would be enough to fill financial holes and stop the scrutiny of 1MDB, Low anticipated, but first Deloitte needed to okay the delayed accounts.
Like KPMG, Deloitte’s Tan had issues with the accounting of the Cayman Islands investment. To get around the problem, Low turned again to Mohamed Al Husseiny, asking for Aabar to guarantee the offshore money. This meant that the Abu Dhabi fund would cover the amount no matter what. It should have been a red flag for Deloitte, given the letters it had received alleging financial fraud at 1MDB, not to mention the fact that 1MDB already had ended its relationship with two major auditors. But a piece of paper from Aabar appeared to be good enough for Tan to get comfortable with the investment.
Auditors are meant to be independent, but Tan offered for Deloitte to help 1MDB with its media relations. With barely any business, and encumbered by huge borrowings, the only way for 1MDB to avoid a financial loss was to again revalue its land portfolio and book the profits, as it had done in 2010. In this way, 1MDB was hoping to show a $260 million profit.
Tan was not only supportive of this accounting, he also offered to explain it publicly to help deflect any negative media stories. Deloitte had been so helpful, in fact, that Tan asked whether his firm would be selected to audit 1MDB’s many subsidiaries, including the energy unit that was gearing up for an IPO. The board confirmed Tan’s request immediately, and its chairman, Lodin Kamaruddin, Najib’s close aide, said he wanted Deloitte’s “professionalism and objectivity” put on record.
Still, the board was adamant that 1MDB’s management repatriate the Cayman Islands money, to help slash the fund’s debt and to show the Edge newspaper and other critics they were wrong. Only Low, and perhaps a few associates like Al Husseiny and Yeo, knew the truth: There was no money in the Cayman Islands.
As dawn approached one night in May, Low made an unusual request of staff in a private gaming room at the Palazzo on the Las Vegas Strip. Drunk and in his element, Low called out for a watermelon. Some of those crowding around the baccarat table, many of them models, didn’t know this short, pudgy figure who was putting down $200,000 bets at a time. The whisper went around that he’d financed The Wolf of Wall Street, a film that everyone was talking about, but there was something unhinged about him. He was on a losing streak, and when the Palazzo staff turned up with a watermelon from the kitchens, Low seized it and rolled it down the table—supposedly for good luck—sending cards flying. Still, the losses mounted, and guzzling Johnnie Walker Blue Label whisky, he started bellowing to staff again.
“Red T-shirts,” he told a staff member waiting on him. “Everyone needs red T-shirts.”
The staff hurried to comply, bringing in red Palazzo tourist shirts for the room of about twenty people, including Joey McFarland and Riza Aziz.
“My friend couldn’t even watch,” said one young woman who was in attendance that night. “He saw on that table all the money he would ever make in his life, his college tuition, car, home, everything. Won and lost.”
It was typical Low, who on another drunk occasion had dropped $50,000 worth of casino chips on the floor, only recovering them when a shocked friend noticed the loss.
As the night of gambling at the Palazzo wound up at sunrise, Low handed the casino staff a tip of $1 million, one of the largest ever at the establishment.
Ho Kay Tat in April wrote a strident column in the Edge calling on 1MDB to name the fund manager looking after its $2.3 billion in the Cayman Islands and to bring the money home. Then, in May, a Singapore newspaper, citing inside sources, named Hong Kong–based Bridge Global as the fund manager. When Lobo Lee later erased details, including his name, from Bridge Global’s website, the newspaper noted the suspicious behavior. Low was furious—he believed there was a leak at BSI—and he ordered the bank to hunt down the source. The suspicion fell first on Kevin Swampillai, Yeo’s boss, and Low made efforts to get him off the 1MDB-related accounts. Swampillai denied any involvement and refused to budge.
Over the summer, Low lurched from party to party, spending his days railing against unnamed “leakers.” The facade of carefree revelry was starting to crumble, as Low became paranoid about a Judas in his ranks.
Around this time, he persuaded Yeo Jiawei, the funds expert at BSI, to come work for him. Yeo accepted. From this point on, Low didn’t even want to speak on the phone or use email for important transactions, and he planned to tap Yeo’s financial expertise, as well as having him courier top secret documents around the world.
The following spring, Low would invite Yeo to watch Floyd Mayweather Jr. fight Manny Pacquiao at the MGM Grand Garden Arena in Vegas, and the young Singaporean became hooked on the jet-set lifestyle. His proximity to Low had swelled Yeo’s self-regard, and he sneered at those at BSI who didn’t travel everywhere by private jet. He already had made millions of dollars, secretly funneling off fees paid by 1MDB to BSI and Bridge Global to manage the Cayman Islands money and other investments. He began to buy multiple homes in Singapore and one in Australia. Now Low enticed him into his inner circle with promises of even more bountiful riches.
Yeo would pocket tens of millions of dollars more, but it came at a price, as Low morphed into a tyran
nical—and insecure—boss. The banker stayed in contact with former colleagues at BSI, telling them stories about how Low would take calls on his private jet and start screaming. He was especially perturbed by details coming out about the Cayman Islands investment. Scared by the way Low was acting, so at odds with the mild manners he knew, Yeo began to believe his new boss was losing control.
Addressing 1MDB’s board in July, Tim Leissner was doing the best he could to keep Goldman in the game to win the IPO business. The fund was in grave danger. In just two months, it had lost $140 million under the weight of hundreds of millions of dollars in interest costs. The fund needed an IPO of its energy assets, and quickly, to restore it to health. For two years, Leissner had championed the IPO, but now he faced a problem.
As part of the deal in 2012 to acquire Ananda Krishnan’s power plants, 1MDB had given the billionaire the right to subscribe to the IPO at a cheap price. Now, Leissner was explaining to 1MDB’s board how it would cost the fund hundreds of millions of dollars to buy back these rights ahead of the listing. Some board members were outraged. The original deal seemed way too favorable to Krishnan, who already had received above-market prices for his power assets.
Some board members knew about secret charity payments of hundreds of millions of dollars by Krishnan-controlled companies to 1MDB. That was how run-of-the-mill graft worked in Malaysia: The government overpaid for an asset, and the seller made backhand contributions to UMNO, while politicians lined their pockets. Still, the terms seemed very good for Krishnan and his company, Tanjong.
“Is Goldman acting for 1MDB or Tanjong?” Ashvin Valiram, a Malaysian textile entrepreneur and board member, asked Leissner.
“Of course, we’re representing 1MDB,” the banker replied, trying to keep the atmosphere light. “Without this deal with Tanjong, the fund won’t be able to undertake the IPO.”