by Tom Wright
More than a quarter of all home purchases made over a six-month period were flagged as suspicious, leading the Treasury Department to roll the program out in Los Angeles and other city areas, with a view to bringing in new, permanent regulations. Major loopholes remained—lawyers, for instance, could continue to cite client privilege to avoid giving up the names of beneficial owners involved in real estate transactions—but the United States was moving to deal with the problem.
Christie’s, the auction house that sold Low many paintings, began demanding that agents looking to buy or sell works reveal the names of their clients. These rules were voluntary, but Christie’s was taking action. There were still no regulations to effectively stop the flow of corrupt cash into nightclubs, casinos, and Hollywood movies, but the U.S. government hoped the shame of the 1MDB fiasco would make nightclub promoters, directors, and actors think twice before receiving money.
Leonardo DiCaprio and Miranda Kerr in 2017 voluntarily gave up the gifts they had received from Low to the U.S. government, and the actor even returned Marlon Brando’s Oscar statuette, which was not named in the lawsuits. By then, he had a Best Actor Oscar of his own, for The Revenant in 2016.
Kerr had split with Low after the first stories about him began to emerge in early 2015. In May 2017 she married Evan Spiegel, the billionaire founder of Snapchat, cutting all ties with Low.
As for Strategic Group founders Noah Tepperberg and Jason Strauss, their interactions with Jho Low had played a role in building their business. In February 2017, Madison Square Garden Company paid $181 million for a controlling stake in a new company, TAO Group, which included their nightclubs.
Red Granite, in March 2018, agreed to pay $60 million to settle the Justice Department’s efforts to seize rights to the film company’s future profits. Joey McFarland maintained a public presence, attending the premiere of Red Granite’s Papillon in September 2017 at the Toronto International Film Festival. On Instagram, he posted pictures with Charlie Hunnam, the film’s star, from the red carpet.
McFarland also appeared to keep in touch with some of his old associates. In March 2017, he posted an Instagram picture from the Batu Caves, just north of Kuala Lumpur, the capital of Malaysia. That was where Riza Aziz, the cofounder of Red Granite, had been cooling his heels since the Justice Department’s asset-seizure lawsuit in mid-2016. Scared to travel back to the United States, fearing possible arrest, Riza was trying to do business deals in Asia with one of Najib’s sons.
The exact whereabouts of Low remained unclear.
On March 27, 2016, Yeo Jiawei, the fund expert on whom Low had relied to hide money flows, arrived for a meeting at the Swiss Club in Singapore. Yeo was frantic as he made his way through the doors of the private club, a former two-story, whitewashed British colonial mansion with bright red shutters, and made his way to a café on a verandah out back.
There to meet him was Kevin Swampillai, his former boss at BSI, with whom he had conspired to take money from 1MDB. As they sat at the café, looking over the Swiss Club’s lush garden, Yeo told Swampillai that he’d recently been arrested by Singapore police and let out on bail.
Fearing jail time, Yeo sketched out a plan of action. The pair should tell Singapore authorities that the 1MDB money they’d received into their personal bank accounts was actually investments from another financier. Swampillai was noncommittal.
The same month, Yeo used the encrypted Telegram instant-messaging service to contact José Renato Carvalho Pinto at Amicorp, whose Curaçao funds had disguised the flows of 1MDB money. In his Telegram message, Yeo told Pinto to destroy his laptop and avoid coming to Singapore in case authorities tried to interview him.
Yeo had made a huge misstep. Unknown to him, Singapore police were monitoring his actions, and now authorities had evidence that Yeo was obstructing the course of justice. He was soon back in jail.
As in the United States, Singapore seized assets: $177 million in property and contents of bank accounts, about half belonging to Jho Low and his family. Authorities in the city-state revoked BSI’s banking license, the first time it had shut down a bank for more than three decades. The Monetary Authority of Singapore levied fines of over $20 million in total against eight banks, the majority to be paid by BSI and Falcon, with smaller penalties to Coutts, Standard Chartered, and others, for failing to stop money laundering. The financial penalties were paltry, but Ravi Menon, managing director of the Monetary Authority of Singapore, defended the city-state’s response to the calamity.
“When you fine a bank billions of dollars, it hurts basically shareholders and other stakeholders. It doesn’t hurt the board and senior management, and it doesn’t hurt the individuals much. And that is what, in my view, is one of the failings of the current regime globally, that people continue to do wrong things because they’ve not been held personally liable and responsible,” Menon said.
But Singapore’s criminal sanctions could hardly be called draconian. After cooperating with authorities, Yak Yew Chee, Jho Low’s personal banker, was sentenced to eighteen weeks in jail after pleading guilty to forgery and failing to report suspicious transactions. He handed over a few million dollars in 1MDB-related bonuses to Singapore’s government but was allowed to keep millions more. Haughty and defiant through his trial, Yeo was handed a thirty-month sentence for witness tampering and a further four-and-a-half-year term for money laundering and other charges.
Three other people, comprising a subordinate of Yak’s at BSI, the head of Falcon’s Singapore office, and a Singaporean broker, got short sentences of a matter of weeks. Prosecutors said Jho Low was a person of interest, but authorities had no idea where to find him. Singapore’s central bank referred Hanspeter Brunner, who had retired as head of BSI in March 2016, and Kevin Swampillai, along with a number of other BSI executives, to state prosecutors for further investigation, but more than two years later, authorities did not appear to have taken any action against either man.
Switzerland’s attorney general’s office also launched a criminal probe into the 1MDB affair. Investigators focused on the role of Jho Low and Al Qubaisi, but the office also named BSI as a target, and Swiss financial regulators ordered the bank to hand over 95 million Swiss francs in illegal profits. After 143 years in operation, BSI ceased to exist in 2017, its assets folded into another Swiss bank under orders from authorities.
Falcon Bank, owned by the Abu Dhabi fund Aabar, also was under criminal investigation in Switzerland. Like Brunner, Eduardo Leemann, the chief executive of Falcon who had complained to Jho Low about hundreds of millions of dollars of risky payments in 2013, before letting them through anyway, also retired in 2016. Unlike BSI, Falcon was allowed to remain in operation, but ordered to return over $2.5 million in illegal profits.
Mark Branson, chief executive of the Swiss Financial Market Supervisory Authority, the financial-sector regulator, worried publicly that Swiss banks were becoming more exposed to money laundering as they targeted wealthy clients in emerging markets. “Money laundering is no victimless crime. It allows criminals to profit from breaking the law. It also facilitates corruption and the abuse of power and privilege,” Branson said.
As in the United States and Singapore, the proof of Switzerland’s seriousness in combating white-collar crime would be in criminal prosecutions of Swiss bankers, not rhetoric.
Chapter 51
King Khadem Falls
Abu Dhabi, August 2016
In the fall of 2016, Abu Dhabi’s police swooped, detaining Khadem Al Qubaisi. It was an unprecedented move for the Gulf emirate, where the dirty laundry of the elite is rarely hung out for public view. For years, Al Qubaisi had acted without boundaries, a seemingly omnipotent figure who had the authority to move around billions of dollars. The key to his untouchability was a close relationship with Sheikh Mansour.
The Justice Department lawsuits had forced the ruling Al Nahyans to take stern action. Al Qubaisi’s role in the 1MDB scandal had been exposed for the world to see, bringing shame
on Abu Dhabi. Someone had to pay. Al Qubaisi’s tenure atop the world’s financial system had come to a close with his dismissal from IPIC in 2015. Now he was taken into custody, along with Al Husseiny, the former head of Aabar. Authorities did so without fanfare—there were no public statements—but the arrests nevertheless marked a rare moment of accountability in the emirate. Though the men’s assets were frozen, neither was formally charged.
Both men were held in a detention facility meant for criminals on their way to prison. Given Al Qubaisi’s closeness to Sheikh Mansour, it would have been difficult to sanction him without opening up the inner workings of the Persian Gulf state, and it appeared unlikely he would be handed a long prison sentence. The fate of Al Husseiny, who was not even a citizen of Abu Dhabi, was unclear.
From his bases in Bangkok and Shanghai, Low had been working to reach a deal with Abu Dhabi authorities to brush the scheme under the carpet. With Al Qubaisi’s arrest, such hopes were fast ebbing away.
Instead, both sides became embroiled in a public scrape over who was liable to pay interest on 1MDB’s bonds, which IPIC had guaranteed. The Malaysian fund defaulted, but Abu Dhabi was on the hook for payments, or would face cross-defaults by investors on its own debt.
The bigger issue of who should pay for the money Low and Al Qubaisi took remained unresolved. Abu Dhabi’s negotiators argued this was not their problem, but they couldn’t walk away because IPIC had guaranteed $3.5 billion in 1MDB bonds. There was also the issue of the $1 billion emergency loan that IPIC had made to 1MDB.
Abu Dhabi authorities had taken action against Al Qubaisi, but now the rulers wanted this embarrassment to melt away. IPIC took a $3.5 billion provision, basically an admission to investors that it never expected 1MDB to pay its debts, and then was merged into Mubadala, bringing an ignominious close to the $70 billion fund’s thirty-two-year history. For years, Goldman, Morgan Stanley, and other banks had made huge profits dealing with IPIC, and now suddenly it did not exist.
The empire of Khaldoon Al Mubarak, the chief executive of Mubadala, which had done so many deals with Low, appeared to have grown even larger as IPIC now came under his control.
Abu Dhabi authorities and 1MDB continued to negotiate how to sort out the debt problem, but it was unclear how the Malaysian fund would come up with the money it owed. The hopes that China would bail out Malaysia seemed to have been misplaced. In early 2017, one deal for a Chinese state–owned company to acquire a parcel of 1MDB’s land fell apart, after President Xi Jinping’s government declined to sign off on the arrangement. It seemed that Beijing didn’t want to get involved in this imbroglio, even if it helped bind Malaysia closer to China.
Low’s efforts to cover up the PetroSaudi phase of the fraud also were failing. In November 2017, Prince Turki, cofounder of the oil firm, was detained in a consolidation of power in Saudi Arabia. His father, the former king, had passed away, and Saudi’s new rulers detained scores of princes and cabinet members, ostensibly for corruption. Prince Turki’s fall was another blow to Low’s prospects.
PetroSaudi’s role in the 1MDB affair was a focus of investigations in Swizerland. While Prince Turki was detained, Xavier Justo was let out early, in December 2016, from jail in Thailand, and he returned to his family in Geneva. Angry over his treatment, he filed a criminal complaint in Switzerland against Tarek Obaid, Patrick Mahony, and Paul Finnigan, the former British police officer. Obaid and Mahony still ran the PetroSaudi business, although it had few real operations. Obaid continued to party and was snapped on a superyacht off the coast of Turkey in August 2016. Mahony was at home in London with his family. In May 2018, Switzerland’s attorney general announced it had begun criminal investigations into two officers of PetroSaudi.
In June 2017, Bradley Hope received an intriguing message in his Wall Street Journal email. The message, from a mysterious group calling itself Global Leaks, offered him access to emails hacked from the computer of Yousef Al Otaiba, Low’s associate and the UAE’s ambassador to Washington.
“We have something extremely smoking gun and exclusive,” the email promised.
The email was sent from [email protected], a suffix denoting Russia, but the location of the group was a mystery. Their motivation was crystal clear. Global Leaks approached a number of international news outlets at the time. In messages, they pointed out Ambassador Otaiba’s role in Middle East politics, including his efforts in June 2017 to isolate the tiny Persian Gulf nation of Qatar.
Hope was interested in a different aspect to Ambassador Otaiba’s life, one about which other news outlets had no clue: his connection to Jho Low. He asked the group to search their files and come back with anything related to Low or 1MDB. The haul was remarkable.
The emails gave a comprehensive picture of Otaiba’s relationship with Jho Low and how the ambassador had benefited financially from 1MDB. They also showed how Otaiba, after the stories in the Journal and Sarawak Report, had cut off Low, who was desperately trying to get in touch with him.
The Abu Dhabi government attempted to discredit the emails, pointing out the hackers were backed by Otaiba’s political enemies in the Middle East, but it did not go as far as to claim the documents were doctored. Otaiba remained in his position, appearing on Charlie Rose’s talk show in the United States to discourse on Middle East politics not long after the Journal published a story in July 2017 on his ties to Low.
Ambassador Otaiba was a survivor.
Prime Minister Najib started to act as if 1MDB had never existed. He disbanded the fund’s board and placed it directly under the Finance Ministry, which he also headed. After the Justice Department suit, Deloitte Touche said it had resigned as auditor, and cautioned that 1MDB’s 2013 and 2014 financial statements—accounts that Deloitte had earlier approved—could no longer be relied upon. The cost of the corruption was set to impact generations of Malaysians.
Moody’s estimated the government would be on the hook to repay about $7.5 billion of the fund’s debt, a sum equivalent to 2.5 percent of Malaysia’s economy. Foreign investors, worried over the 1MDB scandal, sold Malaysian assets, pushing the local ringgit currency down 30 percent against the U.S. dollar in just a few months.
About half of the fund’s debt was in dollars, and a weaker ringgit made it even more costly to repay in local-currency terms. The fund was supposed to have created new jobs for Malaysians, but instead would be a burden on state finances for years to come. Most of the borrowings weren’t due for repayment for a few years, but 1MDB’s debt was a ticking time bomb, waiting to go off in the future.
Any hopes Malaysia would one day become a true liberal democracy were shattered. Many Malaysians, from top bankers to lawyers and officer workers, were tired of the direction of their country. The country’s brain drain, a phenomenon which had pushed many of the country’s brightest minds to live and work in the United States, the United Kingdom, Singapore, or Australia, was unlikely to reverse anytime soon.
Sticking by her husband’s side, Rosmah became more staunchly anti-Western after the Justice Department suits described how she had received jewelry from Low worth almost $30 million. The attempts to use charity to burnish the images of those involved with 1MDB also did not stop. In September 2016, Rosmah was to have received a “Lead by Example” award at a gala dinner hosted by the United Nations Educational, Scientific and Cultural Organization and a U.S. charity at New York’s Metropolitan Museum, in honor of her work for children’s education in Malaysia. The organizers canceled the award at the last minute after queries from the Wall Street Journal.
Malaysia slipped more into China’s orbit. To coincide with a visit to Beijing late in 2016, Najib wrote an editorial in the People’s Daily, the Communist Party mouthpiece, saying former colonial powers should not lecture nations they once exploited. A few weeks later, at an Asia-Pacific summit that Najib also attended, President Obama, in his last few days in office, made an allusion to Malaysia, one that wasn’t lost on its people.
“There are limits t
o our reach into other countries if they’re determined to oppress their people,” Obama said, “or siphon off development funds into Swiss bank accounts because they’re corrupt.”
The United States’s influence was indeed constrained. As the Justice Department prepared its criminal case, it focused on Jho Low, the main target of its investigation. But ensconced in Bangkok and Shanghai, the Equanimity safely parked in waters nearby, he appeared out of the reach of American justice.
Epilogue
Phuket, Thailand, February 2017
From the jetty that jutted into the sparkling waters off Phuket, the southern Thai resort island, the hulk of the Equanimity was visible, even though the captain had anchored a few nautical miles from the palm-fringed shoreline to avoid scrutiny. Fishermen said the crew had recently come ashore for supplies. We had received a tip that Jho Low—despite the threat of arrest by the FBI and the jailing of his associates in Singapore—was planning a major party aboard the yacht.
As we continued to try to locate the Malaysian, it became clear that he had no appetite for a quiet life. Since early 2015, Low’s world had narrowed considerably. Fearing arrest if he set foot in any Western country, he was living on the boat and in serviced apartments at the St. Regis in Bangkok and Pacific Place in Hong Kong.
Thailand, ruled by a military junta, was a safe harbor for Low. China, meanwhile, saw him as a strategic asset—a pawn who gave Beijing influence over Najib. He still had access to copious amounts of cash. It was a comfortable existence, if isolated.