Billion Dollar Whale

by Tom Wright

  Finally, ties between Goldman and 1MDB were starting to fray. Earlier in the year, 1MDB had enticed banks to lend even more by offering them a role leading the IPO. The fund had secured a $250 million loan from a consortium led by Deutsche Bank, whose new country head, Yusof Yaacob, had been at Goldman. Finally, another bank was getting a look in.

  Goldman itself, worried by the negative articles and focus in the Wall Street Journal on its huge profits, began to distance itself from the fund, and was not keen to get entangled in fresh lending. Leissner was furious when 1MDB selected Deutsche and Maybank to run the IPO, a lucrative assignment for both banks, and he turned to Jho Low to ensure a role for Goldman. In the end, 1MDB appointed the bank as an adviser for the IPO.

  At this juncture, Leissner was unsupervised, traveling the world, and spending large chunks of time in the United States with his new wife, Kimora Lee Simmons. The banker, through a limited liability company, put down $19 million over the summer for a base on New York’s Upper East Side, a 4,600-square-foot, five-bedroom apartment in the Marquand, a 1913 Beaux Arts building just a stone’s throw from Central Park, but he spent as much time in Los Angeles, at Simmons’s Beverly Hills mansion, and flying to Asia. The following year, a British Virgin Islands company that Leissner controlled acquired the Sai Ram, a $20 million, 170-foot yacht with six cabins.

  For years, Leissner had resented that Goldman never promoted him to a regional role, a consequence of his reputation as a cowboy who wouldn’t hesitate to bypass internal permissions to get deals done. But in June, Goldman appointed him chairman of Southeast Asia; he was making too much money for the firm, and there were fears he might walk to another bank, taking his Southeast Asian relationships with him. Later in the year, Lloyd Blankfein, eager for Goldman to continue building its presence in emerging markets, held Leissner and Andrea Vella up as models to follow.

  “Look at what Tim and Andrea did in Malaysia,” Blankfein told a meeting in New York on how to build business in growth markets, rather than the increasingly heavily regulated U.S. “We have to do more of that.”

  Blankfein, Cohn, and other Goldman leaders, in the aftermath of the mortgage crisis, had pledged to put clients first and regularly preached good governance. Yet Goldman had made hundreds of millions of dollars and 1MDB was in disarray, at a high cost to Malaysia’s people. The bank had turned a blind eye to irregularities, enabling the kind of industrial-scale corruption carried out in the past by Sani Abacha of Nigeria or Ferdinand Marcos of the Philippines. Those dictators had been crude—Abacha had sent trucks to loot cash from the central bank—but this was simply a more sophisticated way of taking money, one conducted under the noses of Goldman Sachs.

  Leissner wasn’t the only one interested in boats. Even as his scheme was starting to unravel, Low was making his biggest purchase yet. There was one asset he didn’t yet possess: a megayacht. Since the previous year, Oceanco, a Dutch builder of custom yachts, had been constructing a three-hundred-foot vessel for Low, complete with a helicopter landing pad, gymnasium, cinema, sauna, and steam room. This wasn’t going to match the Topaz, but it was still one of the most luxurious yachts in the world, and Low would be spared the ignominy of renting again from Sheikh Mansour and other tycoons.

  As the shipbuilders were putting the finishing touches to the yacht at the Alblasserdam shipyard near Rotterdam over the spring, Low peppered Oceanco executives with demands to ensure every element was just so. In the same way he curated his parties, with performances, food, and drink organized down to the most minute detail, Low wanted this boat to be perfect.

  “For owner’s cabin, perhaps if you can get expert advice from Tempur specialists which is most top of the line and expensive with most functions for mattress,” Low wrote in one email.

  All those years ago in Penang, Low had borrowed a boat and pretended it was his family’s. Now, this yacht would deepen the mystique of a little-known Asian billionaire—and keep hold of Miranda Kerr. Perhaps there was another reason: The yacht could be moved anywhere in an emergency.

  Now, Low needed $250 million to pay Oceanco, and he had so many other financing requirements that he was starting to get reckless. Deutsche Bank’s recent loan to 1MDB was meant to pave the way for the IPO of 1MDB’s power assets. In 2012, the fund’s management, without the board’s knowledge, granted Aabar, the Abu Dhabi fund, options to buy cheap shares in the IPO. It was supposedly a reward for its parent IPIC’s guarantee of 1MDB bonds—the payoff that Sheikh Mansour had been promised two years earlier.

  Ahead of the listing, 1MDB’s management claimed it needed to buy Aabar’s options back at a cost of hundreds of millions of dollars, and Deutsche provided the money. Of course, Aabar’s chief executive, Mohamed Al Husseiny, and chairman, Khadem Al Qubaisi, were conspirators; the options were just another ruse by Low to move money around. As soon as 1MDB got its hands on the Deutsche Bank loan, the fund’s management sent the money to the look-alike Aabar, the same vehicle Low and Al Qubaisi had used to divert cash in 2012.

  At this critical stage, Low could have deployed these funds to fill financial holes, especially the nonexistent cash in the Cayman Islands. Instead, he used the bulk of the money to pay for the superyacht, which was delivered in the summer. At this late stage, with politicians and journalists clamoring for the Cayman Islands money to be returned to Malaysia, it was irrational to be exacerbating the financial damage at the fund.

  After years of getting away with the scheme, Low was blinded to the peril he faced. The first party on the yacht, complete with a dragon-shaped cake provided by Oceanco, was a birthday celebration that summer for May-Lin, Low’s sister. He christened his new yacht Equanimity, meaning calmness and composure, especially in a difficult situation.

  PART IV

  BONFIRE OF SECRETS

  Chapter 39

  “No Cash. No Deal.”

  Bangkok, Thailand, June 2014

  Clare Rewcastle-Brown, who ran the Sarawak Report blog, looked across the lobby of the Plaza Athénée hotel in central Bangkok for her contact. She was scanning for a Swiss man in his forties, and apart from those meager details, knew only the name and title: Xavier Justo, a former employee of PetroSaudi. When a bronzed and muscular figure approached, and introduced himself as Justo, she was taken aback. This encounter made even a muckraker like Rewcastle-Brown nervous. The meeting, in June 2014, had been arranged by an intermediary, and she was expecting a short, bald, bespectacled man. But then, it quickly became apparent that Justo, too, was deeply anxious, and that wasn’t the demeanor of someone about to inflict harm.

  “The people we’re dealing with are ruthless and powerful,” Justo said.

  Justo was working on an alternative way to get the money he believed he deserved: find someone else willing to pay for the PetroSaudi documents he had taken.

  His connection to Rewcastle-Brown had been a fortuitous one. After leaving PetroSaudi in 2011, Justo had traveled to Singapore for the city-state’s Formula 1 night race. He was supposed to have met Tarek Obaid, the chief executive of PetroSaudi, there for a negotiation over the files, but his erstwhile friend had not shown up. The trip, however, turned out fruitful in other ways. By chance, he met people close to Mahathir, the former Malaysian prime minister, and had given them his business card.

  Nothing happened for more than two years. Then, in the summer of 2014, those people had connected Justo to Rewcastle-Brown, who was digging around, trying to find more about 1MDB for her blog. She was eager to have a source with information about PetroSaudi, who she hoped would help her unravel what had transpired at the fund. Before meeting in person, Justo had supplied Rewcastle-Brown with a sampling of his material, a single piece of paper with the heading, “Thousands of documents related to the deal (emails, faxes and transcripts)” and details of what the server contained. This was just the break she needed to prove her suspicions about 1MDB and Jho Low. A few weeks later, she traveled to Bangkok to meet Justo.

  The server data was ready on a portable h
ard drive, detailing the PetroSaudi phase of the scheme. But there was a condition: Rewcastle-Brown had to pay $2 million if she wanted the information. Justo defended the request by explaining this was simply money PetroSaudi owed him. She was a member of Britain’s establishment, with a brother-in-law who had been prime minister, but unlike Malaysia, that didn’t grant her access to millions of dollars.

  Justo was adamant. “No cash. No deal.”

  Keen to get her hands on the documents, Rewcastle-Brown set about finding someone who could pay. It would take her seven months to secure a benefactor.

  Low must have heard from the PetroSaudi executives about Justo’s demands for money. But he had no idea about this dangerous meeting between Justo and Rewcastle-Brown. What would he have done if he did know? It was as if Low didn’t take Justo seriously. He could easily have arranged for a payoff of a measly few million dollars to the former PetroSaudi executive. But Low didn’t seem interested in attending to the nuts and bolts of his scheme. He was too taken with his new love interest to focus on the mundane business of ensuring crucial information didn’t leak out.

  Wearing a green skirt and shirt, with purple floral patterns, Miranda Kerr stepped from the car in Munich and, as a small group of photographers snapped her picture, made her way into a branch of Escada. It was July 29, 2014, a hot Bavarian summer’s day, and she was there to launch Joyful, a new perfume line for the luxury German fashion brand. The scent was meant to evoke simplicity, and Kerr’s makeup was light, her brown hair falling naturally over her shoulders. As German models and television personalities drank champagne and chatted, there was a flurry of activity around Kerr, the kind that attended her wherever she traveled.

  “Simple things, like, you know, a fresh bouquet of flowers makes me really happy, watching the sun rise or the sun set,” she told one interviewer.

  In the past few weeks Kerr’s life had been anything but simple. Britain’s Daily Mail, HELLO! magazine, and many other publications were speculating about a burgeoning romance between the model and James Packer, the Australian gambling billionaire. In June, Australian newspapers noted Kerr had been aboard Packer’s superyacht, Arctic P, off the coast of Cyprus, and cited “inside sources” saying that, rather than a romance, she was looking to get the mogul to invest in KORA Organics. Her current investors, with a 25 percent stake, were the twin sons of Rene Rivkin, an Australian stockbroker who had been jailed for insider trading and later took his own life. But the model had grander ambitions for her company, which specialized in organic cosmetics, and she needed a big capital injection.

  The speculation, however, was focused on the wrong billionaire. As Kerr finished up her work in Munich, Jho Low had arranged for a private jet to pick her up and whisk her to Naples in Italy. He had been planning this trip for over a month, even hiring a high-end concierge service to choreograph every element. Low ordered his new yacht Equanimity, piloted by British and American captains, to sail to the waters around Italy. With its Asian-inspired interior, constructed out of wood, bamboo, marble, and gold leaf, the boat helped Low stand out from the merely wealthy. It could accommodate twenty-six guests, but had even more berths for twenty-eight crew members, ensuring a sufficient staff-to-guest ratio. It would cost millions of dollars a year just to operate. This trip was to be much more intimate, although Kerr, as ever, was accompanied by her publicist, Kristal Fox.

  Billionaires are today’s royalty, and like a modern-day Louis XIV, Low thrived at being the center of orchestrated formality, each of his whims met immediately, whether by boat staff, private bankers, or art dealers. A few days earlier, Low had taken delivery from Lorraine Schwartz of a matching set of jewelry, comprising diamond earrings, a necklace, a bracelet, and a ring. A few weeks earlier, he’d sent Schwartz a picture of Kerr wearing Tiffany jewelry to give her an idea of the model’s taste. Over the next ten days on the boat, as it sailed around Italy and to the Greek island of Corfu, Low gave the various pieces of jewelry to Kerr over elaborate set dinners.

  Yet Low was straining to pay for all this opulence. Although some $5 billion had come out of 1MDB, the scheme had so many tendrils—so many payments to conspirators and business partners, and to keep up a billionaire’s lifestyle—he was often hustling for cash. Recently, he had hired U.S. public relations firm Edelman to help counter the growing number of negative press stories about him, and he would later employ Schillings, the British reputation consultancy. Edelman’s services were costing him as much as $100,000 some months.

  As bills piled up, Low began to miss payments, including legal bills and salaries for the crew of Equanimity, forcing him to use his vast art collection as collateral for a loan from Sotheby’s Financial.

  To pay the $2 million invoice on Kerr’s latest jewelry, Low again raided the fund. As he was such an important customer, Schwartz permitted him to pay a few months after the Corfu trip, but by September he needed to send the cash. Given how much he had taken from 1MDB, Low seemingly could have financed this relatively small amount from some pot of money somewhere in the world.

  Instead, he was seized by the need to get as much out of 1MDB as he could, perhaps believing the upcoming IPO would keep the edifice from collapsing. He had already taken money from a Deutsche Bank loan to 1MDB in May—a late-stage flow of money that could have gone to shore up 1MDB’s finances—and spent it on the Equanimity. Now, he set about trying to get a further $725 million in loans from Deutsche, ostensibly for the same reason: Ahead of the IPO, 1MDB needed to pay off Aabar to cancel even more options that allowed it to take a stake in the listing.

  Given the profits Goldman had made from 1MDB, Deutsche Bank was keen, but it couldn’t muster this money alone. To rally other Middle Eastern banks to take part, Low wrote Ambassador Otaiba on September 10, 2014, using the Eric Tan Gmail account, requesting him to use his sway in Abu Dhabi to get other lenders on board. The ambassador duly obliged and wrote the managing director of First Gulf Bank, which, along with Abu Dhabi Commercial Bank, and a Kuwaiti lender, joined a consortium led by Deutsche Bank. Goldman looked at taking part, but finally—after a number of years of obliviousness—the bank had questions about the fund’s behavior and backed out. As collateral for the loan, 1MDB had posted its $2.3 billion Cayman Islands investment, but the fund’s executives, when pushed by Goldman bankers, had been unable to show proof it existed, just a guarantee from the Abu Dhabi fund Aabar.

  Mohamed Al Husseiny, Aabar’s chief executive, helped the process along, urging Deutsche Bank employees to disburse the new loan quickly. Another Low associate, Terence Geh, a finance executive at 1MDB, also pushed Deutsche Bank to hurry up, citing Prime Minister Najib’s desire to receive the money expeditiously.

  Then, 1MDB requested Deutsche Bank send the first tranche of the $725 million loan directly to Aabar. It was an odd arrangement. Normally a bank, for compliance reasons, would send such large amounts of cash directly to the borrower. But Deutsche was satisfied by the apparent involvement of the Abu Dhabi fund. The perpetrators had tricked the bank: The recipient was another look-alike Aabar, set up by Al Husseiny with an account at UBS Bank in Singapore. Two days later, more than $100 million was diverted to a shell company controlled by Fat Eric.

  It became clear from what occurred next why Low needed to keep pilfering the till: There were just so many people to repay for their services. The shell company sent $13 million to Densmore, a British Virgin Islands firm partially controlled by Otaiba, which had an account at BSI in Singapore, an apparent reward for using his ambassadorial position to help get the Middle Eastern banks on board. Khadem Al Qubaisi, who was Al Husseiny’s boss, got $15 million.

  And Low, of course, took his cut, sending some of the money to Lorraine Schwartz. A few months later, he would buy Kerr yet more jewelry, a $3.8 million diamond pendant, making a grand total of over $8 million to acquire the supermodel’s affections.

  In September 2014, Mahathir Mohamad, the eighty-nine-year-old former prime minister of Malaysia, who remained a powerful f
igure in the ruling UMNO party, received a dossier of leaked information, including emails from 1MDB that showed Jho Low was involved in investment decisions. After years of speculation about his role at the fund, here was proof. Mahathir still wielded power at UMNO, and he began to engage in backroom dealing intended to force Prime Minister Najib to resign over this mess. The fund’s huge debt risked toppling Malaysia into a crisis like Argentina, Mahathir wrote on his blog. This was not the Edge, a scrappy newspaper, but one of the nation’s most powerful figures raising concerns about 1MDB.

  Until now, journalists had only been able to speculate about Low and the source of his wealth. To counter the stories, Edelman, the public relations firm, put out a statement denying their client had received “patronage” from Malaysia’s government. But now solid information was starting to leak out from the troubled sovereign wealth fund. Clare Rewcastle-Brown at Sarawak Report, who also got hold of the emails, published a piece titled “Jho Low’s Spending and Malaysia’s Development Money,” in which she questioned why the fund had lied about Low’s secret role.

  “Malaysians are entitled to conclude that Low’s record levels of spending in various billionaire hotspots,” she wrote, “has largely been paid for by them.”

  At Deloitte’s offices in Kuala Lumpur, the developments sparked panic. Its auditors were rushing to sign off on the accounts for the financial year to March 2014, which under Malaysian law were supposed to be submitted by the end of September. The fund had never managed this in the past, but now a timely submission was crucial to getting the IPO under way by the year-end.

  Concerned about its reputation, Deloitte was demanding a quick repatriation of the $2.3 billion in the Cayman Islands fund. The 1MDB board, apparently under the illusion there was money there, upped the entreaties on management to comply. Since first taking cash from 1MDB, Low had relied on accounting magic to make this problem disappear, but through three different auditing firms there it remained, like a pebble in his shoe. Before, he’d gone on taking more, and spending wildly, seemingly under the assumption he could cover it up with new trickery down the road. Now, as his desperation mounted, Low was coming to a stark realization: He would have to give up some real funds. The trouble was, he didn’t have $2.3 billion at his disposal. He had to find another maneuver—and it would be his most reckless yet.