Malaysia’s 1MDB Sent $850 Million to Entity Set Up to Appear Owned by Abu Dhabi Wealth Fund


December 17, 2015

Update:

Latest WSJ story brings 1 MDB into UK jurisdiction :UK can now compel 1 MDB,Malaysian Govt ,to provide evidence & seek extradition of those involved

by Ganesh Sahathevan

The WSJ’s latest story on 1 MDB brings the 1 MDB matter well and truly within the jurisdiction of the United Kingdom, given the evidence of a sham transaction involving a BVI dummy company.
That being said, even if for some reason it is determined that UK law does not apply in this instance, it is unlikely that the UK is going to let minor legal technicalities get in the way of a billion dollar affair,given the international desire for better enforcement of money laundering and terrorist financing laws.
The BVI has managed to stay clean despite other tax haven being found wanting in that regard,and the magnitude and extent of the 1 MDB matter will compel the UK to seek evidence both internally and externally,and use its powers to compel production if necessary. In the event that anyone is found to have committed a crime, a request for extradition can be expected. It would not be a good look for Malaysia if extradition is denied, regardless of the legal niceties,and therefore,those involved should not be too confident of a safe haven in Malaysia.

Malaysia’s 1MDB Sent $850 Million to Entity Set Up to Appear Owned by Abu Dhabi Wealth Fund

Transfer deepens mystery over 1MDB state-investment fund, which is under investigation in at least six countries

A troubled Malaysian state investment fund sent at least $850 million last year to an offshore entity set up to appear that it was owned by an Abu Dhabi sovereign-wealth fund, a transfer which deepens the mystery over billions of dollars that are unaccounted for, according to documents reviewed by The Wall Street Journal and people familiar with the matter.

The 1Malaysia Development Bhd. fund, or 1MDB, set up by Malaysian Prime Minister Najib Razak in 2009 to promote economic development, is under investigation in at least six countries over a broad array of allegations that money was siphoned off for political spending and for personal gain.

One focus of investigation is $2.4 billion in payments that 1MDB said it made to a unit of Abu Dhabi’s International Petroleum Investment Co., or IPIC, as part of a deal involving the Malaysian fund’s purchase of power plants. The Journal reported in September that IPIC officials had concluded they did not receive the money, according to people familiar with the matter.

A 1MDB unit transferred at least $850 million via three transactions last year to a British Virgin Islands-registered company with a name that made it look like it was controlled by IPIC, according to wire transfer documents viewed by the Journal and two people familiar with the matter.

The 1MDB fund sent the money to “Aabar Investments PJS Ltd.” which closely resembles the name of IPIC’s wholly owned subsidiary Aabar Investments PJS, the wire documents show.

One focus of investigation is $2.4 billion in payments that 1MDB said it made to a unit of Abu Dhabi’s International Petroleum Investment Co., or IPIC, as part of a deal involving the Malaysian fund’s purchase of power plants. The Journal reported in September that IPIC officials had concluded they did not receive the money, according to people familiar with the matter.A 1MDB unit transferred at least $850 million via three transactions last year to a British Virgin Islands-registered company with a name that made it look like it was controlled by IPIC, according to wire transfer documents viewed by the Journal and two people familiar with the matter.

Aabar, the IPIC subsidiary, is an Abu Dhabi-registered company that holds prominent investments in the space tourism venture Virgin Galactic and a 5.1% stake in UniCredit SpA, Italy’s biggest bank.

Executives at IPIC and Aabar investigating the transfers have concluded neither of the two Abu Dhabi funds ever owned or controlled the British Virgin Islands company, according to the people familiar with the matter. Records in the British Virgin Islands don’t give any details on the owners or directors of the company.

The records show the British Virgin Islands firm was incorporated on March 14, 2012, and liquidated on June 23 this year, a time of growing criticism of 1MDB from opposition politicians and within Mr. Najib’s ruling party.

The 1MDB fund, in a statement to the Journal after publication of this article, did not reply to questions previously submitted about the transfers. The statement said “that the Wall Street Journal continues its campaign to malign 1MDB.” The fund also said it was cooperating with investigators. 1MDB in the past has said it stands by its financial statements, which show it made the payments to the Abu Dhabi fund.

An IPIC spokesman did not respond to questions. The Abu Dhabi fund hasn’t made any public statements about its relationship with 1MDB or the missing money.

Mr. Najib promised the fund would spur economic development by investing in new industries like renewable energy. But it has only bought existing power plants and land, while rolling up over $11 billion in debt that it is struggling to repay.

The transfers involving Abu Dhabi are among a series of transactions by 1MDB that are the focus of investigations. In Malaysia, the fund is being probed by the auditor general, the nation’s anticorruption body, the central bank and a parliamentary committee.

In 2012, 1MDB issued $3.5 billion in bonds to fund the purchase of power plants in Malaysia and overseas. The Abu Dhabi fund guaranteed the bonds.

The 1MDB fund’s publicly-available financial statements for the year ending March 31, 2013, show it paid $1.4 billion to IPIC’s unit Aabar as collateral for guaranteeing the bonds. The Malaysian fund said it paid another $993 million to Aabar in 2014 to cancel options granted to IPIC to buy a stake in 1MDB’s power assets, according to a copy of a draft report into 1MDB by Malaysia’s Auditor-General and 1MDB board minutes reviewed by the Journal.

Officials at IPIC say neither they nor any subsidiary received this money, the Journal reported. It is not clear why the payments were made to Aabar since IPIC made the guarantee.

IPIC’s consolidated financial statements, which include Aabar, make no reference to the collateral payment. A footnote in the 2014 statements said that as of the end of that year 1MDB owed IPIC $481.3 million in outstanding payments for the options.

No substantial amount of money was received by IPIC, the people familiar with the matter said. It isn’t clear how IPIC arrived at the $481.3 million figure and whether it relates to the $993 million transfer 1MDB says it made to IPIC as partial payment to cancel the options.

IPIC’s former Managing Director, Khadem Al Qubaisi, was dismissed in April by a presidential decree. The new management team of IPIC has been scrutinizing Mr. Al Qubaisi’s activity at the fund, according to the people familiar with the matter.

 How $2.4 billion in payments from Malaysia’s 1MDB to the gulf emirate of Abu Dhabi appear to have gone missing.A London-based representative of Mr. Al Qubaisi said he declined to comment.

The latest twist in the 1MDB saga comes as Mr. Najib battles a separate scandal linked to the fund. Malaysian investigators said earlier this year that nearly $700 million was transferred into his personal bank accounts through entities linked to 1MDB, including a private Swiss bank owned by IPIC.

The source of the funds was unclear and the government investigation didn’t detail what happened to the money that allegedly went into Mr. Najib’s accounts.

Malaysia’s anti-corruption body in August said the funds were a donation from the Middle East. The donor wasn’t specified. Mr. Najib has denied wrongdoing and said he didn’t use any money for personal gain. He said this month that using money from a donor was appropriate and legal.

As well as Malaysia and Abu Dhabi, authorities in the U.S., Switzerland, Singapore, and Hong Kong are looking at 1MDB’s activities.

Write to Bradley Hope at bradley.hope@wsj.com

 

4 thoughts on “Malaysia’s 1MDB Sent $850 Million to Entity Set Up to Appear Owned by Abu Dhabi Wealth Fund

  1. WHY CAN’T 1MDB SIMPLY STATE IT DID NOT PAY TO THE WRONG ENTITY? 1MDB SEEMS AVOIDING A DIRECT ANSWER TO THE ALLEGATION. It again behaving like Najib – saying a lot of things but NOT answering it straight-up when, if the allegations are not true, its a simple matter to say they did not make a mistake.

    This feels like “the account is in my name but its not like its a personal acccount”

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