US To Seize $1 Billion In Embezzled Malaysian Assets Which Goldman Sachs Helped Buy

Tyler Durden's picture

The last time we wrote about the long-running saga of the scandalous collapse and constant corruption at the Malaysian state wealth fund, 1MDB, which also happened to be an unconfirmed slush fund for president Najib, was a month ago when we learned that the NY bank regulator was looking into fundraising by the fund's favorite bank, Goldman Sachs. Then overnight, the story which already seemed like it has every possible angle of crime and corruption covered for a series of Hollywood action-adventure blockbusters, got a new twist when the DOJ announced it would seek to seize some $1 billion in assets from individuals affiliated with the fun as part of one of the largest seizures in US history.

The expected asset seizures would be the U.S. government’s first action tied to the 1MDB investigation. Among the properties the US is looking to confiscate, are Van Gogh paintings, Beverly Hills properties, a private jet, ultra high end real estate in NYC and LA, and the rights to profits from the hit movie The Wolf of Wall Street.

The move by U.S. authorities to seize assets tied to an investment fund run by a foreign government would be a major escalation in Washington’s global efforts to fight corruption and block allegedly illegally obtained funds, facilitated by Goldman Sachs, from moving through the world’s financial system the WSJ adds.

The case represents the most detailed and sweeping allegations to be brought in the multinational probe into a global scheme to siphon more than $3.5bn from the Malaysian government fund.  As the FT adds, it is also the first time Malay prime minister, Najib Razak, has been officially tied to the scandal, and while he has not been by name in court documents the description of “Malaysian Official 1” matches his biography and job responsibilities. In what may develop into a major diplomatic row, the DOJ states that that "official" received funds misappropriated from 1MDB, prosecutors say. Najib has repeatedly denied any wrongdoing.

The actions by U.S. authorities also threaten to upend the country’s relationship with Malaysia, a moderate Muslim nation that has long been an important U.S. ally in Southeast Asia, and may force Malaysia to enter China's sphere of influence in exchange for protection from US retaliation. Malaysia has deep ties to the Middle East and has been seen as a bulwark against China, which has increasingly asserted its power across Asia. President Barack Obama cultivated a relationship with Mr. Najib, including playing golf together in Hawaii over the Christmas holidays in 2014, something we reported at the time.

 

Amid the controversy, the Malaysian leader now was likely to focus on his domestic political survival rather than retaliate against the Obama administration, said James Keith, US ambassador to Malaysia from 2007 to 2010. Malaysia is a key regional partner for the US, backing a proposed trans-Pacific trade deal and hosting a digital centre to counter Islamic State propaganda. “I don’t think this is unexpected from Najib’s perspective,” said Mr Keith. “His approach is: batten down the hatches; we’re going to survive this, no matter what. He’ll do everything he can just to pretend this didn’t happen.”

* * *

Political fallout notwithstanding, the case reveals just how extensive money-laundering by the fund, the Malay prime minister, and a handful of affiliated individuals, often with US bank assistance, has been ever since 1MDB was created in 2009 as a government-owned vehicle to promote economic development through global partnerships and foreign investment.

Ironically, it ended up anything but as funds intended to benefit the Malaysian people were instead diverted to buy real estate, works of art and jewellery, pay casino bills and hire musicians and celebrities for the conspirators’ “lavish lifestyles”,  the complaint says. More than $200m was spent on art alone, prosecutors allege.

As part of the complaint, US authorities accuse Malaysian officials and business executives with receiving laundered 1MDB funds through banks in Singapore, Switzerland, Luxembourg and New York. The Malaysian officials “treated this public trust as a personal bank account”, said Loretta Lynch, US attorney-general. The misappropriation occurred over four years beginning shortly after Mr Najib set up the fund, according to the complaint. According to the suit, in March 2013, $681m in proceeds from a 1MDB bond offering were transferred into an account belonging to the official matching Mr Najib’s description. Five months later, $620m of that amount was shifted to a different account to which a 1MDB official was an authorised signatory.

Officials at 1MDB and others began diverting money shortly after the fund was created in September 2009 under the guise of investing in a joint venture with a private Saudi oil extraction company, PetroSaudi International. More than $1bn was transferred to a Swiss bank account held by Good Star Ltd, which was owned by Mr Low, prosecutors allege. Andrew McCabe, deputy director of the FBI, told reporters in Washington: “The Malaysian people were defrauded on an enormous scale.”

There is more in the full complaint, and it revolves around the three main players who, aside from the prime minister,  were instrumental in the perpetuation of this grand fraud, including, Riza Aziz, stepson of Malaysian Prime Minister Najib Razak; Jho Low, a Malaysian financier; and Khadem Al Qubaisi, a former Abu Dhabi managing director of a sovereign-wealth fund.

Details about their involvement can be found in the WSJ.

* * *

Much of the above was already known, or implied, however this is the first official confirmation of just how vast the money-laundering scheme was and that it stretched to the very top. What is now also confirmed, is that at the heart of the fundraising operation was none other than Goldman Sachs.

According to the complaint, in 2012, 1MDB officials and others fraudulently diverted $1.4bn in proceeds from two bond offerings arranged by Goldman Sachs, according to the complaint. Representing almost 40 per cent of the total raised, the funds were transferred to a Swiss account controlled by a British Virgin Islands entity called Aabar Investments PJS Limited. Aabar had been named to suggest a relationship with an Abu Dhabi company, Aabar Investments PJS, an investment arm of the Abu Dhabi government. But funds diverted to the Swiss account ultimately ended up in a Singapore bank account.

In 2013, several officials including those from 1MDB diverted nearly $1.3bn from another $3bn Goldman bond offering. The money was supposed to be used to finance a joint venture known as the Abu Dhabi Malaysia Investment Co but was instead funnelled into a Singapore account controlled by Mr Low’s associate, the complaint says.

Where it becomes clear that Goldman had a special arrangement with the complicit issuer and the prime minister, is that Goldman earned $192.5m or nearly 11 per cent of the principal amount on one of the 2012 bond deals, a $1.75bn offering, according to court documents, which also said that the offering circular “contained misleading statements and omitted materials facts”. Considering that a typical fee for an emerging market sovereign or quasi-sovereign bond offering between $1bn-$5bn would be between 0.1 per cent and 0.3 per cent, according to Dealogic, this is nothing short of kickback to Goldman, and raises questions about why Goldman wilfully accepted such an overblown fee for a deal which any of its competitor banks would have done for a fraction of the cost.

This being Goldman, of course, the bank was not accused of any wrongdoing in today's action. It may be in the future as per the DOJ's parallel prove whether Goldman violated the Bank Secrecy Act in its handling of the proceeds of the securities offerings, but somehow the FBI was unable to link the bank to any crime conducted by the same people who were paying it exorbitant fees to keep the money flowing.

* * *

So once Goldman's fundraising skills allowed corrupt Malaysian politicians and selected shady middlemen to have access to billion which they would then embezzle, what did they spend the money on? Perhaps a better question is what did they not spend on: among the purchases were Van Gogh paintings, a private jet, the rights to profits from the hit movie The Wolf of Wall Street, and real estate. Lots and lots of ultra high end real estate.

Here are some of the details from WSJ:

The properties allegedly bought with funds misappropriated from a Malaysian investment fund would make for a stunning house tour of high-end real estate in New York and Los Angeles. Besides flashy real estate, the U.S. government alleges that money from the fund, known as 1Malaysia Development Bhd. or 1MDB, was used to buy a $35 million private jet and a stake in EMI Music Publishing.

The assets that the government is trying to seize were purchased by three men who had close ties to 1MDB: Jho Low, a Malaysian deal maker; Riza Aziz, the stepson of Malaysian Prime Minister Najib Razak, and Khadem Al Qubaisi, a former Abu Dhabi managing director of a sovereign-wealth fund, and occasionally the men sold or gave assets to one another.

The properties range from a Beverly Hills mansion with a 120-foot-long pool to a string of Manhattan condos, including a seven-bedroom, five-bathroom duplex overlooking Central Park that cost $35 million.

 The complaints paint a picture of lavish spending on casinos and private jets and a taste for high-end real estate—an asset that has been an increasingly popular place for the world’s wealthy to stash their cash outside the banking system and inside stable countries. Mr. Low declined to comment. A representative for Mr. Al Qubaisi didn’t reply to requests for comment. Red Granite Pictures, a company owned by Mr. Aziz, said it and Mr. Aziz “did nothing wrong.”

Mr. Aziz’s New York duplex is by far the most expensive property in the Park Laurel building, a prominent luxury address near Lincoln Center and overlooking Central Park. Mr. Aziz has stayed in the apartment when he visits New York, according to a doorman there.

A home bought by Mr. Low is located in the so-called Bird Streets in Los Angeles’s Hollywood Hills—a quiet enclave of narrow, twisting roads named after different types of birds. The property on Oriole Drive is a 6-bedroom, 5-bathroom home with a swimming pool, spa and wine cellar, which Mr. Low bought in 2012 for $39 million, according to records. A tall, white wall surrounds the house.

The Los Angeles home owned by Mr. Aziz on North Hillcrest Road— a winding street just off Sunset Boulevard—was purchased in 2010 for $17.5 million. Security guards on the site Wednesday said that they had no idea who owned the property and that no federal agents had visited.

The Viceroy L’Ermitage Beverly Hills, the hotel Mr. Low purchased in 2009 through his family’s trust, sits discreetly on a tree-lined, residential street and features a rooftop pool and 116 newly renovated suites. Hotel staff said they hadn’t noticed any unusual activity Wednesday morning.

Mr. Low owns a majority stake in the Park Lane Hotel, a trophy property overlooking New York’s Central Park. He put up about $240 million of the $400 million of equity provided by the investors who bought the 46-story property in 2013 in a deal that valued it at about $850 million.

The investor group, led by New York developer Steve Witkoff, planned at the time to continue running the Park Lane as a hotel while studying the possibility of redeveloping the hotel into condominiums or a mixed-use property. But when news broke that Mr. Low was under investigation, those plans were stymied. Such a plan would require approval from the New York state attorney general’s office, an unlikely event when the property’s majority owner was being investigated.

* * *

And that kind of magnificent organized crime, dear New Yorkers, is why real estate in Manhattan has never been more expensive.

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santafe's picture
santafe (not verified) Jul 20, 2016 9:30 PM

Goldman doing "god's work". Again.

https://goo.gl/bFYusM

Aristotle of Greece's picture
Aristotle of Greece (not verified) santafe Jul 20, 2016 9:32 PM

Wonder which god.

santafe's picture

The horned kind.

Aristotle of Greece's picture
Aristotle of Greece (not verified) santafe Jul 20, 2016 9:33 PM

lol

Déjà view's picture

One and only error...NOT placing funds in 1 of 4 U.S. states offering ulta secretive LLC'$...

philipat's picture

"The move by U.S. authorities to seize assets tied to an investment fund run by a foreign government would be a major escalation in Washington’s global efforts to fight corruption and block allegedly illegally obtained funds, facilitated by Goldman Sachs, from moving through the world’s financial system the WSJ adds."

Really? They might better make a start closer to home?

philipat's picture

@santafe = Aristole of Greece = mofio, You are talking to yourself again. You really need to remember to take your meds every day.

Spammer asshole, I cannot understand why the Tylers allow you to continue spamming almost every thread like this.

Ms No's picture

"The move by U.S. authorities to seize assets tied to an investment fund run by a foreign government would be a major escalation in Washington’s global efforts to fight corruption and block allegedly illegally obtained funds, facilitated by Goldman Sachs, from moving through the world’s financial system the WSJ adds."

So Goldman Sachs is like ISIS now?  Everywhere Goldman kicks off a crime the US thinks it can step in and seize assets?  This empire is done.  Everybody is going to turn on it.  We are being set up. 

Weapons of mass migration are just going to increase the extremity of any collapse or chaos scenario.  They seem to want to make sure that things are bad enough.  Enough for what, who knows.  They better have some pretty gnarly weapons stored in New Zealand for their retreat.

philipat's picture

And one also has to wonder upon whose behalf these assets are being siezed? And what will happen to the assests after seizure? Will they be returned to the people of Malaysia where they rightly belong? IMHO, the chances of that happening are close to "when hell freezes over"?

What a shit show doing God's work has become these days...

Maybe Lynch was promised a piece of this action in exchange for her ruling on a recent FBI enquiry? The balance perhaps would go to the Clinton Foundation to continue to do its good works?

philipat's picture

Yup, the UK (BVI, Caymans, Jersey, IOM etc) and the US (Delaware, Nevada etc.) have the tax haven business monopolized. You don't think they wanted to squeeze out Switzerland and Luxembourg because they wanted to clean thing up, didi you? Hahahahahaha.....

erkme73's picture

[sarc] Hi.  I'm SantaFe... Or Aristotle of Greece.  Well, whichever account I happen to be logged into.  My goal at ZH is to spam the shit out of the comments section on every article.   I then log out of my current account, and into the other one.  That insures I get at least one up-vote.  Sometimes, I'll even post a supporting comment with one of the other account just to make the original post seem more credible (see above)

I desperately hit refresh at the main page every few seconds to make sure I can get in the first few posts.  Then I use a clever URL obscuring site like goog.le or bit.ly to obscure the link to the same boring biblicism website.   I do that because ZH readers wouldn't click on the link if they knew where it goes.   I hope to trick them.  It hasn't really worked in the last 500 articles I spammed, but if I try just a bit harder, perhaps I'll finally get some converts!   In the meantime, here's a picture of me as I wait patiently for the next article to pop up.  http://goo.gl/GPvBRo

Love, 

SantaFe/Aristotle of Greece.

[/sarc]

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) erkme73 Jul 20, 2016 9:43 PM

When I see shortened links I always assume "virus" and never click it.  I assume most people with a brain do as well.

Librarian's picture

IMHO, it's just common courtesy to shorten a long URL.

Also, hotlinks are often killed by the hosts once they start getting a lot of hits.

Something about the owners of the content not wanting to pay for 3rd party hits that don't actually visit the hosting site.

Shortening the URL seems to takes them a bit longer to remove the content.

FYI, my last shortened link was a kick-ass litterbag "Don't Mess With Turkey".

So, no.  They aren't all viruses.

Paranoia will destroy ya.

 

IndyPat's picture

Just went and clicked the fucking link anyway.
I really want to thank you for that.

Edit: yes, I do have a brain and realize it could have been malicious junk.
Rums got me a bit loose at the moment and I've seen erkme around and the post was funny, so I thought what the hell.

The link, however...is not funny. It will not make you wish to accept the Lord.
I will make you wish you never were.

beemasters's picture

Why do I suspect there's much more than 1.3 Billion at stake and only this amount will be officially seized?

Well, I guess that should be enough to keep Malaysians content for awhile.

Troy Ounce's picture

 

 

Yeah. They should look underneath the van Gogh paintings and Ferrari''s. They might well find some pieces of a Boeing 777 with number MH370 glued to it.

April_Love's picture

My last pay check was 9500 bucks working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... www.trends88.com

erkme73's picture

Spammer getting spammed.  Priceless...

philipat's picture

That is hilarious isn't it. Why do the Tylers continue to allow this asshole to spam every thread? Beats me.....

IndyPat's picture

April_Love. Would you and your sisters friend like to pass sexy times with me? Also, I run a rough-trade fisting enema spa and tea house where I think you both could average much, much more. You won't believe how easy it is once you try it out. The sky (and the flexibility/strength of your sphincter muscles) is the limit on how much you could make!
This is where you go to post a profile....www.rectalrooter.com/ourpigs.htm
Hope your excited! Xoxoxoxo

junction's picture

So, the thieves at the US Department of Justice and New York State's Department of Financial Services claim they can grab the assets of 1MDB, a Malaysian company.  Maybe first the Justice Departement can clear up its role in prosecuting former governor Spitzer on fraudulent money laundering charges, charges helped by then U.S. Attorney Michael Garcia's pimping out escort Alexander DuPre to Spitzer.  With Spitzer out, the Malaysian gambling company Genting Group got a second chance to apply for a casino license in Queens, NY, a license they got in 2010.  The Resorts World casino has made billions of dollars for the Genting Group.  Governor Andy Cuomo appointed Garcia to the New York State Court of Appeals earlier this year, a payoff for forcing Spitzer to resign and clearing the way for Cuomo to run for governor.  New York State is run by criminals in business suits who control the corrupt government.

IndyPat's picture

So they've shaken down all the little fish in the state and its now hyena eat hyena now? May want to just wait and nab the last one standing.
Which is a long round the bushes way of saying lock up Cuomo first chance ya get.
It's a world class mess. Take heart though. Law-retta is on it. She's a tough,,hard nose.....something or other

Librarian's picture

Actually that was JP Morgan's Jamie Dimon that said that, not GS.

But we're just comparing differently colored turds, really.

junction's picture

(Follow-Up Posting With WSJ Article Information) Why isn’t the U.S. Attorney investigating the $600 million profit the Genting Group made when 1MDB overpaid for the Genting Group’s coal fired power plant in Kuala Lumpur?  Now you know another reason why Governor Cuomo appointed former U.S. Attorney for the Southern District Michael Garcia as a judge on the New York State Court Of Appeals earlier this year.  Even though Garcia has no judicial experience.  The same Michael Garcia who, as U.S. Attorney, engineered former Governor Spitzer’s resignation, allowing Genting Group to get a second chance to apply for a casino license.  A license Genting got (almost certainly illegally) and has made billions from.  I wonder what Cuomo’s Democratic clubhouse friends got from this casino license deal.   

Wall Street Journal (June 18, 2015) In one power-plant deal, the seller was Genting Group, which calls itself Malaysia’s leading corporation. The sprawling real-estate, plantation, hospitality and casino company owns New York City’s only casino and just broke ground on a $4 billion Chinese-theme casino in Las Vegas. The 1MDB fund in October 2012 acquired a Genting unit that owned a 75% stake in a 720-megawatt coal-fired power plant near Kuala Lumpur. The price, which was equivalent to about $740 million at the time, came to 2.3 billion Malaysian ringgit. Genting later reported it had a 1.9 billion-ringgit extraordinary gain on this sale, implying a value for its stake in the power plant of just 400 million ringgit—or less than one-fifth what 1MDB paid for it.

In a second sign that 1MDB paid a high price, the fund’s financial statement for the fiscal year ended in March 2013 said the power unit’s property, plant and equipment were worth a little under 500 million ringgit at the time of acquisition.

The fund cited 1.7 billion ringgit of “intangible assets,” which were the value of the plant’s agreement to sell power to a state-owned entity. But this valuation appeared to be contingent on Genting obtaining a renewal of its power-sale agreement, which was running out in 2016.

Genting announced the terms of the sale to 1MDB in August. Equity analysts at the time noted the size of the deal was positive for Genting given its contract to sell power was ending. In early October, Malaysia’s Energy Commission, an independent body which regulates the energy sector, announced Genting had won a 10-year extension to sell power through 2026. A few days later, Genting and 1MDB finalized the sale.

Soon after the purchase, 1MDB appeared to recognize that it had overpaid for power assets. In its financial accounts for fiscal 2013, the fund took an “impairment” charge of 1.2 billion ringgit, writing down part of the premium it had paid to acquire power assets from Genting and another Malaysian company.

A few months after the sale, a unit of Genting called Genting Plantations Bhd. made a donation of about $10 million to a Najib-linked charity, according to a spokesman for Genting Plantations. The charity, Yayasan Rakyat 1Malaysia, lists Mr. Najib as chairman on its website. Stock analysts at the time said the surprise donation reduced the company’s net profit in the first quarter of 2013, and said they didn’t expect it to be repeated.

http://www.wsj.com/articles/fund-controversy-threatens-malaysias-leader-...

 

Possible Impact's picture

So, our Million Dollar Bonus ZH poster

has legal problems now?

Squid Viscous's picture

please don't tell me Obozo lost to that little pan faced fucker!

ohh rat farts!!

Dormouse's picture

Oh, I thought that was the golf cart chauffeur and ball boy.

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Squid Viscous Jul 20, 2016 9:40 PM

I heard he really got his ass beat but I'm not sure it was in the golf game...

booboo's picture

Obummer likes the hand crank egg beater up the pucker hole, sometimes reg clips playing cards to the egg beater to make it sound like a motorcycle

TradingIsLifeBrah's picture
TradingIsLifeBrah (not verified) Jul 20, 2016 9:39 PM

Should have used the money to buy US assets, then no questions would have been asked.  

rehypothecator's picture

Wait. Are you saying that there exist assets which aren't properly considered US assets?  

HRH of Aquitaine's picture
HRH of Aquitaine (not verified) Jul 20, 2016 9:44 PM

First an arrest at JFK of HSBC execs and now this. Looks like someone is trying to show they have a pair.

aVileRat's picture

Nah, just settling scores. Every administration (and their Director of the Hour) does it. The last thing you want is the next guy finding your dirty laundry. Or worse, your allies dirty laundry.

 

 

IndyPat's picture

In Goldmans case it could be time to give the Dee oh Jaye their Quaterly tips and gratuities. Purely customary.

Tarshatha's picture

No wonder the Malaysian's hate the Jews.

 

 “If we had lost [the 2013 election], [rival political party] DAP would be in power. DAP with its Jewish funding would control this country (Malaysia). Based on that, our Muslim friends in the Middle East could see the Jewish threat through DAP.”

http://www.tabletmag.com/jewish-news-and-politics/196642/anti-semitism-i...

 

So when the Jews lose, they just get their lap dog in Washington to go and steal the money.

 

 

IndyPat's picture

Could ask choomboy about that.
His old stomping ground is around there somewhere.

Yen Cross's picture

     Those fuckers must know Jon Corzine,,,

booboo's picture

"The move by U.S. authorities to seize assets tied to an investment fund run by a foreign government would be a major escalation in Washington’s global efforts to fight corruption"

who writes this shit, Josh Earnest?

PT's picture

Note:  Just because you have plenty of loot and hang out with the "in" crowd doesn't mean you really are "in" with the "in" crowd.  But your loot will definitely stay "in" with the "in" crowd.

See what happens when you lose your "leverage"?  I wonder how many other people are feeling nervous now.

Perhaps US Gummnt has rent due so they are looking for loose change stuck between the cushions in the sofa.

Vlad the Inhaler's picture

Steal a twinkie, go to jail.

Colonel Klink's picture

Goldman is the biggest scourge upon the planet.

yogibear's picture

The Squid is always in the middle between 2 parties making a transaction.

 

gregga777's picture

Goldman Sachs knows to whom in the United States they have to pay protection money in order to escape prosecution. They didn't tell the 'dindus' at 1MDB to make the proper payoffs and the rest, as they say, is history. Maybe they'll be smarter next time and grease the right palms in the Democratic-Republican Fascist Party (the GOK—Grand Old Kleptocrats).

IndyPat's picture

No shit.
Book a few speeches with Hill and offer Willie a few rounds of golf with two underage local Lolita as 'caddies' and all these fine men would still be farting through silk.
Protocol is protocol.

Yen Cross's picture

  The asshole had the $1B[get out of jail] card in his wallet.

Nobodys Home's picture

Goldman Sucks.. still only Rothschild minions...whoodathunk?

WTFUD's picture

11% to punch a couple of keys, well that and the appropriate clearances from To Whom It May Concern. Has Goldman No Shame? (Rhetorical )

Nobodys Home's picture

We in the US are reeally good at taking your money1

Unless you want to reinvest it in our newly funded tax havens.