My initial response to the US action: a Q&A by Lim Sian See
Lim Sian See
The USA Government Department of Justice (DOJ) has filed a civil case to seize the assets, which they believe are linked to 1MDB, from four individuals under the USA’s Kleptocracy Asset Recovery Initiative.
The US DOJ document is a long read but so far the following is what I can summarise from this and from the press conference.
Q1. Who are the four individuals?
They are Riza Aziz, stepson of Prime Minister Najib Razak; Jho Low, a Malaysian financier; Khadem Al Qubaisi, the former managing director of Abu Dhabi’s sovereign-wealth fund IPIC and former Chairman of Aabar Investments PJS; and finally Mohamed Ahmed Badawy Al-Husseiny responsible for dealing with 1MDB at that time.
Q2. What is the USA’s Kleptocracy Asset Recovery Initiative?
It is an initiative started in the year 2010 by the USA Govt under the US Department of Justice (DOJ) with the aim to seize and recover assets within the USA which the DOJ suspects is linked to corruption from a foreign country and return them to the originating country.
Q3. Why is the DOJ investigating this case?
In March 2015, the DOJ received a complaint from Sarawak Report. Further complaints appears to also have been made by Tun Dr Mahathir Mohamad loyalist, Khairuddin Abu Hassan.
Q4. What is the DOJ actually filing against the four individuals and what will happen next?
The DOJ is filing civil cases against the four individuals to ask the courts to seize their assets. The courts will then check if the identified assets are being claimed by anyone else. If no one else is claiming these assets then the courts will ask the DOJ to prove that these assets have indeed been stolen or received illegally.
Q5. Is Prime Minister Najib Razak also charged?
No. He is not charged and is not named in this case despite Mahathir previously saying in September 2015 that Najib is afraid to go overseas as he will be arrested by the FBI. This is untrue as not only is this a civil case but Najib is not named in the suits.
But there is a reference to a MALAYSIA OFFICAL 1 which is alleged to have received funds that DOJ alleges is linked to 1MDB.
Q5. Will anyone go to jail if the assets are seized?
No. These is a civil suit and not a criminal case. If the courts find in favour of the DOJ, only the assets are seized. There is no jail terms or criminal conviction.
Q6. If the court allows the assets to be seized, what happens to the seized assets?
The assets are eventually returned back to the whomever the DOJ believes it is stolen from – in this case, 1MDB.
Q7. Are the assets purchased with money stolen from 1MDB?
1MDB has consistently maintained that no money was stolen and can account for where its money has gone to. However, 1MDB is currently in dispute with IPIC where 1MDB maintains that it has paid or deposited or guaranteed up to USD6 billion by a company called Aabar Investments PJS BVI upon the instructions of Aabar’s the then Chairman, Khadem Al Qubaisi and the then Managing Director.
IPIC disputes that it owns Aabar Investments PJS Ltd (BVI) and thus denies it has received these funds from 1MDB.
This dispute is now in arbitration at the London Arbitration Center and will take many months. However, 1MDB is confident that they will win this case and stand a good chance to recover their money – which is why 1MDB had earlier refused to pay the interest on a USD3.5 billion bonds despite comfortably able to, which triggered the bond guarantee by IPIC thus leading to the arbitration process.
Q8. If the money is not stolen then why is the USA DOJ acting on the complaint?
It is possible that some of the money that was paid by 1MDB into the Aabar Investments PJS Ltd (BVI) controlled by Khadem – which IPIC denies is owned by them, may have been used to fund various investments in the USA including real estate, investment in films, artwork and companies.
Q9. How much worth in asset is impacted by the USA DOJ?
No specific amounts have been confirmed yet but reports by NYT and WSJ is quoting up to USD 1 billion.
Q10. Why is the PM’s step-son Riza Aziz involved?
WSJ had previously reported that investigators believe that Red Granite, Riza Aziz’s film company, received USD$155 million in loans from the Aabar Investments PJS Ltd (BVI) much of which went to finance the 2013 movie The Wolf of Wall Street and to purchase properties.
WSJ said documents show three transfers to Red Granite Capital in 2012 – US$60 million, US$45 million, and US$50 million. Of this, US$105 million was booked by Red Granite Capital as a loan, while the other US$50 million was moved to the company through intermediaries.
“Among the intermediaries, according to people familiar with investigations and the person familiar with 1MDB: Telina Holdings Inc, a company that had been set up in the British Virgin Islands by Mr Al-Husseiny and his boss, Khadem Al Qubaisi.”
According to WSJ , the US$50 million loan from Telina Holdings has been repaid, citing people familiar to the investigations.
A Red Granite spokesperson told WSJ that the company “has been repaying and will continue to repay all its loans. “Red Granite had no reason to believe at the time that the source of Aabar’s funds was in any way irregular and still believes the loan to be legitimate,”
“What Red Granite have done and will continue to do is develop and produce successful and acclaimed movies that have generated more than US$825 million in worldwide box-office revenues.”
Q11. So, if it was a loan or investment into Red Granite and is already part repaid or being repaid from a successful film company, why is Riza Aziz still the target of a civil suit?
In the USA, if you make profits based on funding which the DOJ suspects was from an illegal source then this is called “profiteering” and hence your profits are also considered illegal and can be seized – essentially making money out of illegal funding. This is different from stealing money.
The DOJ will then have to prove that Red Granite is aware that the funding or loan that they received is deemed illegal.
Q12. What about Jho Low’s investments?
Not much has been revealed what assets or the amounts of investments are owned by Jho Low, who is a fund manager, in the USA but Jho Low had confirmed before that he has real estate holdings in the USA and may have co-invested in some US-based companies.
Q13. How long will this civil cases take before a judgement is reached?
Similar cases have taken years as both sides present their arguments to the US courts for the judge to make a final decision.
Q14. Is there anything unusual about this case?
Yes. Typically, the supposed victim of any stolen money has to make a complaint to the USA DOJ to request the DOJ to seize any assets they deem was purchased using the stolen money. In this case, 1MDB has consistently maintained that there is no money stolen and they can account for all their investments or transfers. But the DOJ seems to be still going ahead with filing civil suits to recover stolen money even though the “victim” said no money has been stolen.
Q15. How come 1MDB says no money missing and all accounted for when the US says are spent in such flamboyant ways?
1MDB dealt with JV partners that are part of the foreign governments and also legitimate investment funds recommended by an international bank. 1MDB transferred those money to them. What happens after the money is transferred is not within the control or knowledge of 1MDB. It is the responsibility of those counter-parties.
1MDB has started the process of recovering its assets from those counter-parties,, which is primarily the relationship we have with the disputed Aabar Investment PJS Ltd – a process that is now in arbitration and which 1MDB is confident of a positive outcome
Q16. What about the deposits into Malaysia Official 1 accounts as detailed in the FBI accounts?
It is important to note that this account although opened in his personal name is not for his personal use and was the special president account for use on the party and allowed by the party constitution – a practise that even Muhyiddin Yassin admitted was in practise from way back. https://www.youtube.com/watch?
Even WSJ admits that the funds in this account were used for political purposes and not for personal benefit.
At no point in time did the Malaysia Official 1 received any direct transfers of funds from 1MDB accounts into his private accounts but from other different companies or accounts.
The DOJ alleges that the Malaysia Official 1 retained RM210 million from three transfers from funds that can ultimately be linked to 1MDB.
The 3 payments are:
1) RM60 million (USD20 million at that time) – paid in 2011 (the JV between 1MDB and PetroSaudi was started in 2009) from the accounts of the then Governor of Riyadh, Prince Turki Al Saud.
The DOJ alleges that these RM60 million payment in the year 2011 comes from the USD1.83 billion that 1MDB invested in the JV with PetroSaudi starting in 2009.
2) RM100 million (USD30 million at that time) – paid in late 2012 from the accounts of BlackStone Asia
The DOJ alleges that this RM100 million payment in Nov 2012 comes from the USD3.5 billion bonds that 1MDB and IPIC issued in April 2012.
But this transfer was accompanied by a letter dated a year ago in 2011 which said the sender was going to be sending up to USD375 million from different accounts including BlackStone Asia.
https://assets.documentcloud.
3) RM50 million – which came from the RM2.08 billion (or the infamous USD681 million at exchange rate of USD1 to RM3.05 then) transferred in during March 2013, just before GE13 where RM2.03 billion (or USD620 million at exchange rate of USD1 to RM3.27 then) was returned in August 2013 – to and from the accounts of Tanore.
This transfer was also supported by a letter from the Saudi Royal family donor which the MACC officials also interviewed and which the Saudi Foreign Minister had said was their funds.
I would believe that at no point in time that the Malaysia Official 1 have knowledge of the ultimate source of the funds transferred into the account. His knowledge is based on a prior multi-year arrangement made with the Kingdom of Saudi Arabia where political donations would be made to his account and his party.
It is important to note that each transfer was also accompanied by a letter from the Saudi royalty.
I will be writing more on this as I go into the documents deeper and await the official statements from the Govt for better understanding.
However, it looks like the timely release of this document has completely diverted the focus on the recently deepening Penang snap elections issue – which is a pity.
