23
Jul
16

1MDB Fraud in Three Phases – Bloomberg


The Malaysia fund is at the center of several international investigations into alleged corruption and money laundering by public officials. Prosecutors in at least four countries — Singapore, Switzerland, Luxembourg and the U.S. — are looking into money flows from the investment vehicle, which was established for national development.

The suspected fraud occurred in three phases in which money was laundered through bank accounts in Singapore, Switzerland, Luxembourg and the U.S., prosecutors said.

In 2009, after 1MDB was set up to pursue development projects, officials of 1MDB and others, under the pretense of investing in a joint venture between 1MDB and a Saudi oil company, transferred more than $1 billion to a Swiss bank account, according to the Justice Department.

In 2012, 1MDB officials and others diverted proceeds raised through two separate bond offerings arranged by Goldman Sachs Group Inc., according to the Justice Department. More than 40 percent of the proceeds, or $1.4 billion, were transferred to a Swiss bank account belonging to a British Virgin Islands entity. More than $1 billion was diverted from another bond offering arranged by Goldman Sachs in 2013.

Goldman Ties

Goldman Sachs, which enjoyed a lucrative relationship with 1MDB, did the bidding for fund officials even as many Goldman employees questioned whether Low was involved, prosecutors said. The bank also circulated misleading offering statements when raising money for 1MDB, though the complaint doesn’t indicate that Goldman employees were aware of whether the statements were misleading.

Goldman Sachs said in a statement: “We helped raise money for a sovereign wealth fund that was designed to invest in Malaysia. We had no visibility into whether some of those funds may have been subsequently diverted to other purposes.”

Compliance ‘Overkill’

E-mails and recorded phone calls between 1MDB and several banks show how billions of dollars were siphoned out of 1MDB accounts under false pretenses, according to the complaints, underscoring the weaknesses of bank compliance systems.

A handful of global banks were used to shift money improperly without confirming who the recipients were, other than information provided by 1MDB, according to the complaint. At times, when compliance officers raised questions, they were brushed aside and the transfers were eventually approved.

In one phone call cited in the documents, prosecutors say a 1MDB employee pressed a Deutsche Bank supervisor to approve transfers into Swiss accounts, complaining he was “under tremendous pressure” to get the deal done.

“Let me must convince my compliance person,” the Deutsche Bank employee said, according to prosecutors. ”It’s a little bit sticky with this.”

”They cannot wait for this, you know,” the 1MDB official added. ”If they’re going to overkill on the compliance thing, uh, they have to be responsible, you know.”

The transaction went through.

Deutsche Bank declined to comment as did JPMorgan, which was also mentioned in the documents. Standard Chartered said it is cooperating with all relevant investigations and declined to comment further.

Art Purchases

Low or his associates used some of the misappropriated funds to buy artworks, the complaint alleges. Low then used part of his collection — which he valued at more than $300 million, according to an e-mail cited in the complaint — as collateral for a loan from Sotheby’s Financial Services, a unit of Sotheby’s.

He used 17 pieces, including the two Monets and the Van Gogh, to secure a loan of $107 million loan that went to a company owned by Low, according to the complaint.

By May 2016, Sotheby’s had recovered enough from the sale of several works pledged as collateral to cover the outstanding balance of the loan, according to the complaint. Then Sotheby’s released its security interest in the artwork, it said. As of June 7, Sotheby’s still had the three works in its possession, according to the complaint.

Sotheby spokeswoman Lauren Gioia said the company always cooperates with government investigations. “As set forth in the complaint, Sotheby’s has no continuing security interest or relationship to the three works that are the subject of the action, and is not in a position to comment on any potential seizure,” she said.

Vegas Trip

Low and Riza were also at the center of a gambling spree in Las Vegas in July 2012, using money that had come through 1MDB, according to prosecutors. A few weeks after Riza wired $41 million from a Red Granite account to one controlled by an associate, Eric Tan, the two of them went to Vegas, where over several days they wired $13 million into an account maintained by Las Vegas Sands Corp., the parent of the Venetian Casino.

Sands, which hasn’t been accused of wrongdoing, declined to comment.

The two of them — joined by Low and a producer of the “Wolf of Wall Street” — gambled at the Venetian for three days. They were joined on July 15 by what the complaint identifies as a lead actor in the film, who it noted ultimately won a Golden Globe award for his performance.

That actor is DiCaprio, who isn’t accused of wrongdoing. His publicist, Shawn Sachs, didn’t immediately respond to a request for comment.

The case is U.S. v. “Wolf of Wall Street,” 16-05362, U.S. District Court for the Central District of California.

…more
U.S. Maps 1MDB Fraud Trail From Kuala Lumpur to Hollywood
Greg Farrell, Andrew M Harris, Keri Geiger, David McLaughlin
July 20, 2016 – Bloomberg

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