PetroSaudi’s evident financial problems go back to accusations of malpractice by the Government of Venezuela, which is refusing to pay for oil extracted by the company pending arbitration on this issue, Sarawak Report can confirm.
The company, which had launched operations in Venezuela thanks to a huge cash input from Malaysia’s 1MDB development fund, attempted to by-pass these accusations by exacting a stand-by letter of credit from a Venezuelan Bank, which cited that the government must pay the company, whether or not there were disputes to be settled.
However, when the matter came before the UK High Court (which had jurisdiction over the credit agreement) the Judge ruled against PetroSaudi Oil Services (POS) on grounds of fraud by its then Director and Legal Counsel, none other than the ex-White & Case lawyer Tim Buckland, who helped mastermind the 1MDB heist by Jho Low.
Ruling in October last year the court said that Buckland, as a lawyer, must have been aware that the terms of the letter of credit contravened the provisions for such contracts under Venezuelan law, which demands that certain procedures are fulfilled in terms of invoices and approvals before payments are made. These procedures were not yet satisfied.
“The court did not accept that the signatory, a POS director (also POS’s general counsel) [Tim Buckland], honestly believed that the sum was due and owing at the time of certification. The certification under the L/C [Letter of Credit] was, therefore, held to be fraudulent and the bank was restrained from making payment.” [Published 20th October]
It is a devastating indictment of Buckland, who appears to have resigned all his directorships in July of 2015 (although owing to the company’s overdue filings of its accounts this cannot be confirmed).
It also means that PetroSaudi was not able to extract the $130 million that it was hoping to get out of the Venezuelan Novo Bank, despite its dispute with the authorities in that country. This would seem to explain the group’s warning in belated accounts that it might not be able to service the $16.3 millions dollars in debts owed by one of its London subsidiaries PetroSaudi Energy & Trading (UK) Ltd, which has ceased trading.
Widespread legal coverage of this ruling on 20th November makes plain that it was an important test case. In commercial law Letters of Credit from banks are treated as largely sacrosanct, in order to protect principles of international trade.
The legal commentators point out there is just one major exception to the generally inviolable principle that Letters of Credit should always be honoured and that is fraud. In this case the High Court Judge ruled that it was plainly evident that such fraud applied.Good luck to Mr Buckland when he looks for his next job as a General Counsel for a global company. Meanwhile, shortly after this ruling Directors Patrick Mahony and Tarek Obaid were spotted looking preoccupied and peturbed in one of their favourite 5 Star Hotel haunts in Geneva.
Could they have been discussing (right) a major reversal in their fortunes and a threat to the jet-set life-style they had become accustomed to since the 1MDB joint venture in 2009?
Malaysians, on the other hand, will be more concerned by the further light this throws on the financial profile of PetroSaudi, which was touted back in 2009 as a major player in the oil business, linked to the Kingdom of Saudi Arabia and in possession of $3.5 billion worth of oil assets.
The supposed key asset, comprising an oil well in the Caspian Sea, has now been established as belonging to another company altogether, called Buried Hill, which has yet to commence drilling anyway, owing to other disputes. So, all PetroSaudi’s revenues since 2009 came in from the Venezuelan venture, which had been initially funded thanks to $300 million supplied by 1MDB.
Following intense criticism of the joint venture 1MDB severed the connection with PetroSaudi in 2012, claiming that it had retrieved all its investments and then managed to sell its share for a profit.
Whereas $1.83 billion had been invested in total, 1MDB claimed it received $2.3 billion from that sale in 2012, which it then inexplicably invested in ‘Units’ in an unlicenced off-shore investment portfolio in the Cayman Islands.
Few observers found this easy to believe, given the money was needed to pay debts back home and auditors KPMG were sacked personally by Najib after they refused to sign off the 2013 accounts without proper proof of the money in the Caymans.
Nevertheless, when 1MDB crisis later erupted in 2015 PetroSaudi went out of its way to issue a formal statement backing the claim that it had repaid the entire sum ($1.83 billion) supposedly invested by 1MDB in the joint venture – and with profits!
Given all the mountains of evidence to the contrary Sarawak Report contends this was a further fraudulent claim by Directors of PetroSaudi. In fact, out of the total $1.83 billion, $1.03 billion was filtched directly by Jho Low’s Good Star; a further $260 million was siphoned out to leverage the buy-up of the UBG Group (owned by Taib and Jho Low) and the remainder was poured into PetroSaudi’s Directors’ pockets and its operations in Venezuela.
There seems no possible way in which the company could therefore, within less than three years have returned the entire amount with profits.
The Cayman Island fund was therefore a front for empty coffers and this lie was continued when that non-exitstent ‘cash’ was then “redeemed” into the 1MDB Brazen Sky account in BSI Bank Singapore. As early as April 2015 Sarawak Report reported that the Singapore authorities had examined this account and found that the claim that it held a billion dollars in cash was false.
This only goes to further prove PetroSaudi’s ongoing and repeated history of lies and collusion with the managers of 1MDB, in order to assist in the theft of Malaysia’s public money in return for handsome payments to themselves. Now that the cash appears to be running out those lies will be all the harder to hide from the global forces of law and order.
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