1MDB Probe Closes In On Sarawak

1MDB Probe Closes In On Sarawak

Back last year Sarawak Report predicted the 1MDB scandal had only just begun to show its impact on the world of finance.  Since then of course Goldman Sachs has felt the pain as investigations have reached into the top of the bank, which now faces criminal charges and demands of billions in damages. BSI has been closed, Falcon Bank and its former Swiss CEO is under criminal investigation and numerous others have been fined and censured.

Now, this week it has emerged that formal investigations have also begun in America into the conduct of the already beleaguered Deutsche Bank, one of 1MDB’s key bankers that was directly involved in transfering billions of dollars to the ‘joint venture’ partner PetroSaudi (most of the money was diverted into Najib’s fixer, Jho Low’s Coutts Bank account in Zurich).

It was also Deutsche Bank that moved to raise another billion for the fund as it struggled to repay debts in 2014 – based on alleged collateral held at BSI Bank Singapore that turned out merely to be worthless ‘units’.  After Sarawak Report exposed the misinformation about the so-called Brazen Sky account Deutsche Bank pulled out early from the loan.

A former Goldman Sach’s employee of Deutsche Bank in KL at the time has now been widely cited as having been questioned about the matter. Tan Boon Kee was previously a colleague of Goldman’s indicted South East Asia boss Tim Leissner who is now awaiting sentence before moving to Deutsche Bank, which she has also now left.

However, there is further history at Deutsche Bank that is likely to connect to this affair because it was from Deutsche Bank also that Leissner recruited Roger Ng (pictured above leaving court in New York) back in 2005 thanks to his reputation as a banker well connected to the powerful players of Malaysia and a history of successful bond deals.

Roger Ng worked closely with Leissner in connecting Goldman first to the Terengganu Investment Authority and then to the bonds raised by 1MDB, which were largely plundered immediately after being raised ostensibly for public investment purposes. He was arrested in KL and then extradited to the US earlier in the year to assist with the money laundering investigations. Roger Ng is also reported as having been close to Ms Tan  Boon Kee:

Tan has also been questioned about her links with former Goldman Sachs Group Inc. banker Roger Ng, according to the people. Ng, who has been interviewed by authorities, introduced Low to Tan, a Goldman Sachs alumnus who joined Deutsche Bank in 2013 and became one of the lead bankers on the 1MDB account, the people said. [Bloomberg]

Roger Ng’s connections with Deutsche Bank may very well lead to an examination of the bank’s other activities in Malaysia, in particular extraordinary close ties with the company owned by the family of the Governor of Sarawak, Taib Mahmud, which Sarawak Report and others have long since queried.

The bank and CMS are the joint dominant share holders of the major investment fund Kenanga Holdings. Deutsche Bank also acts as a trustee for Sogo Holdings, the Jersey based off-shore company that acts as the secret (until exposed by Sarawak Report) parent company behind Taib family properties in North America and probably elsewhere.

Deutsche Bank has failed to answer why it entered into such arrangements with blatantly wealthy politically exposed persons such as the Taibs.

And if Roger Ng’s trail of activities were to be followed Sarawak Report has also repeatedly highlighted another Sarawak connection built during his time at Goldman Sachs, namely the 2011 Labuan bond deal raised for the State of Sarawak ostensibly to fund its massive industrialisation plans under SCORE.

Years before Goldman was making lucrative profits out of the corrupt 1MDB bonds the bank was already setting a pattern with the so-called Equisar bond for Sarawak, criticised at the time for being every bit as secretive, unaccounted for and profitable for the bank:

As Goldman looks to replace those [US] profits it could certainly do far worse than the trade it privately completed just over a week ago for an investment company owned by the state of Sarawak in Malaysia. The sole books deal for Equisar must have turned rival Asia-based DCM originators and structurers green with envy.
Goldman’s fees on the US$800m three-tranche 15-year are rumoured to be anywhere from 1.25% to 1.75%. That’s a US$10m–$14m payday from one deal, the kind of wedge it might take a rival bond house more than two dozen standard G3 syndicated bonds to bring in – and there’s also the possibility of a juicy follow-on commission to be earned from Equisar.
According to the offering circular, proceeds from the offer may be invested in “eligible investments” comprising infrastructure projects in Sarawak or “an investment in any US dollar-denominated note, fund or other instrument arranged by Goldman Sachs International or its affiliate under which the issuer will receive periodic payment(s)”.
[Reuters]

Soon state government critics were levelling very similar complaints about lack of clarity in how all this and other money had been spent that one was to hear from later critics of 1MDB.

As the DAP opposition leader YB Chong has made clear almost half the entire state budget is now apparently dedicated to funding this and other secretive loans raised by the state government with no accountability provided under the category of ‘Contributions To Approved Agencies Trust Fund’.

Earlier this year court proceedings (levied against him by the state government which accused him of defaming it by raising such matters) finally enabled Chong as an elected representative of the people to gain crucial information about how half the state’s public money has been spent.  He has identified five such loans raised by the government in the name of state owned companies Sarawak Capital Assets, SSG Capital Resources, SGOS Capital Holdings, Equisar and Aquasar – all Malaysian limited companies.

Respectively these companies had raised USD350m, USD800m. USD800m, USD800m and RM1.5bn according to the information finally prized out by Chong and it is costing the local taxpayer around one and a half billion a year to pay the interest on these loans even though there has been no record of where these companies have spent the money.

There is now allegedly proper probe being conducted by the MACC under the new government that ought to shed light on this extraordinary sector of the Sarawak State budget that has remained unaccounted for despite eating up over half the entire annual spending of the state.

The story of Sarawak’s bonds and the role played by these two major banks in the murky finances of the state threaten to be every bit as scandalous as 1MDB, for which doing business with the Taibs would have certainly provided a handy training ground.

 

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