In the second of a series of articles on government fund 1Malaysia Development Fund, KiniBiz takes a look at some of the key players involved in its set up and running. It’s a wide, varied lot with a range of interests and geographical spreads. In subsequent articles we will examine specific issues in greater detail.
1Malaysia Development Bhd (1MDB) may have received flak for lack of transparency, but critics may not be able say it has no checks and balances. According to its website, 1MDB has a “triple-tier” corporate governance structure–the board of advisors, board of directors and senior management. Sitting on top of the pile is Prime Minister Najib Abdul Razak, who is chairperson for the board of advisors.
But before there was 1MDB, there was Terengganu Investment Authority. And behind the fruition of TIA, was the close relationship between the Terengganu Sultan Mizan Zainal Abidin, the King at the time, and a young man who will later become a household name.
The whizkid dealmaker
In his early thirties, wheeler-dealer Taek Jho Low is perhaps most popularly known for hitting the New York gossip rags after splashing a fortune on cases of Louis Roedre Cristal with celebrities including heiress Paris Hilton.
Hilton, however, was not the only celebrity he rubbed shoulders with. He claims to be friends with Oscar nominee Leonardo di Caprio and Jamie Foxx–the latter of whom reportedly sang a “flirty” number with prime minister’s wife Rosmah Mansor at an event in the Big Apple.
It is unclear if the New York party scene was where Rosmah and Low got close. But the Penang born-whiz kid’s connections with the wealthy worldwide were forged even before Rosmah started calling herself first lady of Malaysia.
Low–or J Low as he was at one point referred to–is son to founder of engineering company MWE Larry Low. Like most children of the rich in Malaysia, he was packed off to a top UK boarding school in his teens.
It is at Harrow, and later Wharton School of Business that baby-faced Low would became tight friends with people with deep pockets from the Arab world.
The combination of wealthy friends and well-to-do family landed Low with capital of US$25 mil–seed money for his very own private equity fund, the Wynton Group.
Some have speculated that these are among Low’s business associates who picked up the RM5 billion bonds issued by TIA, much to the ire of deprived local bankers. 1MDB has never disclosed who the debt papers went to. It is unclear what Low got for lining up the investors.
On 1MDB’s part, it said that Low’s role in 1MDB is “zero”. It stressed that 1MDB’s dealings with foreign investors are on a government-to-government level without intermediaries.
One of Low’s friends, however, went further than buying the debt papers.
The Abu Dhabi connection
TIA was to be modeled on the Abu Dhabi investment company Mubadala Development Company (Mubadala). And Mubadala officials played a significant role in getting the Terengganu sultan on board. Low brought Mubadala into the picture.
One mubadala official is CEO Khaldoon Khalifa al-Mubarak. His involvement in TIA would last past the later conversion of TIA from a state fund to a national fund.
In 2009, Khaldoon, who succeeded former Thai PM Thaksin Shinawatra as chairperson of Manchester City football club when Abu Dhabi United Group partly took over, was appointed onto 1MDB’s board of advisors.
A seat on the advisory board was not all it got. Mubadala in Oct 2012 signed a deal with 1MDB to work on the RM26 billion Kuala Lumpur International Financial District, later re-christened Tun Razak Exchange.
Keeping Khaldoon company on the board is a fellow Middle-Easterner, Sheikh Hamad Jassim al-Thani.
The Qatari PM
Sheikh Hamad is the prime minister of Qatar. He was appointed as special advisor to 1MDB, on the same level as prime minister Najib who sits as chairperson of the advisory board.
He was appointed following a memorandum of understanding between 1MDB and Qatar Investment Authority (QIA) in May 2010. Sheikh Hamad is CEO of QIA.
Four days after the MOU, news reports indicate that QIA will partner 1MDB in developing Bandar Malaysia–a 196-hectare development taking place at the former military airport at Sungai Besi.
The Middle East connection has led critics to finger Low in the deal, which saw the land go to 1MDB for an alleged discount of more than RM3 billion, only to later benefit the Qatari developers. Low denies that he had anything to do with the Sungai Besi project.
But the Arab-link does not stop there.
The Saudi prince and his friend
One of 1MDB’s more controversial friends is PetroSaudi International. The independent oil and gas company company, reportedly incorporated in the Seychelles in 2005 formed a joint-venture with 1MDB in 2009. 1MDB later pulled-out of the joint-venture but converted its US$1 bil investment in the venture into Islamic debt papers for PetroSaudi.
Unlike the other Arab players linked to 1MDB, neither Sheikh Tarek Assem Obaid or Prince Turki Abdullah al-Saud are on the boards of 1MDB. But Petaling Jaya Utara MP Tony Pua believes that as co-founders of Saudi royal family-linked PetroSaudi, they have gained handsomely from their ties to 1MDB. KiniBiz will delve into this further in the next articles in this series.
PetroSaudi has offices in the UK, Saudi Arabia and Switzerland. News reports state that its UK operations was incorporated there in 2010.
It has also reportedly signed memoranda of understanding with Ghana’s and Nigeria’s national oil companies. It also previously held stakes in Paraguayan oil company CDS but sold it off in 2009 and has business dealings with Petrolers de Venezuela SA.
Prince Turki, the seventh son of King Abdullah is the head of boards of directors for several Saudi funds. However, it is CEO and founder Tarek who is in the driver’s seat.
Pre-Petro Saudi, the duo were seen together at Riyadh-based company al-Obayya, reportedly owned by Prince Turki. Tarek was quoted in a news report speaking on behalf of the company in 2004. According to al-Obayya’s website, it helps businesses wanting to operate in the Gulf.
Tarek, 37, was also part of Genii Capital, a private equity company. One of his partners in Genii was Renault F1 Team chairperson Gerard Lopez. In May 2010, Tarek became part of Team Renault. Genii Capital’s subsidiary is Lotus F1 Team.
While the camera shy Tarek leads the charge for PetroSaudi, the royal links have built its image–at least in Malaysia. Tarek credited the royal family when PetroSaudi stepped in to charter planes to generously lift Malaysians out of crisis-hit Egypt in 2011.
Tarek is also generous in his personal capacity. A centre for surgery at the Mayo Clinic is named after his parents after he made a donation of US$10 million in 2011.
Interestingly, PetroSaudi’s website is identical with the website to another company purportedly also founded by Tarek in 2005 — Murtuza Oil Mining Company. The companies also share exactly the same addresses and telephone numbers as PetroSaudi in Switzerland, UK and Saudi Arabia.
1MDB is also not the only company in Malaysia that PetroSaudi is involved in. In January 2010, the company bought stakes in UBG Bhd linked to Sarawak chief minister Abdul Taib Mahmud. It spent RM1.12 billion for the stakes and eventually took it private. On the board of UBG was Jho Low.
The second richest man in France
If birds of a feather flock together, so do the wealthy. Also on the board of advisors is France’s second richest man and the 10th richest man in the world according to Forbes, Bernard Arnault.
The soon-to-be-knighted Arnault controls luxury goods group Louis Vuitton Moet Hennessy. Arnault’s inclusion as 1MDB advisor was hailed by PM Najib as a positive, although it could have others scratching their heads.
Arnault, however, is not without controversy. He has been reported in the British media as having close ties to former first family, the Blairs when Tony Blair was prime minister. He had been photographed holidaying with them and had hosted the Blair children at his lavish digs. In 2010, Blair took up the post of advisor for Louis Vuitton Moet Hennessy.
Luxury and glamour in the world of textiles
While he may not be in the same league as Arnault, Ashvin Valiram, who is 1MDB director, is from the same industry. A third generation owner of the textile company Valiram Group, he is credited for taking the Batu Road business into what he terms the world of “luxe glam”.
At 41, Ashvin made a name for himself by bagging distribution deals for luxury brands from Cartier to Ferragamo. The Valiram Group has also launched its own brand, Flow, for women with curves who want to “glorify their femininity” .
PM Najib in welcoming him to the board said he was chosen for his entrepreneurial spirit. In the world of “luxe glam” being a successful entrepreneur also means working the socialite scene. Ashvin often appears in the society pages, photographed at launches and parties alongside celebrities like the Kardashian sisters.
1MBD chairperson Lodin Wok Kamaruddin has spent his career in defence-related companies and funds. He has been chief executive of Lembaga Tabung Angkatan Tentera (LTAT) since Aug 1982 and became group managing director of Boustead Holdings in 1991.
Incidentally, Najib was defence minister from 1990 to 1995 and from 1999 to 2008. The close professional ties have led to Lodin being widely viewed as a Najib loyalist.
Lodin took over as 1MDB chairperson from now Sime Darby chief Bakke Salleh in Dec 2009. The change of guards raised speculation that something was amiss but 1MDB claimed that its intention was always to tap into expertise of professionals in government-linked companies.
It said that this is with the understanding that these individuals would return to their companies once their tasks are completed. Bakke returned to Felda, while Employee Provident Fund’s (EPF) Azlan Zainol also did not stay in 1MDB.
Some familiar faces
Among the foreigners on the board of advisors are a couple of familiar faces. They are Minister in the Prime Minister’s Department Nor Mohamed Yakcop and former chief secretary Mohd Sidek Hassan.
Nor Mohamad was also Finance Minister II from 2004 to 2009 but is mostly remembered for his time in Bank Negara Malaysia, where he spent 32 years from 1962.
He has been accused of being part of the currency speculation scandal in the early 1990s, with losses to BNM estimated to be as high as RM30 billion. No action was known to be taken against him, while Nor Mohamad has refused to respond to media queries on the matter.
Meanwhile, Mohd Sidek, who is now chairman of Petronas, was accused of hanky panky when his daughter and son-in-law won most of the feed-in tariff quotas from the Ministry of Energy, Green Technology, and Water.
The ministry has, however, refuted claims of rigging or preferential treatment. It said that the bidding was done online and award was done automatically on a first-come, first-serve basis, without human intervention.
If there was someone who would know the 1MDB story back to front, it would be former CEO Shahrol Halmi. His departure from 1MDB on the quiet for the Performance Management and Delivery Unit (Pemandu) has already raised eyebrows.
A former Accenture consultant, Shahrol was with TIA from when the outfit was a team of five people. He joined Accenture in 1995 and worked on the public service sectors, financial services and oil and gas.
It still unclear why he has moved from a power player like 1MDB to an oversight and management body like Pemandu.
But Shahrol’s notable achievements have been in transformation programmes, including one executed in the EPF. Pemandu’s role in transforming the government and economy may indicate a fit. He remains as director of 1MDB.
1MDB’s partnership deals and acquisitions, which have come under question, were also done under Shahrol’s watch. Hazem Abdul Rahman, who has replaced him as CEO, only joined in August 2012, after the deals were done and dusted.
Prior to 1MDB, Hazem was managing director of Sime Darby’s unit Auto ConneXions Sdn Bhd. Interestingly, Auto ConneXions under Hazem had brought in armoured Land Rovers for distribution. It is unclear how many were actually sold.
He is said to have extensive experience in corporate turnovers and strategy and spent 17 years in various industries including power and equities.
Tomorrow: Accounting for the billions