Monday, February 13, 2017

SR: FELDA Super-Scandal Emerges As The New 1MDB Times Ten..

FELDA Super-Scandal Emerges As The New 1MDB Times Ten..

FELDA Super-Scandal Emerges As The New 1MDB Times Ten..

The new Chairman of FELDA, Shahrir Abdul Samad, was one of the people exposed for having received a big fat million ringgit cheque from Najib’s slush fund accounts, for which he has yet to give an explanation.
Najib has moved quickly therefore to bring this UMNO backbencher Chairman to heel when he appeared to stray this weekend, after he’d appointed the veteran politician to head the plantation fund last month (instead of an objective business leader, which was plainly needed).
To begin with, Samad had clearly decided that he did not want to end up the figurehead of the next 1MDB scandal (times ten on the Richter Scale). Therefore, unlike Arul Kanda, he decided to cry foul rather than start covering up from day one.
On Saturday he went public with his concerns that RM4.3 billion of FELDA famers’ money cannot be properly accounted for.
It didn’t last long. One assumes it took a far larger cheque to get Samad to change his tune, but by Sunday evening the party stalwart had denied his earlier reported statement, rattling out a list of unbelievably expensive global investments to apparently explain where all the money went.
These inflated purchases consisted mostly of hotels, which have nothing to do with FELDA’s core plantation business and many of which the fund is now desperately trying to off-load, doubtless at a loss, in order to finance borrowing and debts… and looming election costs:
Shahrir was commenting on reports that ..RM6 billion received by Felda after the FGVH listing has not been accounted for.
He said RM1.438 billion was invested in property, namely in Bukit Katil, Malacca for RM304 million, Grand Borneo Hotel in Sabah (RM86 million), Grand Plaza Service Apartment in London (RM500 million), Institut Penilaian Negara (INSPEN) building (RM225 million) and Iris Corporation Berhad shares (RM110 million).
Shahrir said the RM1.438 billion invested in the service sector, especially property involving hotels, was to ensure long-term investments that can be beneficial in the future.
He said Felda had also purchased Felda Technoplant Sdn Bhd worth RM38 million while total accumulated loses for Felda amounted to RM108 million, involving the Transnovasi Project…
Shahrir, who took over the post from Isa Samad, said Felda had also decided to sell a hotel bought by the agency in London at a cost of RM548 million in 2012.
So, why did FELDA spend hundreds of millions on these hotels, when much of its plantation stock was already in need of regeneration and the business needed to upgrade and improve its productivity on behalf of the long-term interest of Malaysia and its farmers?
Sharir must know that whilst 1MDB has moved the nation to righteous fury, that anger will measure nothing compared to the outrage and disgust of the hundreds of thousands of FELDA families, who have started to realise how all their savings and their patrimony have  disappeared with the sinking fund.

FELDA Super Scandal

Back in 2012 the FELDA Global Ventures sell off was another of the new Prime Minister Najib Razak’s ‘economic master-strokes’.  Reuters reported that it was the 2nd biggest ever IPO after the Facebook stockmarket launch – it put Malaysia on the global map.
However, it also disposed of a hugely valuable industry that had been originally founded and nurtured in the interests of the working families, whose lands and livelihoods were tied up in the plantation lands.
Reuters recorded how at that time many of those farmers were therefore rightly worried and reluctant. They knew they could never buy back their heritage, which had so grown in value in recent years.  However, Najib, also Finance Minister, knew how to tempt their worries all away:
Felda’s listing plans were initially met with resistance from the farmers who partly owned the firm and feared the loss of control of an asset they had invested in for generations.
The government, a key shareholder in the firm via state-linked funds, sweetened the deal with windfall payments totaling nearly $5,000 each generated from the a fifth of the IPO proceeds.
To keep the farmers happy, government-linked funds and the domestic pension fund, which accounted for part of the institutional tranche, made a rush for the stock during the book-building process.
“This Felda IPO is an embarrassment,” said an official with a Malaysian bank-backed fund management firm. “About 23 percent of the book was allocated to ‘friends and family’, all at the expense of legitimate investors with potential synergies.” [Reuters 2012]
So, for around RM15,000 a family (a fifth of the money raised) Najib bought the resisters round and also directed a mass of government linked companies to join the rush to build up the stock market share price to astonishing levels.
At their height at the time of the launch shares in the new FELDA Global Ventures traded at up to RM5.46 (ringgit), whereas now after years of plunder and mismanagement they are trading at a miserable RM1.9.
It represents a horrifying loss for investors. Those include government-controlled funds entrusted with the money of ordinary savers like Tabung Haji, which was encouraged for political reasons bump up the original share price. Opposition MP Rafizi Ramli has pointed out that the pilgrimage fund has lost a billion ringgit owing to the plummeting share value.
That represents a billion ringgit of savers’ pilgrimage money lost thanks to politically driven bad decisions to pay far too much money for those shares.
And the situation went from bad to worse. Under Najib’s original toady Chairman, Isa Samad, the money that had been made from that original IPO has by all accounts been disappearing. As one insider has told Sarawak Report:
“an excess of RM2 Billion is being furiously padded on projects being approved to be siphoned off my PM & his wife”
Such projects would appear to have included the ludicrous decision to buy a 37% stake in the Indonesian plantation business of Najib’s personal friend Peter Sondakh for $700 million, which was at least double its market valuation, last year.
Following that scandal the Employee Provident Fund, which has also clearly lost huge sums of ordinary Malaysians’ pension money owing to FELDA Global Ventures, pulled out of it investment in the fund. Yet, Najib has persisted in trying to force FELDA itself to invest in Peter’s projects. The reason seems blatantly obvious.

Where did the money GO?!

So, with all those developments the question facing Shahrir Abdul Samad, as the new incoming Chairman, was what has happened to the original $3 billion (RM15 bn) windfall made by FELDA back at the time of that original IPO in 2012 (just before the election)?
Just four years later, after all, the fund is in difficulty and having to borrow money!
One fifth of the money went on that up-front RM15,000 bribe to the farming families, in order to persuade them to support the public offering, according to coverage at the time.
This is what Najib Razak told FELDA farmers as the 1MDB scandal broke in 2015:
‪”We must.. not blindly believe what is in social media. What is true is true, what is false is false,” he told some 500 Felda settlers.
‪He also stressed since he had Felda under his watch, he had spearheaded many “changes” that were “unseen before”, including ensuring better living conditions for Felda settlers.
‪Najib labelled the interest free loan given to Felda settlers to upgrade their homes as the “best loan in the world”.
‪”Which other country has a loan this good? I look at the settlers’ homes and they are quite well-built,” he said.
‪Under the scheme, each settler was allowed a loan to a maximum of RM40,000 to upgrade their homes, without interest.
Now those farmers are starting to realise how they were short-changed, just as the Sarawak Native Landowners were short-changed after they were forced to place their money in the now empty ASSAR fund.
FELDA’s farmers will have to settle on Najib getting a good price for the none too glamerous Kensington Hotel, because he is without doubt planning on using it for their next election bribe.
Grand Plaza Kensington - bought for £100 million (RM500m)
Grand Plaza Kensington – bought for £100 million (RM500m) – guests complain of poky rooms

Thursday, February 02, 2017

SR: Coutts Rapped - Najib Trapped!

Coutts Rapped - Najib Trapped!

Coutts Rapped - Najib Trapped!

Another bombshell has been detonated by international investigators under the Prime Minister of Malaysia’s rickety construction of lies over 1MDB.
Today the Swiss finacial regulator, FINMA,  finally produced its devastating verdict on the conduct of the private bank Coutts, which was exposed by this news site as the major facilitator of the original 1MDB heist back in February 2015.
Having closed down investigations in Malaysia, which had turned up volumes of information resulting in a series of charges being drawn up against the Prime Minister, Najib’s new Attorney General has dogedly maintained that there was no evidence of wrong-doing or misappropriation at the fund.
Yet today, FINMA detailed a trail of theft from 1MDB in a statement that further corroborates findings by the United States Department of Justice and the Singapore Courts.  The authority has therefore sanctioned the bank for having facilitated the heist and failing catastrophically in its anti-money laundering requirements.
As part of the punishment the Swiss financial authority has commanded Coutts, which was owned by the UK state-owned bank RBS at the time of the transgressions, to disgorge a stunning US$ 6.5 million (CHF 6.5 m) in illegal profits from its 1MDB relationship.
Possible criminal charges are also pending against individuals at the bank.

Detailed Charges

The FINMA statement, the product of over a year of investigation, lays out in detail what took place between Coutts and 1MDB, referring plainly to the fund’s criminal collaborators, who were Najib’s advisor Jho Low and the directors of the company PetroSaudi.
Yak Yew Chee - early relationship with Low?
Yak Yew Chee – early relationship with Low?
This detailed information contrasts with the vague and contradictory denials from 1MDB and Najib Razak over past months, which have failed to provide any other convincing explanation for the disappearance of billions from the fund, whilst claiming that an anonymous Saudi Royal donated the billions that subsequently popped up in Najib’s own KL bank account.
The Department of Justice has in fact traced the bulk of that money directly back to 1MDB.

Key relationship started early

According to FINMA the relationship between certain Coutts bank employees in Singapore and ‘individuals who  subsequently became associated with 1MDB” started back in 2003. There is little doubt that the regulator is referring to Jho Low and his relationship manager Yak Yew Chee (currently serving time having pleaded guilty to a number of related charges in Singapore), along at a later stage Yak’s boss, HansPeter Brunner, who took charge of the branch in 2002.
Brunner remains grounded in Singapore pending further investigations against individuals from Coutts/BSI
Brunner remains grounded in Singapore pending further investigations against individuals from Coutts/BSI
Sarawak Report was the first to reveal that it was Jho Low who had incorporated an off-shore company May 18th 2009, named Good Star Limited, in the Seychelles with the assistance of the team at Coutts Singapore, which was registered as the principal client on the account.

Coutts agreed to the last minute cash transfer

Separately, we have published email evidence from PetroSaudi’s data, which shows that initially Low had hoped to set up an account at BSI Bank in Geneva in late September 2009, in order to receive $700 million (originally $720 million) siphoned out from 1MDB in the guise of a bogus loan repayment to PetroSaudi as part of the joint venture contract.
PetroSaudi had also planned to place its joint venture business account at BSI and emails make clear that the collaborators believed that having both accounts at the same bank would help in promoting the fiction that PetroSaudi owned Good Star.
This was laid out in an internal document named ‘PetroSaudi Plan’ – sent to PetroSaudi directors by Low assistant Seet Li Lin 15/09/09, showing how the $700 million would be diverted to Low in his capacity as “Promoter” of the deal.
Close text
Objectives to be met:
  • Signing by 30th Sept 2009
  • First tranche of Malaysian investments: US$1,000mm
    1. US$280mm will remain in JV company
    2. US$720mm will be moved via PSI
    3. MDB must hold 49% or less in JV company
  • MDB to recognize approximately US$186mm in revaluation gains due to buying below valuation due to ability to close the deal fast.
Issue Structure:
  1. Is it possible to use a BVI for the new JV company instead of Cayman Island company?
  2. We will like to structure the US$720mm as a repayment to PSI for loans extended to the JV company or asset.
PATRICK: please improve on our proposed structure as you deem fit.
Issue: Valuer
  1. Timeline consideration. Time required to generate report.
  2. Valuation figure. We need to work backwards, with the objectives above in mind to produce the right valuation.
Issue: Agreements required
  1. For MDB – Joint venture agreement with PSI
    1. 5 board members including 1 chairman
    2. Chairman will be PSI
    3. MDB will nominate 2 members, PSI will nominate 3 members
Issue: Official story
  • MDB is partnering the Saudi royal family to spur sustainable economic development in Malaysia by investing in global renewable and non-renewable energy resources and others.
Issue: Bank Accounts
  • BSI as bankers
  • Company receiving the monies must use same bank as Promoter
  • Payment out of PSI must follow immediately after its receipt at PSI
Meeting in Switzerland
  1. Meeting BSI
  2. Preparation of various agreements to pay Promoter – $720mm
    1. 1 introduction fees to Promoter
    2. Several deep in the money derivative contracts in favor of Promoter (with various companies)
Preparation Work
  1. Appointment of lawyers by us.
Clarifications:
  1. PSI will appoint its own lawyers.
Potential Structure
  • PSI create new BVI company as new joint venture vehicle (PSI-1MDB Future Energy Corporation)
  • PSI sells Argentina asset to PSI-1MDB Future Energy Corporation for US$50mm. This will be funded in shares.
  • PSI sells Turkmenistan asset to PSI-1MDB Future Energy Corporation for US$1720mm. This will be funded by US$1000mm in shares and US$720mm in advances.
  • 1MDB pays US$1000mm. US$720mm used to clear advances. US$290mm remains in PSI-1MDB Future Energy Corporation. 1MDB should own 48.8% of PSI-1MDB Future Energy Corporation, PSI should own 51.2% of PSI-1MDB Future Energy Corporation.
  • Valuation report should come in to value assets at US$3.285bn. This will result in US$186m gains attributable to the US$1000m investment made by 1MDB.
Key Dates:
18th Sept (Fri) – Meeting in Geneva
30th Sept (Wed) – Prince Turki in Malaysia for official signing
However, compliance officers at BSI pulled out of the deal just two days before the signing of the 1MDB PetroSaudi Joint Venture, after asking increasing questions about compliance, leaving the collaborators with a problem.
Close email
From: chr.zuc.a1@bsibank.com
To: Patrick.Mahony@Petrosaudi.comSubject: Additional information please
Dear Patrick, 
 Please let us come back on our questions, my compliance needs some additional information before sending her presentation to our General Management. 
_________________________________________________________________ 
1. Business Plan
Outflows
USD 100         JP Morgan London
USD 200         remains at 1MDB Petro Saudi Ltd (BVI)
USD 700         will go to various accounts to be opened at BSI (says Tarik Obaid) – to explain
PM: The 100 (at JPM) and 200 (at BSI) will be used to fund the assets costs – basically exploration and production costs – and also to purchase assets. The 700m is premium that was made in the transaction and will be used to fund future transactions in any sector (not necessarily oil and gas) 
We please need additional details on the remaining 700 m : beneficiaries, location, depositary bank ?
It seems that the Malaysian Sovereign Fund invests only in Malaysia. Is this money going back to Malaysia f.ex. and if so, when ?
_________________________________________________________________
2. Joint  Venture Contract :
PM: The JV company is the BVI company called 1MDB PetroSaudi Ltd and this is a JV between PetroSaudi International (Holding) Cayman Ltd and  1 Malaysia Development Berhad (Malaysia) . 
Our Compliance please needs the draft agreement between the contracting partners.
It is difficult for her to give an opinion to our General Management  on the deal without the joint venture draft.
_________________________________________________________________
3.  “1 Petro Saudi International Holdings Cayman Ltd (Cayman) ”
What is the purpose of this account and how will it be used please ?
__________________________ _________________________________________________________________
Thank you
Christophe Zuchuat 
Directeur Adjoint 
BSI SA 
8, Boulevard du Théâtre – 1204 Genève
Tel. +41 58 809 13 52 – Fax +41 22 809 43 03
chr.zuc.a1@bsibank.com  – www.bsibank.com 
________________________________________ 
From: Patrick Mahony  [mailto:Patrick.Mahony@Petrosaudi.com]
Sent: mercredi, 23.  septembre 2009 23:21
To: Zuchuat Christophe  (BSI-Geneve)
Subject: RE: Feedback compliance positive / GM  also
Sensitivity: Confidential
Please  see answers below. Let’s discuss tomorrow. Merci
From:  chr.zuc.a1@bsibank.com [mailto:chr.zuc.a1@bsibank.com]
Sent:  Wednesday, 23 September, 2009 5:33 PM
To: Patrick  Mahony
Subject: Feedback compliance positive / GM  also
Sensitivity: Confidential
Dear  Patrick,
Thank you for your  valuable information and help.
Our compliance is  currently consolidating all information,
and will submit it  to our General Management who is already informed.
Overall, the  outlook is quite positive.
Allow me 3  questions please :
____________________
Business  Plan
Outflows
USD 100          JP Morgan London
USD 200          remains at 1MDB Petro Saudi Ltd  (BVI)
USD 700          will go to various accounts to be  opened at BSI (says Tarik Obaid) – to explain
Can you explain us  briefly where and how the money will be invested ?
We suppose the  business plan is financing oil investments/projects.
1. My  compliance has to give some sort of explanation on the 700  especially .
We are very happy  it stays at BSI.
  PM:  The 100 (at JPM) and 200 (at BSI) will be used to fund the assets costs –  basically exploration and production costs – and also to purchase assets. The  700m is premium that was made in the transaction and will be used to fund  future transactions in any sector (not necessarily oil and  gas) 
_______________________
2.  Joint Contract : it is not clear   between  which entities the  contract will be :
Joint Venture  Contract between : linked to cash flow ?
•       1Malaysia  Development Bhd (Malaysia)
•       1MDB Petro Saudi  Ltd (BVI)
Joint Venture  Contract between : linked to ownership ?
•       1 Petro  Saudi International Holdings Cayman Ltd (Cayman)
•       1MDB Petro Saudi  Ltd (BVI)
PM:  I don’t follow question, let’s discuss tomorrow. The JV company is the BVI  company called 1MDB PetroSaudi Ltd and this is a JV between PetroSaudi  International (Holding) Cayman Ltd and 1 Malaysia Development Berhad  (Malaysia).   
__________________________
PricewaterhouseCoopers
3.  Valorization of  Argentinean and Turkmenistan’s Assets :   very  important to get please 
PM:  This will happen but may be another competent authority as PWC is being too  slow.
__________________________
Thank you for your  important support
Best  regards
Christophe  Zuchuat 
Directeur  Adjoint 
BSI  SA 
8,  Boulevard du Théâtre – 1204 Genève
Tel.   +41 58 809 13 52 – Fax +41 22 809 43 03
chr.zuc.a1@bsibank.com – www.bsibank.com 
With the clock ticking, PetroSaudi turned to JP Morgan, where Director Tarek Obaid had business and that bank agreed to accept the account for the joint venture, which was to receive $300 million out of the $1 billion transferred from 1MDB.
Jho Low, who was now looking for a place to park the remaining $700 million “loan repayment to PetroSaudi”, turned to his own existing relationship, which was at Coutts.
Frantic emails were exchanged in the closing hours of the joint venture deal between 1MDB, PetroSaudi and Coutts compliance officers in Zurich over this sudden request to transfer $700 million into a newly created account, which showed the concern amongst Coutts staff about accepting this huge and suspicious sum of money when there was inadequate information about who owned the account and how the money had been earned.
Close email
Sent via BlackBerry from T-Mobile
From jho.low@gmail.com
Date : Fri, 2 Oct 2009 12:28:01 +0000
To :
Subject : Fw: RESEND : URGENT REQUEST OF RBS COUTTS
Shld be cleared soon. Pls update tarek.
Sent via BlackBerry from T-Mobile
_____
From Shahrol Halmi
Date : Fri, 2 Oct 2009 08:21:15 -0400
To : ‘jacqueline.ho@db.com’ ; Casey Tang
Subject : Re: RESEND : URGENT REQUEST OF RBS COUTTS
Jac, please use this address for GOOD STAR LIMITED.
P.O.Box 1239, Offshore Incorporation Centre, Victoria, Mahe, Republic of Seychelles
Thanks
_____
From : Jacqueline Ho
To : Casey Tang; Shahrol Halmi
Sent : Fri Oct 02 06:19:20 2009
Subject : RESEND : URGENT REQUEST OF RBS COUTTS
Dear Casey and Shahrol
Please see an email request from RBS Coutts to reveal the beneficiary name pertaining to 1MDB’s remittance.
In that sense, I believe RBS needs confirmation on the beneficiary’s name in order to complete their internal risk mitigating processes as no name was
We will await your instructions on whether to reveal the beneficiary name and address (please provide) to RBS Coutts.
As requested by them, we will have to send it out via email and an authenticated swift message so would appreciate a reply as soon as possible.
Best Rgds
Jacqueline Ho
Corporate Coverage
Deutsche Bank (M) Bhd
Tel: + 603 20317798
Mob: +6012 2059561
Email: jacqueline.ho@db.com
This e-mail may contain confidential and/or privileged information. If you
are not the intended recipient (or have received this e-mail in error)
please notify the sender immediately and destroy this e-mail. Any
unauthorized copying, disclosure or distribution of the material in this
e-mail is strictly forbidden. —– Forwarded by Jacqueline Ho/db/dbcom on 10/02/2009 05:41 PM —–
Prakash Gopi/db/dbcom 
10/02/2009 04:55 PM
To Jacqueline Ho/db/dbcom@DBAPAC
cc Jeremy Lewis/db/dbcom@DBAPAC
Subject Fw: REQUEST OF COUTCHZZ
Jac,
RBS Coutts is requesting for bene’s full details.
Can we proceed to provide the necessary information. If so, appreciate if you could provide me with the relevant details.
Warm Regards,
Prakash Gopi
Global Market Operations
Deutsche Bank (M) Bhd
03-20536851
—– Forwarded by Prakash Gopi/db/dbcom on 02/10/2009 04:53 PM —–
Laurent.Schmid@rbscoutts.com 
02/10/2009 04:38 PM
To Prakash Gopi/db/dbcom@DBAPAC
cc Eliane.Humair@rbscoutts.com, Thomas.Tuerler@rbscoutts.com
Subject RE: REQUEST OF COUTCHZZ
Dear Prakash,
Please urgently confirm the full name of the final beneficiary of the funds per e-mail and authenticated swift (see details below) in order for us to apply the funds.
We are not in a position to credit the funds without full beneficiary details (full name, address, account no.).
Kind regards,
Mr Laurent Schmid 
Regulatory Risk 
RBS Coutts Bank Ltd
Lerchenstrasse 18
P.O. Box
8022 Zurich, Switzerland
Tel. +41 43 245 53 52
Fax +41 43 245 54 04
laurent.schmid@rbscoutts.com
www.rbscoutts.com 
____
From: Humair, Eliane (RBS Coutts, CH) 
Sent: 
Freitag, 2. Oktober 2009 10:27 
To: 
Cousin, Dominik (RBS Coutts, CH); Tuerler, Thomas (RBS Coutts, CH); Schmid, Laurent (RBS Coutts, CH) 
Subject: 
FW: REQUEST OF COUTCHZZ
TO URGENT
Eliane Humair
Investigations Department
RBS Coutts Bank Ltd
Stauffacherstrasse 1
P.O. Box
8022 Zürich
Telephone +41 (0)43 245 58 62
Facsimile +41 (0)43 245 57 99
eliane.humair@rbscoutts.com
www.rbscoutts.com
_____
From: Prakash Gopi [ mailto:prakash.gopi@db.com
Sent: 
Freitag, 2. Oktober 2009 10:22 
To: 
Humair, Eliane (RBS Coutts, CH) 
Cc: 
Jeremy Lewis; Krystof Balwierz 
Subject: 
Fw: REQUEST OF COUTCHZZ
Dear Eliane,
I have received this msg from Krystof Balwierz on behalf of yourself today.
May i urgently enquire what further details you require from DEUTMYKL since our MT103 msg had indicated that the funds were to be credited to acc 11116073.
Thank you.
Warm Regards,
Prakash Gopi
Global Market Operations
Deutsche Bank (M) Bhd
03-20536851
—– Forwarded by Prakash Gopi/db/dbcom on 02/10/2009 04:13 PM —–
Chooi-Fong Liew/db/dbcom 
02/10/2009 04:09 PM
To Krystof Balwierz/db/dbcom@DBCOM cc
Prakash Gopi/db/dbcom@DBAPAC Subject
Fw: REQUEST OF COUTCHZZ
Hi Krystof
I have forwarded the email to my colleague who is handling this. You can laise directly with him direclty.
Regards.
Chooi fong
—– Forwarded by Chooi-Fong Liew/db/dbcom on 10/02/2009 04:06 PM —–
Chooi-Fong Liew/db/dbcom 
10/02/2009 04:01 PM
To Prakash Gopi/db/dbcom@DBAPAC cc
Subject
Fw: REQUEST OF COUTCHZZ
Pls help.
—– Forwarded by Chooi-Fong Liew/db/dbcom on 10/02/2009 04:01 PM —–
Chooi-Fong Liew/db/dbcom 
10/02/2009 03:59 PM
To Connie Lam/db/dbcom@DBAPAC, Umadevi Maslamani/db/dbcom@DBAPAC cc
Subject Fw: REQUEST OF COUTCHZZ
HI
Pls note email below . Did you send the pymt instruction? Bene Bank unable to apply. Pls provide addl details via BKTRUS33.
Thanks.
Chooi fong
What can be seen is that Jho Low was himself being back-copied into these emails (above) and that he responded to his colleagues at PetroSaudi (also back-copied) that the problem would soon be resolved.
FINMA’s further evidence today makes clear that individuals high up at the bank over-ruled the concerns of the compliance department and that there were numerous shortfalls in the due diligence process and in the documentation provided by Jho Low:
“In the summer of 2009, Coutts opened a business relationship in Zurich with a young Malaysian businessman. When the account was opened, information was provided to the effect that USD 10 million would be transferred to it from the account holder’s family assets. Instead, in the autumn of 2009, approximately USD 700 million was transferred to the account from the Malaysian sovereign wealth fund 1MDB. The reasons given for this transaction were inconsistent, and some information was changed retrospectively. Moreover, the documents presented in support of the transaction contained obvious mistakes, not least the fact that the identities of the contracting parties were transposed. A member of the bank’s Compliance unit noted in an internal email: “It would be the first time in my career that I would see a case where [in] an agreement over the amount of USD 600 Mio. or so the role of the parties has been confused.” The Legal Services unit even spoke of the risk of a “total fabrication”. Nevertheless, the bank failed to clarify the background to the transaction with the necessary diligenc [FINMA Statement]
It is noticeable that within this last minute rush and change of plans there were still attempts made to disguise the eventual destination of the money from people who might be scrutinising matters in Malaysia.
Both payments were initially sent to JP Morgan, in order to create an appearance that the money had all gone to PetroSaudi, however the $700 million payment was then designated for forwarding to the separate Coutts account:
Masking the transfer to make it look as if it was going to PetroSaudi
Payment directions from PetroSaudi’s White & Case lawyers were designed to make the $700m transfer look as if it was also going to PetroSaudi
The FINMA statement is unequivocal in support of the finding that $700 million was therefore stolen from 1MDB in September 2009 under the guise of the joint venture with PetroSaudi and went to Jho Low. Something the Prime Minister has repeatedly denied.
The authority effectively corroborates Singapore’s findings that Jho Low later sent much of the money (over half a billion dollars) on to his ADKMIC account at BSI Bank in Singapore, where Brunner, Yak and their team moved over to in October of that year:
“Subsequently, between late 2009 and early 2013 numerous high-risk transactions with a total value of USD 1.7 billion were processed through the account. For example, more than USD 0.5 billion was transferred to a domiciliary company belonging to the businessman on the basis of intransparent loan agreements. The bank justified these actions on the basis that the same beneficial owner was involved. Coutts took no action to clarify the use of USD 35 million for visits to casinos and the purchase of a range of luxury services (e.g. the chartering of yachts and private aeroplanes).”

Even more money went through Coutts in later 1MDB transactions

FINMA has confirmed that in total as much as $2.4 billion went altogether into the Coutts Zurich account, far more than the $1.83 billion that disappeared from the original PetroSaudi joint venture with 1MDB through Good Star:
“When the Coutts employees moved to another bank in Singapore in 2009, some of the business relationships were transferred to Coutts Zurich. In total, 1MDB-related assets to the value of USD 2.4 billion were transferred through Coutts accounts in Switzerland” [FINMA Statement]
This confirms the DOJ’s earlier contention that money raised from later 1MDB borrowing associated with the Aabar Abu Dhabi wealth fund (whose managers have now been jailed for their part in the 1MDB scandal) also went through Coutts.
US$6.5 billion was raised in loans 2012-13 by Goldman Sachs (whose Asia head is now sacked and under investigation in the United States), much of which has been traced to bogus off-shore accounts through BSI and Falcon Bank set up by Jho Low (alias Eric Tan) and the ex-managers of Aabar (Khadem Al Qubaisi and Mohd Al Husseiny).
FINMA confirms that Coutts also was involved in the disappearance of a further $680 million dollars from 1MDB in March 2013. The sum matches the $681 million that was sent in the same period to Najib’s account in KL, but this money went to Jho Low.
“Although Coutts had serious grounds for suspicion due to the unusual transactions from 2009 onwards, it opened a further business relationship with the Malaysian businessman in the summer of 2012. Contrary to the information provided when the account was opened, USD 380 million was transferred to this account from an offshore company in March 2013. A further USD 300 million followed. Pass-through transactions were then used to transfer most of the funds received to another domiciliary company belonging to the businessman. Despite the obviously suspicious nature of these transactions, the bank failed to look into them seriously and was content to make superficial enquiries.
The separate DOJ filing in July has also traced these sum through Coutts which went into the account of a Jho Low owned company called Dragon Market:
Screen Shot 2017-02-02 at 12.52.31
Much of the cash was then laundered back through another Jho Low account called Dragon Dynasty at BSI Singapore and into accounts owned by his father and brother, in order to disguise its criminal origin, according to the FBI.
FINMA makes clear its concern that the prime culpability for these transactions lay at the highest level at Coutts Bank.  It means that very senior figures at Coutts in Zurich, as well as at BSI which went on to handle these transactions, were willing to participate in a culture of deliberate complacency when it came to processing huge sums of money from 1MDB:
A number of bank employees expressed serious, timely concerns to their managers and the Compliance unit about the business relationship with the Malaysian businessman. Following negative media reports, the individual responsible for providing advisory services to this businessman in Singapore noted: “I feel very uncomfortable with this guy and the transactions that are going through the account. I think the management has to make a decision whether to keep this relationship.” …… Instead it was decided to continue with the lucrative business relationships and process the transactions. As early as March 2012 the following was noted in an internal bank meeting about the business relationship with the Malaysian businessman: “[X] is a key client who we are comfortable with the Source of Funds, Source of Income and activity performed on these accounts”. In 2013 and 2014, various compliance bodies within the bank again raised and questioned the business relationship. On each occasion, however, they decided to continue with it.

Poor UK record on 1MDB

The owner of Coutts at that time was the UK government-owned entity RBS. FINMA says it has notified RBS and the UK financial regulator the Financial Conduct Authority (FCA). However, there is no evidence that any UK authorities have taken any action whatsoever to investigate any of the UK aspects of the 1MDB scandal. A British Foreign Office delegation in due in KL shortly to continue to lobby for preferential trade deals.
Last year the UK trade representative at a special reception held for Najib two days after London’s anti-corruption conference and in the same venue, Lord Marland, said it would not be right to judge a man (Najib) as guilty until found to be so in court, implying that he is prepared to suspend judgement on several of the world’s most notorious criminals when it comes to trade and politics.
Switzerland on the other hand today also indicated it is also looking at a further 5 banks who were involved in the 1MDB scandal. BSI and Falcon are already facing proceedings – other names in the frame are Julius Baer, Credit Suisse, UBS, JP Morgan Suisse.
If any of these plead innocence, then they will be able to bring the Malaysian Prime Minister, the sole shareholder and signatory of 1MDB, to testify on their behalf.

Sunday, January 15, 2017

SR: PetroSaudi's 1MDB-Financed Venezuelan Gamble And The Money It Didn't Make

PetroSaudi's 1MDB-Financed Venezuelan Gamble And The Money It Didn't Make

PetroSaudi's 1MDB-Financed Venezuelan Gamble And The Money It Didn't Make

Early March 2010 a lordly letter was delivered to the all powerful President of Venezuela’s petroleum industry PDVSA, who was also Minister of Energy, Rafael Ramirez. It was from one Prince Turki bin Abdullah, who numbered among the then King of Saudi Arabia’s many sons.
The tone was grandiloquent, but there was an amateurish feel to this official communication and the content had little to do with diplomacy:
“It has come to my attention that an opportunity has arisen for PetroSaudi to meet with you during the upcoming OPEC meetings in Vienna. It would indeed be our pleasure to finally meet you and discuss all of the ways that we wish to cooperate with PDVSA. We would very much like to strengthen the ties between our two companies and we believe that such a meeting is essential in order for us to forge a stronger partnership. Unfortunately though I will not be able to attend such a meeting myself as I am already committed to official functions here in the Kingdom that will prevent me from travelling in the next few weeks. However my most trusted and closest business partner and the CEO of PetroSaudi, Sheikh Tarek Obaid, will be available to meet with you. I would greatly appreciate it if you could please take the time to meet with Sheikh Obaid as I believe such a meeting can only result in new business opportunities for PetroSaudi and PDVSA.
Furthermore, I would like to take this opportunity to invite you to the Kingdom of Saudi Arabia in the very near future so that we could also meet and discuss increased cooperation between our two companies. It would be my pleasure to host you in the Kingdom and I would kindly request that you please liaise with Sheikh Obaid and his office on potential dates.
Your Excellency, please accept my sincere apologies for not being able to meet with you in person but I thank you in advance for taking the time to meet Sheikh Obaid. I look forward to personally meeting you in the near future and working with you on increasing the cooperation between our two great nations.”
Letter from the Saudi Prince Turki, Shareholder of PetroSaudi
Letter from the Saudi Prince Turki, Shareholder of PetroSaudi
The text for this missive had in fact been sent hastily the day before in an email from Tarek to Turki entitled “PDVSA Letter Urgent”, which perhaps accounts for the poor presentation, since Turki’s secretary had just reproduced it verbatum.
It illustrates how PetroSaudi presented itself in Venezuela, which was just the same way as it had in Malaysia and in the various other parts of the world, where the young playboy named Tarek Obaid was trying to peddle his access to the Saudi royal family and supposed diplomatic influence to make a fast buck.
Prince Turki has since severed his ties with Obaid’s businesses, but at the time the former airforce pilot was a 50% shareholder and proved very willing to sponsor his young pal’s efforts to try and make money out of his royal connection.  To begin with, say insiders, it helped open the door to what the colleagues hoped would be a major money making opportunity in a country where few others dared to trade.
Tarek, who had limited means of his own, meanwhile inflated the reality of his own position in Saudi Arabia as much as possible.
I understood he was the Prince’s nephew” one business contact told Sarawak Report. To which another, who knows better, says not true: “he is nobody in Saudi Arabia, he has no royal blood, he was the son of a once wealthy businessman who lost all his money”.

Argentina debacle

The first serious investment into PetroSaudi, which was only incorporated in 2005, came from an emerging market fund run by the private equity group Ashmore.  It involved the purchase of a supposed oil asset in Argentina in 2008, which Tarek apparently had no intention of developing (PetroSaudi had no capacity), but seemed to think that he could flip on to the Chinese for a big profit.
It was super, mega-early stage” an insider has told Sarawak Report, “the only people who would seriously invest in an opportunity like this would be some huge outfit like Exxon and they would pay nothing for it, because only they would know what to do”.
But, friends of Tarek had suggested otherwise and his old schoolfriend Patrick Mahony, who then worked for Ashmore, pursuaded the group to take up the investment and sink some $50 million into the project.  An insider explained why they made that decision. “The only reason Ashmore invested was because the deal with PSI [PetroSaudi International] was that Tarek or ‘The Kingdom’ would guarantee a 35% return, whether or not it failed”.
Tarek's old schoolfriend Patrick Mahony had got himself a job with the private equity fund managers Ashmore
Tarek’s old schoolfriend Patrick Mahony had got himself a job with the private equity fund managers Ashmore
However, when the project did predictably pan, Tarek did not pay and nor did his royal partner get Saudi Arabia to pay either. “Ashmore were incensed” our contact told us.
However, Tarek reckoned he knew exactly how to play that situation. He warned the company that if it made trouble for him he would ensure the company’s valuable Saudi investors pulled out of the fund. Ashmore walked away.
Again, people who know him better confirm that Tarek has no such influence in the Kingdom.  However, it is a trick Tarek has played more than once, according to various sources: persuading anxious outsiders that he can destroy their connections in the secretive kingdom if they cross his wishes or do business with people he doesn’t like.

Key partner from the start – Patrick Mahony

This was not the only project at Ashmore involving Patrick Mahony which involved big risks that lost big money.  Mahony had joined Ashmore from Blackstone in 2006 and was also the portfolio manager behind an investment of some $200 million in a Turkish port project with partners, whom some warned had a dubious business history.
There was a sort of hubris about knowing how to do business with emerging markets – how to work with people who were dodgy.  But, if you deal with scorpions you should know what to expect” reflects one former associate. The partner stole Ashmore’s share of the venture and then refused to pay up on a court judgement.
Nevertheless, Tarek and Patrick clearly continued to work together, taking the same risky approach.
Obaid in favourite surrounding on a yacht last July
Obaid in favourite surrounding on a yacht last July
They had been in class together at the same Geneva private school and they shared a taste for the same kind of socialising, which generally involved louche gatherings at the most expensive locations, in the company of rich movers and shakers and lots of hired Russian models.
Tarek would cadge the money to pose as a playboy, but it was all acting and both men sought real wealth.
By 2009 the pair were seriously pushing the PetroSaudi business model as their opportunity to maximise their supposed ‘royal access’ in the oil kingdom: “Tarek’s business model was not to invest, it was signing up to play the Saudi business card. He would put zero money in, but expect to get a stake. But, it was never really clear how close he really was to the KSA”, explains a finance industry observer.
It was Patrick Mahony who drew up the template that Obaid started to use as he hunted for willing investors, particularly from China. The document was called “Basic Story On PetroSaudi” and it purported to explain what it was that teaming up with the microscopic little company had to offer huge outfits like Sinochem, who for a while showed interest.
It was all based on PSI’s purported ability to wield Saudi diplomatic influence and backing for the company’s business interests. PSI was even acting as a proxy for Aramco in acquiring foreign oil wells, which the state company is barred from doing, the document claims. As such it was really a front for the Saudi Royal Family and the King himself:
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Obaid used the same document to net in Tony Blair as a very highly paid consultant to PetroSaudi in 2010.
In an email he further told Blair’s office that whilst the first step was for investors to put money in projects that would gain Saudi diplomatic support in places where that could be crucial, the second advantage would be preferential treatment and opportunities to get contracts in Saudi Arabia itself:
We are very happy to work with the relevant Chinese companies to bring them to the Kingdom and give them full access to our shareholders’ ability to win large government contracts” Tarek told Blair’s people:
Email from PSI Directors to Tony Blair's staff
Email from PSI Directors to Tony Blair’s staff
Needless to say, it was all bluff, aided by the opaqueness of Saudi Arabia to foreigners and the perception of its royal family as all-powerful and untouchable…. and possibly corrupt.

1MDB

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Family holiday with the ‘wealthy’ Prince
Tarek’s blatant pitch had attracted the attention of Jho Low in 2009, who had been seeking just such a vehicle for his own purpose of siphoning money out of 1MDB.
He recognised PetroSaudi for what it was, a bogus front company, which acted big and flashed a great figurehead in return for a pay-off.
The royal facade certainly went down well with Malaysian PM Najib and wife Rosmah, who were delighted if they could give the impression of a big shot Saudi investment as they took money out of 1MDB.
Turki hired a yacht for a week and pretended he owned it, causing Rosmah to boast to all her friends about her rich connection. Suitably impressed by Jho’s catch, the Malaysians were willing to let the Saudis take 30% of the enormous first billion ‘investment’ by their fund and the rest was siphoned by the PM’s own proxy, Jho Low.
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Tarek Obaid (left) and Prince Turki play host on Tatoosh, which Turki pretended to own
Which is why by the time PetroSaudi engaged in their next venture in Venezuela they also had what that country was looking for as well, which was up-front cash.

Venezuela

The fact that PetroSaudi had started negotiating with Venezuela’s state oil company PDVSA within days of beginning the 1MDB joint venture deal owed to Patrick Mahony.
Mahony was still working for Ashmore, although he was now also a PetroSaudi director, and he believed he had spotted an opportunity through Ashmore’s own portfolio to make big returns on the money due to flow into the ‘Joint Venture’.  He was also doing Ashmore a big favour.
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In September 2009, as the prospect of a big pay-out from 1MDB loomed, Patrick turned to Venezuela in the hope of a high yield investment for the huge sum of money that was about to flow into the ‘1MDB PetroSaudi Joint Venture’
Ashmore had put money into a floundering investment that was in deep trouble in Venezuela, based on an elderly drill ship named Neptune Discoverer. The project, called Jasper, was one of the company’s top ten emerging market investments and the company’s stock exchange reports spelt out the problems:
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Sold to PetroSaudi
Mahony reckoned he could relieve his soon to be former employers of a cut-price drill ship and, according to associates, thought he would be able to make money from it where others could not in cash-strapped Venezuela:
“Discoverer was under contract with PDVSA, but as with most suppliers to PDVSA (then and now) they had trouble collecting from PDVSA.  I think Patrick and pals thought they had a ‘fixer’ in Venezuela that was close to the Chavez government and thought they could facilitate ‘timely’ payments from PDVSA”
was how one fellow fund manager put it.
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“Unique Approaches – As a private company, we have flexibility and can use innovative structures to unlock otherwise trapped value”
By January 2010 all the $300 million which had been sent by 1MDB into the joint signatory/ joint venture account of 1MDB PetroSaudi Limited had been signed over to PetroSaudi’s Venezuela project.
PetroSaudi had informed 1MDB officials that they were paying $250 million for their drill ship, but in fact they only put down $40 million on the elderly barge and another $120 million was paid to structure the deal with PDVSA.
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How the $300 million that 1MDB placed into the ‘Joint Venture’ passed into PSI’s Venezuela venture [The Edge]
Their presentation documents designed to attract further investors explained how the company reckoned it could structure a lucrative deal by providing PDVSA this money and equipment up-front (although the planned uses for that $120 million remained vague):
PetroSaudi would lend PDVSA the money to invest in the planned joint venture, which they would receive back in high interest rates and a guaranteed contract for their drill ship
PetroSaudi would lend PDVSA the money to invest in the planned joint venture, which they would receive back in high interest rates and a guaranteed contract for their drill ship
PetroSaudi claimed it had succeeded in extracting hugely advantageous terms with a five year fixed contract for its drill ship Neptune Discoverer (it was 7 years for Saturn) with a daily fee that would guarantee a 30% annual return on the initial investment; a sky high rate of interest on the loan – over 20% – and a ‘mobilisation fee’ up-front, which itself amounted to nearly a third of the company’s inital outlay on the asset:
5 year drilling contract and huge interest rates on the initial lending
5 year drilling contract and huge interest rates on the initial lending
PetroSaudi’s self-promotion as an arm of the Saudi state and royal family seems to have played a significant part in pushing through these excellent terms. Correspondence shows that the company was presenting the deal as an opening round in what could be serious Saudi investment in the country’s collapsing oil infrastructure.
Shades of 1MDB - Investors were told that PetroSaudi brought the diplomatic muscle of Saudi Arabia into the contract with PDVSA
Shades of 1MDB – Investors were told that PetroSaudi brought the diplomatic muscle of Saudi Arabia into the contract with PDVSA
But that whole facade was soon to fall apart and by 2011 the clapped out Discoverer had to be de-commissioned – according to one expert observer who spoke to Sarawak Report:
“In March 2011 the workers demanded the evacuation of this barge, now called Petro Saudi Discoverer, due to the deplorable conditions of the equipment. They demanded that Jose Luis Parada, head of PDVSA Services, detain the operations and evacuated the 103 workers in the barge. The barge, they said, lacked the international certification from the American Bureau of Shipping”.
However, there was another reason Mahony and Obaid believed they could sustain their contract and get Venezuela to honour its payments, which was because of their unique inside contacts.
Not fit for purpose
Not fit for purpose
They had used those contacts to help lock PDVSA into a Letter of Credit arrangement linked to the deployment of the second ship Saturn, meaning a bank had agreed to pay the contract, whether or not Venezuelan officials came back later to quibble over those extortionate terms.
Taking advice from their favourite top London law firm White & Case, PetroSaudi battled with their Venezuelan negotiators to insist that the Letter of Credit for $130 million was issued under UK jurisdiction and not Venezuelan, which was required of all such contracts under Venezuelan law. This was to prevent the payment being frustrated by local protective measures.
However, the Venezuelans said this procedure was not acceptable under their own laws and emails show that negotiations were tense with Mahony’s local ‘fixers’ placed under pressure. At last, the day before the contract was due to be signed, the fixer told Mahony and PetroSaudi Legal Counsel and Director Tim Buckland (himself ex-White & Case) that he could get the deal through, but they must only allow the finished form of the contract to be seen by one top official and two named juniors and it must not be sent to anyone else. These people would handle the situation.
That top official was Jose Luis Parada, who was later arrested and jailed on grand corruption charges, before managing to escape to Canada after reportedly paying a $30 million bribe.
Only for three eyes only, including Jose Luis and Rafael
For three people only, including Jose Luis Parada
Parada’s boss, the Minister cum PDVSA President Rafael Ramirez (who met with Tarek Obaid) is also no longer in his job.  His friend Chavez appointed him to a diplomatic post to give him immunity after an enquiry by the country’s National Assembly accused him of misappropriating $11 billion during his 10 years in the job.
The Saturn contract allowed for a staggering $485,000 fee payable per day on a fixed contract for seven years – at least double the market rate. When the PDVSA negotiators attempted to put in further break clauses on the contract PetroSaudi legal counsel aggressively refused, saying the drill ship’s daily fee must be guaranteed.  It was this demand that the intermediaries also requested be only sent to the three men in the Ministry.
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Show email
Expand text
Show email

Patrick’s ‘Special Fixers’

Venezuelan oil analysts have told Sarawak Report that they were immediately suspicious of the arrival of PetroSaudi, whom they immediately identified as a non-professional bunch of speculators rather than a genuine oil company.
“When I looked Petro Saudi up I found it to be a company created in 2005 without oil operational experience, along the lines of a financial speculator, managed by a gentleman called Tarek Obaid, who seemed to be an international playboy, more involved with Formula One activities than with the oil business.
I also found out that the other barge offered to PDVSA, the 34 year old Neptune Discoverer, had been bought from Jaspers Investments for a price of some $120-150 million, $50 million below book value. Their performance has been dismal. It took two years for the Discoverer to drill the first well, while in Trinidad a similar well could be completed in 30-45 days.”
comments one senior veteran of the industry and well-known critic of PDVSA, Gustavo Coronel.  A well known scandal in Venezuela at that time was the sinking of another below standard drill ship called Aban Pearl in early 2010. Coronel discovered that this Indian barge had a contract paying it $700,000 per day to drill wells, although the owners had agreed to only recieve $300,000 of that. There was no performance clause on the amount.
For years he and other Venezuelan observers have suspected a similarly inflated contract for Discoverer and for PetroSaudi’s second ship Saturn, which Patrick Mahony negotiated quick as a flash to replace the Aban Pearl straight after it sank. Saturn cost $250 million and Mahony leveraged the payment after he extracted another $500 million from 1MDB in September 2010, this time in the guise of a Muharaba loan agreement (of which $260 million went straight to Jho Low and the UBG buy out).
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PetroSaudi quickly acquired a second barge Saturn to replace the Aban Pearl contract wit PDVSA
Sarawak Report has obtained copies of the hidden contracts from the PetroSaudi data in our possession, which confirms the extortionate terms PetroSaudi extracted from PDVSA.  For the Saturn contract PetroSaudi negotiated a daily ‘Operating Rate’ payment of $485,146 (worth $1.2 billion over the seven year duration of the contract) merely for PDVSA to hire its drill facility (which in the case of Discoverer only drilled one well).
The Saturn Contract - inflated operating fee, inflated mobilisation fee and inflated lending rates
The Saturn Contract – inflated operating fee, inflated mobilisation fee and inflated lending rates
It is more than double the going rate” one industry insider has confirmed to Sarawak Report.  On top of that there was a vastly inflated ‘Mobilisation Fee’ of $56 million, which ought have been no more than $15 million, according to Coronel, himself a former geologist.  Added were hefty accomodation fees for the army of workers, to whom PetroSaudi sub-contracted all the actual work – and finally, of course, the enormous interest rates charged on the original loan to the ‘Joint Venture’.
With returns like these on two second-hand drill barges and solid 7 year contract for Saturn there would even appear to have been a theoretical possibility that PetroSaudi could after all have paid back 1MDB’s original $1.83 billion loan over the given period along with some profit.
However, Venezuela was in corruption-induced economic free-fall and the ships were third rate vessels, so why was a small circle of apparently very corrupt officials pushing through such a disadvantageous deal for their country and could it have been any surprise to the Directors of PetroSaudi when it turned out to be hard to extract the promised payments after all?

Who were Mahony’s “Special Fixers”?

PetroSaudi correspondence on all these deals show exactly upon whom the company was relying to secure its interests in Venezuela. All correspondence was copied into the Pantin brothers Gerardo and Eduardo and whenever trouble arose Mahony turned to them to sort it out:
“We need a strategy for how we will get paid …. We expect this from you as our partners on the ground and the ones that understand PDVSA best and have all the key relationships”
he told the Pantins as payments began to go awry in 2011:
Pantin family were PetroSaudi's key partner
Pantin family were PetroSaudi’s key partner
The Pantin brothers are in charge of a major family enterprise with a long history in the Venezuela oil business, who developed good contacts with the Chavez regime. Their company CPVEN was subcontracted to manage all the drilling work for the PetroSaudi adventurers (who had no clue how to run an oil operation) and there were other sweeters.
Pantin family firm CPVEN was regarded as the local agent
Pantin family firm CPVEN was regarded as the local agent
On top it was agreed the Pantins would receive 2% of the day operating rate from Discoverer and 3% of the day operating rate from Saturn.
There was also a deal to split the vast mobilisation fees that the Pantins extracted as upfront payments from the Venezuelans at the start of each operation.  This fee should have been no more than $15 million to cover costs of the set up, however the Pantins organised $56 million to be paid in the case of Saturn, much of which was distributed back to local officials and contacts via banks in Panama, according to inside information from PetroSaudi.
The Pantin brothers themselves requested additional payments of $7 and $8 million to be paid through anonymous off-shore companies:
Anonymous payments to the Pantins
Anonymous payments to the Pantins
If outsiders are left wondering over what justification there might be for such kickbacks, so apparently was PetroSaudi’s own shareholder Tarek Obaid. “Why are we paying this guy 7 plus 8?” he demanded of Patrick over the earlier Discoverer deal, which clearly utilised the same arrangement. “This is normal course of business payment, not related to the fee. The other payment is separate” replied Mahony.
Show email
However, clearly the parties to this deal started to find their interests diverging at an early stage and problems with payments started to develop with PDVSA. The anticipation that PetroSaudi’s ‘royal connections’ and ‘diplomatic clout’ would succeed in extracting hard currency from the Venezuelans where others could not proved fantasy.
The Saudi regal thing definitely worked to begin with” one insider has told Sarawak Report. “PetroSaudi executives were royally received at the Venezuelan Oil Ministry as if they were official representatives of the King of Saudi Arabia”. They say the PetroSaudi bid was presented as an opening move towards a massive Saudi investment into Venezuelan oil extraction infrastructure, which in turn might bring further opportunities within Saudi Arabia. This, of course, was exactly PetroSaudi’s pitch.
In which case, the lustre must have started to wear off almost immediately with the reality of the two lame duck, third hand ships PetroSaudi pitched up with and their clear limitations when it came to cash, once the up-front $120 million ‘investment’ had been made. The Venezuelans started to drag their feet. Patrick was forced to write a frank email in early 2011, explaining why PetroSaudi (agent of the Saudi Royal Family though it was and poised to potentially make further vast investments) could not afford not to be paid:
Close text
Patrick Mahony
Para 14/01/2011 01:47pm,“kabboulf@pdvsa.com”
cc Tarek Obaid , Xavier Justo , “Gerardo.Pantin@gmail.com”
Asunto Follow Up to NYC Meeting
Dear Eulogio and Fadi,
Happy New Year to you both. I hope you managed to have a good break.
I wanted to follow up on our meetings of NYC and specifically what is happening with the operations of the Discoverer and the Saturn. As we agreed in NYC, it was very important for us to finish 2010 with zero receivables outstanding from PDVSA so that we could avoid any problems with our bondholders. Unfortunately however this did not happen and we finished the year with almost $70m outstanding from PDVSA. This means we will have to report this to our bondholders when we report our full year results at the end of this month and this means we will put them in a position where they can take action against this business and this could put the entire operation at risk.
When we sat in NYC we discussed the importance of keeping the bondholders happy as this would not only allow us to go back to the debt market when we want to acquire more assets but also these are very large financial institutions that are important for both of us in the international
markets. Defaulting on these loans is something that would look very bad
for both of us and certainly make getting financing for any offshore equipment in Venezuela almost impossible – something neither of us would want if we are planning on growing this business. Furthermore, giving the bondholders reason to take action by not paying could have us end up in another Neptune situation, which we both should work very hard to avoid. We came together to solve the Neptune problem so we would be very foolish to create another Neptune problem only a year later when we can easily avoid it.
The lack of payment is also causing fears with our employees and could disrupt the operations further that way. Together with the fact that the Discoverer contract is coming to an end, we have some nervous personnel on the vessels and this could really hurt what are, by your own admission,
very successful operations today. You mentioned in NYC that you could write us something to reduce the concerns of our employees and show them that the Discoverer contract will be extended. Is this still something you plan on
doing? This would help greatly as we currently run the risk of losing many
good people if they feel a) the Discoverer contract will not be extended
and b) PDVSA is not paying us.
I know you dismissed these matters as not being very important and only being small numbers in terms of what the relationship between PDVSA and PetroSaudi may become but this is unfortunately not the point. Every business we invest in needs to operate independently and be profitable independently. This means that our offshore services business needs to be an independent business and we cannot mix it with what we do in upstream or CITGO with you. Also the numbers may be small in the grand scheme of the things we are discussing but in proportion to the size of this particular business, the outstanding receivables are very large (today $76m approximately) and it troubles us greatly that PDVSA, as such a large national oil company, is not able to make such small payments.
I would like to reiterate our commitment to work with you and PDVSA and our desire to expand our business relationship far beyond these two drillships, however the situation on our offshore business with you has come to a point where we may lose control of this operation due to PDVSA’s lack of payment and this would greatly undermine all of the potential future business we could do together. As you yourself said in NYC, operationally you are very happy with us so the only problem is really a lack of payment.
We will be in Caracas next week and would be happy to sit down and discuss the above with you, please let us know if any times are convenient for you.
I urge you to please attend to these matters so that we can focus on the more interesting and larger business propositions we discussed. Let’s not let our relationship or these operations go to waste over such small amounts.
I look forward to hearing from you.
But, as this email makes abundantly clear, by this stage the chaps in Venezuela had got the full measure of PetroSaudi and were teasing them over why they were worried about punctuality over the odd hundred million. Both sides were belittling the money in the context of the ‘bigger sums available’, but who did Mahony think he was kidding?
I know you dismissed these matters as not being very important and only being small numbers in terms of what the relationship between PDVSA and PetroSaudi may become but this is unfortunately not the point…the numbers may be small in the grand scheme of the things we are discussing but in proportion to the size of this particular business, the outstanding receivables are very large (today $76m approximately) and it troubles us greatly that PDVSA, as such a large national oil company, is not able to make such small payments”.
he wrote plaintively.
By the end of 2011 Discoverer was out of action, Saturn was failing to impress and it seemed the Venezuelans had stopped paying altogether.  By 2014 PetroSaudi’s role in the 1MDB affair had been made world news by Sarawak Report, the Oil Minister Rafael Ramirez was out of office and the top official in charge of the deal, Jose Luis Parada, was a wanted man.
I think there was also anger in Venezuelan official circles at having been misled on the Royal thing by this company“, acknowledges one person close to the situation.
PetroSaudi, it appears then decided to exercise their Letter of Credit in order to get back the $130 million agreed under the Saturn contract. That, at least, would have covered the company’s exposures and more.
However, the British Court did not find for PetroSaudi after all. As Sarawak Report revealed last week the judge who examined the case said that since there was clear evidence of fraud and since PetroSaudi Director and Legal Counsel, Tim Bukland, can only have been aware of the illegalities, the court would apply the fraud exemption to the rule that Letters of Credit should be paid and ordered the bank to withold their obligation.
Prince Turki is no longer the son of the King of Saudi Arabia, since his father died in 2015 and he has pulled out of the company.  So, could the old schoolfriends Tarek Obaid and Patrick Mahony finally be about to face the consequences of their grandstanding and extraordinary string of deceptions, which has also included the framing and imprisonment of their former colleague and key whistleblower, Xaver Justo?
What is clear is that 1MDB’s gambled money has predictably disappeared as has been the case with so many of Mahony’s other reckless multi-million dollar investments using other people’s money. The future of PetroSaudi International, which is now several months late in filing its accounts at London’s Companies House seems to be teetering on the brink.