Pincer Movement To Seize PetroSaudi’s Frozen Assets

Whilst the two PetroSaudi directors, Tarek Obaid and Patrick Mahony, await judgement in Switzerland following their prosecution and trial for major fraud and theft, civil cases are piling in to wrest hold of what is left of the $1.83 billion they are alleged to have stolen from the 1MDB development fund.

Thanks to information and data released by their whistleblowing former colleague, Xavier Justo, and first published by Sarawak Report in 2015, the Malaysian fund has now issued proceedings to recover the money.

Named in the writ filed in KL today are Mahony, in his capacity as Chief Investment Officer of PetroSaudi at the time, and the company’s UK based lawyers from the London branch of White & Case.

Sarawak Report has detailed at length how the deal was promoted to give an impression that PetroSaudi was linked to the Kingdom of Saudi Arabia and controlled access to billions of dollars of oil assets.

A bogus loan was drawn up to be repaid by the joint venture company that supposedly merged those assets with 1MDB as a 40% shareholder. 1MDB’s legal advisors, Wong & Partners, were given to understand through an email from White & Case that the ‘repayment’ of that $700 million fake loan (which siphoned off the lion’s share of 1MDB’s initial billion dollar ‘investment’) had gone to a subsidiary of PetroSaudi in recognition of those assets.

In fact, the company Good Star Limited, into whose RBS Coutts Zurich account the money was paid, belonged to then prime minister Najib’s frontman Jho Low and not to PetroSaudi.  Sarawak Report was the first to explode first evidence and then proof of this fact that was later confirmed by investigations on the part of the US Department of Justice.

However, as Malaysia’s beleaguered development fund makes its move on what funds might be left accessible, it finds itself competing with parallel court actions in the United Sates, where after years of dogged pursuit the authorities this week announced they are nearing a settlement over $380 million frozen from PetroSaudi’s profits from Venezuela.

Again, it was Sarawak Report that originally identified this money, from profits made thanks to the investment of cash provided to the joint venture by 1MDB but from which no returns were ever made to the fund.

The cash was used to purchase two drill ships and to negotiate highly favourable contracts with corrupted agents of the Venezuelan authorities in order to raise hundreds of millions in payments that returned to PetroSaudi alone.

The Venezuelan government has also sought to retrieve the money owing to the contested nature of the contracts. However, that attempt was over-ruled on appeal in the UK courts and the money has remained frozen after PetroSaudi’s other former London law firm, Clyde & Co, surrendered it to the court.

The company’s former counsel in the United States, BakerHostetler, has meanwhile also stepped down from the brief, complaining that it has not been paid or responded to by its clients for over a year. The California Ninth Circuit Judge, Dale S. Fischer, who has ruled on 1MDB cases over several years, is due to come to a judgement shortly over the complex process of dividing out these funds.

Where this leaves the funds available to 1MDB for restitution of its $1.83 billion from PetroSaudi is not yet clear.  However, Messrs Lim Chee Wee Partnership, who filed their suit earlier this month, may hope to make its shortfalls from the decision to pursue White & Case.

The major international law firm hosted the key meetings with 1MDB management in London at the start of the joint venture process and helped structure the deal.

White & Case also provided advice on the structuring of a so-called Murabaha Islamic loan that enabled PetroSaudi to siphon off a further $500 million and then $330 million in later borrowings from 1MDB – money that was never returned.

When an exasperated legal expert from the W&C London office pointed out the loan was not being delivered in accordance with the correct Murabaha procedures and queried whether the Islamic element was intended merely as window dressing? Patrick Mahony emailed her in the affirmative.

Whether 1MDB can make its case against the PetroSaudi director and his lawyers remains to be seen, but it will surely rely extensively on evidence supplied by Justo.

Meanwhile, neither Xavier Justo (who was jailed in Bangkok for 18 months at the behest of the PetroSaudi conspirators and Najib Razak) nor the editor of Sarawak Report (now sentenced to two years in jail by Malaysian prosecutors on grounds of alleged libel) have received any form of official thanks for identifying the scam and providing the evidence which have led to the return of billions to 1MDB and the Malaysian state.

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