KUALA LUMPUR – 1Malaysia Development Bhd (1MDB) is seeking US$1.83 billion (RM8.61 billion) from PetroSaudi International Ltd (PSI) chief investment officer Patrick Mahony and British law firm White & Case over allegations of fraud.
1MDB filed its civil suit at the Kuala Lumpur High Court on May 7, highlighting various discrepancies related to the joint venture with PSI, and other “suspicious” transactions that saw fugitive Low Taek Jho, better known as Jho Low, benefitting US$700 million.
According to the statement of claim, PSI CEO Tarek Obaid wrote to former prime minister Datuk Seri Najib Razak suggesting a collaboration whereby PSI would inject US$1.5 billion worth of energy assets into a joint venture company (JVC) while 1MDB would put in US$1 billion.
This deal would see PSI owning 60% of the JVC, while 1MDB would hold a 40% stake.
Based on this proposal, 1MDB alleged that its executive director Casey Tang fraudulently misrepresented to the board, among others, that PSI was owned by the late Saudi Arabia monarch King Abdullah.
However, PSI only had King Abdullah’s son Prince Turki as a shareholder.
Further, 1MDB’s eventual joint venture was with PetroSaudi Holdings Cayman Ltd (PSH) not PSI and the alleged energy assets were worth less than US$1.5 billion.
The energy assets concerned include interests in Turkmenistan and Argentina owned by PetroSaudi International Cayman (PIC).
As part of the deal, the JVC would own 100% of PIC and its so-called energy assets, in return for US$1.5 billion shares to PSH.
The JVC would also pay US$700 million to PSH according to the terms of an alleged loan agreement. Now, 1MDB alleged that the US$700 million was a sham and did not exist.
“There was no reason for such indebtedness amounting to US$700 million by the JVC to PSH to arise by reason of the alleged injection of the Argentinian and Turkmenistan assets into the JVC, as part of the deal for the joint-venture was that PSI/PSH would contribute assets of at least US$1.5 billion into the JVC and 1MDB would in turn inject US$1 billion into the JVC,” the statement of claim reads.
In fact, according to 1MDB, the US$700 million was eventually funnelled to Good Star Ltd, an offshore company linked to Jho Low.
Why are 1MDB suing Mahony and White & Case?
Among others, 1MDB claims that Mahony participated in the scheme to defraud substantial sums of money from the fund with Jho Low, Najib, and Tarek.
It is alleged that Mahony instructed White & Case to prepare the share sale and loan agreements which would allow the JVC to obtain PIC.
Further, 1MDB said PIC did not own energy assets in Turkmenistan.
All PIC had were assigned rights by Buried Hill Serdar Limited (BSL) for the management and use of hydrocarbon resources, which was subject to the approval of the Turkmenistan government and such rights were worthless as no such approval was ever obtained.
Based on these allegations, 1MDB is seeking an order from the court for Mahony to pay US$1.83 billion and a declaration that White & Case is liable to account for the same amount as a constructive trustee for the fund. – May 23, 2024