1MDB linked to $3b purchase of energy firm: US govt suit

KUALA LUMPUR • Money misappropriated from a Malaysian state fund was used to partly finance the US$2.2 billion (S$3 billion) acquisition of Houston-based Coastal Energy in 2014, the United States government alleged in a lawsuit filed last week.

Proceeds from the Coastal Energy deal were then used to buy a property in London's glitzy Mayfair district, according to the lawsuit dated last Wednesday.

The US is seeking to seize the London property, along with two others, the document showed. The lawsuit was filed as part of a Justice Department effort to seize about US$1 billion worth of assets linked to funds it says were siphoned from 1Malaysia Development Berhad (1MDB), a Malaysian state fund under investigation in at least six countries for money laundering.

The Justice Department filed civil lawsuits last July alleging that about US$3.5 billion had been misappropriated from 1MDB and used instead to buy assets, including luxury property and works of art in the US and abroad.

The latest lawsuit shows that Malaysian financier Low Taek Jho, a central figure in the scandal, allegedly used 1MDB money to fund the Coastal Energy acquisition.

Mr Jho Low, as he is known, partnered with Compania Espanola de Petroleos SAU (Cepsa) to buy Coastal Energy for a total purchase price of US$2.2 billion. Cepsa is the Spanish unit of Abu Dhabi's state investor, International Petroleum Investment Company.

Goldman Sachs acted as financial adviser to Cepsa in the acquisition, according to a news release announcing the deal in November 2013.

NOT CLEAR

The commercial basis for this nearly immediate 600 per cent return on investment is not immediately apparent.

US JUSTICE DEPARTMENT

Mr Low invested about US$50 million in the acquisition through a company called Strategic Resources (Global), with Cepsa funding the remainder of the US$2.2 billion, according to the lawsuit.

Shortly afterward, Cepsa transferred US$350 million to Mr Low's Strategic Resources, buying Strategic Resources' stake in the joint venture used to buy Coastal Energy, the lawsuit says.

"The commercial basis for this nearly immediate 600 per cent return on investment is not immediately apparent," the Justice Department said.

Mr Low's contribution was traceable to misappropriated proceeds of a US$3 billion bond raised by Goldman for 1MDB in 2013, the lawsuit says. Goldman helped 1MDB, which was founded by Malaysian Prime Minister Najib Razak in 2009, to raise US$6.5 billion in three bond sales in 2012 and 2013 to invest in energy projects and real estate to boost the Malaysian economy.

Goldman was not immediately available for comment. 1MDB did not respond to requests for comment.

Mr Low, whose whereabouts are uncertain, could not be reached for comment. He has denied any wrongdoing in the past.

The Wall Street Journal first reported yesterday the allegations in the latest lawsuit.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 14, 2017, with the headline '1MDB linked to $3b purchase of energy firm: US govt suit'. Print Edition | Subscribe