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Generational Dynamics World View
*** 9-Jan-19 World View -- WSJ: China used bribery, corruption and 'leverage on other nations' in Malaysia's 1MDB scandal

This morning's key headlines from GenerationalDynamics.com
  • Malaysia's '1MDB scandal' continues to grow as biggest financial scandal in world history
  • 1MDB corruption mastermind Jho Low remains hiding out in China
  • WSJ: China used bribery, corruption and 'leverage on other nations' in Malaysia's 1MDB scandal

****
**** Malaysia's '1MDB scandal' continues to grow as biggest financial scandal in world history
****


[Image: g190108b.jpg]
Wanted fugitive Low Taek Jho (Jho Low) is believed to be hiding out in China (Malay Mail)

1Malaysia Development Berhad, or 1MDB, was founded in 2009 just four
months after Najib Razak became Prime Minister of Malaysia.

The fund was supposed to attract global investors to finance
infrastructure and other economy-linked deals in Malaysia.
Unfortunately, the fund was unsuccessful at attracting investors, but
it did attract a lot of debt - $12 billion by 2016.

A great deal of that $12 billion was misappropriated to finance
finance spending sprees by corrupt officials and their associates. An
estimated $4.5 billion was misappropriated from 1MDB by high-level
officials and their associates between 2009 and 2014, according to the
US Department of Justice. $681 million landed in Najib's personal
bank account. Billions more were diverted into personal accounts
disguised to look like legitimate businesses, and kicked back some of
those funds to officials. The money was spent on things like real
estate, jewelry, a luxury yacht, a Hollywood movie, "The Wolf of Wall
Street," casinos, champagne and “Dustheads,” a painting by US artist
Jean-Michel Basquiat.

Of the $12 billion in debt, much of it was arranged by Goldman Sachs.
Between 2012 and 2013, Goldman arranged three bonds worth $6.5 billion
for 1MDB with fees totalling $593 million. Malaysia has made criminal
accusations against Goldman and two employees for defrauding
investors, and is suing to recover the fees. Goldman denies the
charges.

Questions arose about the fund’s transparency and performance as early
as 2010. Suspicions about 1MDB began as early as 2013 when it asked
for a six-month extension to file its annual report. The company had
changed its auditors on three occasions at this point, furthering
suspicions. But international exposure became more pronounced in
2015, when 1MDB’s bonds, then worth around $12 billion, were
downgraded to junk status by ratings agencies Standard and Poor’s and
Fitch.

By 2016, the fund was far in debt, and was threatened with bankruptcy.
Wall St Journal and Bloomberg (17-Dec-2018) and Business Insider (12-Dec-2018) and Bloomberg (12-Dec-2018)

****
**** 1MDB corruption mastermind Jho Low remains hiding out in China
****


With 1MDB close to bankruptcy in 2016, prime minister Najib Razak
turned to Low Taek Jho, popularly known as Jho Low, an international
investor and bon vivant, who had been born of a wealthy family
in Malaysia, but had spent years embezzling and laundering billions of
dollars in America, Europe and Asia. Jho Low had advised in the
creation of 1MDB, but didn't hold a formal position in the fund.

Low was known since the 2000s in financial circles, but he began to
have star quality when he dated Miranda Kerr, an Australian supermodel
and former Victoria's Secret model. He wooed her by giving her a $1.3
million diamond necklace on Valentine's Day in 2014, and followed it
up with more jewelry obtained through money laundered through energy
deals and through 1MDB.

A few weeks later, at a party for Kerr's thirty-first birthday, Low
hired out a venue on Chelsea Piers in New York for a nineties-themed
party and flew in Salt-N-Pepa, Mark Morrison, and Vanilla Ice to
perform. Jamie Foxx was on hand to emcee, and Leonardo DiCaprio and
Swizz Beatz were among the hundred or so invitees.

Low had attended London's Harrow School, and had studied at Wharton's
business school, so it was natural that Najib Razak would turn to him
when 1MDB neared bankruptcy in 2016.

Low has been painted by U.S. prosecutors as a central figure in the
1MDB scandal. In December 2018, Malaysian prosecutors charged him with
receiving more than $1 billion from the state fund in 2009 and 2011,
adding to the eight counts of money laundering charges he was slapped
with in August.

He's currently an international fugitive, believed to be hiding out
under the protection of China. Through his public relations agency,
he issued a statement on Tuesday saying, "The article is a selection
of half-truths, mixed in with fiction, to create a misleading and
oversimplified narrative that has been peddled by a morally-bankrupt
Mahathir regime to advance its failing political cause," referring the
current prime minister Mahathir Mohamad. Business Insider (19-Sept-2018) and Bloomberg (12-Dec-2018) and Business Insider (2-Jan-2019)


****
**** WSJ: China used bribery, corruption and 'leverage on other nations' in Malaysia's 1MDB scandal
****


Malaysia's 1MDB scandal has been called the biggest financial scandal
in the history of the world. It involved corruption at the highest
levels of Malaysia's government, channeling billions of dollars
provided by China in 1MDB infrastructure projects into the private
accounts of Malaysia's prime minister Najib Razak.

Now a new report by the Wall Street Journal alleges that the scandal
also involved the highest levels of China's government, including
president Xi Jinping and prime minister Li Keqiang.

In 2016, Najib turned to Jho Low to negotiate the deal with the
Chinese. Low set up meetings between Chinese and Malaysian officials,
where the details could be worked out. According to documents
examined by the Wall Street Journal:
  • The Chinese offered to bail out the 1MDB that had been
    plundered by Najib.

  • At the same time, China offered to use its leverage on other
    nations, including the United States, to discourage investigations of
    the 1MDB scandals.

  • In return, Malaysia would commit to huge new infrastructure
    projects in Malaysia that would benefit China. Najib signed $34
    billion of rail, pipeline and other deals with Chinese state
    companies, to be funded by Chinese banks and built by Chinese workers.
    This is standard practice for Chinese Belt and Road Initiative (BRI)
    deals. China lends the money, and demands that the money be used to
    pay Chinese workers' salaries and to purchase parts and services from
    Chinese factories and businesses. So instead of benefiting the local
    factories and workers, the money goes back to China to benefit
    factories and people there. And then the country still has to repay
    the loan, which means that they're repaying the loan twice.

  • The bailout would be funded by charging substantially more for the
    infrastructure projects than was required by market prices. The
    excess cash would be used to fund the bailout of 1MDB.

  • China also offered to bug the homes and offices of Wall Street
    Journal reporters in Hong Kong who were investigating 1MDB, to learn
    who was leaking information to them. It's not known whether this was
    carried out.

  • Najib also had secret talks with China's leadership to let Chinese
    navy ships dock at two Malaysian ports. This would have been a
    significant concession to China, but it didn't come to pass.

China was clearly unsuccessful in discouraging investigations.
Malaysia has filed criminal charges against Goldman Sachs and several
employees. There are investigations in multiple countries, including
the US, United Kingdom, Australia, Thailand, Hong Kong, Singapore,
Luxembourg, Switzerland, and United Arab Emirates (UAE).

These investigations would have been blocked if Najib were still prime
minister. But Malaysia and the world were shocked last year when
Najib unexpectedly was not reelected. ( "31-May-18 World View -- Malaysia shocked when 92-year-old Mahathir Mohamad becomes prime minister"
)

China's embassy in Kuala Lumpur denies that it had anything to do with
the 1MDB scandal, saying that it adheres to a policy of
non-interference in the domestic affairs of other countries:

<QUOTE>"China never attaches political conditions on our
cooperation with other countries. We promote the ‘Belt and Road’
initiative under the principles of wide consultation, joint
contribution and shared benefits, with an aim to pursue shared
development and prosperity. We do not accept any groundless
accusations made against China."<END QUOTE>


This is laughable. China has already acquired or is about to acquire
ports and other assets in several countries
-- Sri Lanka, Democratic Republic of Congo (DRC), Ghana,
Kenya -- through its "debt trap diplomacy." Several other countries,
including Pakistan and the Maldives, are at risk. Malaysia is still
at risk, as well.

Furthermore, China lies about everything. China has repeatedly lied
about the South China Sea, claiming that there were no plans to
militarize it, and now the South China Sea is bristling with Chinese
military bases and weapons, and the Chinese are threatening anyone who
passes through, even though the United Nations Hague Tribunal has
declared that China's activities are illegal. The statement says, "We
do not accept any groundless accusations made against China," but
fortunately all these accusations are fully grounded. Channel News Asia and Malay Mail and South China Morning Post (Hong Kong) and Malay Mail and Malay Mail

Related Articles:



KEYS: Generational Dynamics, Malaysia, Najib Razak,
Low Taek Jho, Jho Low, Miranda Kerr, Goldman Sachs,
1Malaysia Development Berhad, 1MDB, Mahathir Mohamad,
Salt-N-Pepa, Mark Morrison, Vanilla Ice, Jamie Foxx, Leonardo DiCaprio,
China, debt trap diplomacy, Xi Jinping, Li Keqiang,
United Kingdom, Australia, Thailand, Hong Kong, Singapore,
Luxembourg, Switzerland, United Arab Emirates, UAE,
Sri Lanka, Democratic Republic of Congo, DRC, Ghana, Kenya,
South China Sea, United Nations Permanent Court of Arbitration, PCA

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John J. Xenakis
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9-Jan-19 World View -- WSJ: China used bribery, corruption and 'leverage on other nat - by John J. Xenakis - 01-09-2019, 12:08 AM
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