1MDB affair a simple confidence trick

IFR 2129 16 April to 22 April 2016
5 min read
Jonathan Rogers

A FOOL AND his money are soon parted, as the saying goes. Just think of the scam emails from Nigeria, which involve a confidence trick for which only the most gullible moron would fall.

Perhaps you’ve had one of the emails yourself; I certainly have. It involves a person who claims to be of noble descent whose father – for example – has passed away leaving behind a bank account that contains a huge sum of money.

That sum can only be unlocked with your help and you can get a big chunk of it, if you hand over your bank account details and allow the miraculous transaction to go ahead. Hey presto and your bank account will soon be flush. Most people would not fall for such tosh, but a small number of naive individuals do so all the time, losing vast amounts of their cash in the process.

Something similar seems to have happened in Malaysia with the embattled state-owned investment company 1MDB, if the latter’s public relations spiel is to be believed. It seems that the senior executives of the company fell victim to a scam perpetrated in the Middle East that would make the average Nigerian email conman green with envy.

It wasn’t quite that they gave away the company’s bank account details and access codes to an unknown third party. No. They wired billions of dollars to a company that wasn’t all it seemed to be and that money is now lost.

THE SENIOR MANAGEMENT of 1MDB, we are led to understand from last week’s public statements, sent US$3.5bn around four years ago to a company they believed was Aabar Investments PJS, owned by International Petroleum Investment Co, Abu Dhabi’s sovereign wealth fund.

But the money didn’t get to that particular Aabar. Instead it went to an eponymous Aabar, in the form of Aabar Investments PJS Limited, a British Virgin Islands-registered company that had nothing to do with the Middle East state’s sovereign wealth fund. It was just that by some strange coincidence it just happened to have exactly the same name with a few letters added on at the end in the form of “Limited”. IPIC denied last week that its own Aabar had received any funds from 1MDB and disavowed any knowledge of the “other” Aabar.

What a mistake for 1MDB to make. The company directors who allowed this supposed multi-billion dollar mistake to happen must be dunderheads, cretins, morons, nincompoops, idiots – you can insert your own description here.

Never in the history of state-owned enterprises has such a massive cock-up occurred. Due diligence at 1MDB? If the story of the fraud is true then they wouldn’t know diligence if it whacked them on the back of the head. You might as well have entrusted the company’s financial management to the tea lady (no offence meant to tea ladies).

1MDB’s entire board of directors resigned after Malaysia’s Parliamentary Affairs Commission published its findings. Pray they never end up working as a teller at your local bank branch.

READERS OF THIS column will know that I have been writing about the goings on at 1MDB for quite a few years now. I might even have been one of the first to twig, with the help of my incredulous banker contacts, that all was not quite what it seemed at the fund, which was tasked with building up Malaysia’s wanting infrastructure but which has done nothing more than tear down the country’s credibility.

The office of the Swiss Attorney General last week stated it was widening its investigation into 1MDB, including two unidentified former public officials in Abu Dhabi, who are suspected of fraud, criminal mismanagement, forgery, misconduct in public office, money laundering and bribery.

Swiss investigators suspect that funds were diverted to these officials as well as to the production of a major Hollywood movie.

How unfortunate for the reputation of his office that Malaysian Prime Minister Najib Razak signed off on all of 1MDB’s transactions, as well as being the company’s founder and head of the Ministry of Finance, its sole shareholder.

At the very least, if Mr Najib served simply as a paper pusher for 1MDB who merely signed documents without understanding their import then he sits in the same silo as the company’s senior management. I certainly wouldn’t want a bloke like that running my country.

But then again this is a man who had money transferred into his personal bank account from third parties about whom he knew nothing, described by his PR team as political donations. It’s hardly ideal to have the man you entrust to run your country not bothering to query his bank statements. Then again, perhaps he’s one of the few people out there for whom the Nigerian scam was designed.

Jonathan Rogers