The Companies Switzerland Says Are Linked to Malaysia’s 1MDB Scandal

By TOM WRIGHT and BRADLEY HOPE
Wall Street Journal
Jan. 30, 2016

Swiss attorney general’s office is examining allegations of criminal activity from 2009 to 2013

The Swiss attorney general’s announcement that $4 billion may have been misappropriated from Malaysian state-owned companies opened a new front in the troubles facing 1Malaysia Development Bhd., or 1MDB, the state-investment fund set up by Prime Minister Najib Razak in 2009.

Switzerland’s top prosecutor on Friday named a number of firms in Malaysia, Saudi Arabia and Abu Dhabi in relation to the matter, but gave no details of their roles, if any.

The attorney general’s office said it is examining allegations of criminal activity from 2009 to 2013 relating to PetroSaudi International Ltd., a Saudi oil company; SRC International Sdn Bhd, a unit of Malaysia’s Finance Ministry; Malaysian companies Genting Group and Tanjong PLC; and a joint venture between 1MDB and an Abu Dhabi sovereign-wealth fund called the Abu Dhabi Malaysia Investment Company.

The investigation is one of a series of global probes into 1MDB. A Malaysian government investigation last year found that almost $700 million entered Mr. Najib’s alleged bank accounts via agencies, companies and banks linked to 1MDB ahead of a close election in 2013.

On Tuesday, Malaysian Attorney General Mohamed Apandi Ali said the largest chunk of money transferred to Mr. Najib’s account was a legal donation from Saudi Arabia’s royal family and cleared the prime minister of any wrongdoing.

But a Saudi official said the country’s finance and foreign ministries had no knowledge of the donation. The Swiss attorney general on Friday raised concerns that Mr. Apandi’s decision to clear Mr. Najib would hamper its own investigation.

In a statement Saturday, Mr. Apandi said he was ready to cooperate with the Swiss probe. He added that a number of Malaysian entities are still probing 1MDB, including the police and Malaysia’s auditor general.

PetroSaudi said in a statement that it wasn’t the subject of any investigation and hadn’t been accused of criminal conduct. The company denies any wrongdoing, it said.

Attempts Saturday to reach SRC International and Tanjong were unsuccessful. A spokeswoman for Genting declined to comment.

The office of Mr. Najib, who also heads the Finance Ministry, didn’t respond to requests for comment, but he has previously denied wrongdoing or taking money for personal gain. 1MDB on Saturday said it hasn’t been contacted by any foreign investigative agency and stands ready to cooperate with any investigations. It also has denied wrongdoing.

Here’s what we know so far about these companies and their alleged connection to the 1MDB scandal, based on a six-month examination by The Wall Street Journal.

PetroSaudi International

The 1MDB fund set up a joint venture in 2009 with PetroSaudi. An investigation by Malaysia’s auditor general last year found that $700 million of 1MDB cash meant for the joint venture was instead sent to a Seychelles-based firm called Good Star Ltd. Two 1MDB board members resigned over the matter, according to a copy of the auditor general’s draft report, which was viewed by the Journal. The company that received the money was set up by Jho Low, a young Malaysian businessman who helped set up 1MDB, according to a person familiar with the matter.

PetroSaudi has called its joint venture with 1MDB as profitable for the Malaysian company. 1MDB also said it made profit from the venture.

Singapore police last year told Malaysian authorities in a letter—a copy of which was reviewed by the Journal—about more than $500 million in transfers from the Swiss bank account of Good Star into a business bank account in Singapore controlled by Mr. Low. The Singapore account was held at a branch of Swiss bank BSI SA, the letter said. The transfers occurred between 2011 and 2013, it added. 1MDB also has acknowledged it holds an account at BSI in Singapore. BSI has declined to comment on the matter.

SRC International

This unit of Malaysia’s Finance Ministry allegedly sent about $14 million into Mr. Najib’s accounts in 2014 and early 2015 via a company that carries out corporate social-responsibility work for 1MDB, according to a Malaysian government investigation into the fund carried out last year.

Mr. Apandi, the attorney general, said this week that Mr. Najib wasn’t aware of, and had not approved, the transfer of money from SRC that went into his accounts.

At a news conference, Mr. Apandi held up documents from an investigation by Malaysia’s antigraft agency that appeared to show a further $10 million in transfers between SRC and Mr. Najib’s accounts that had not previously been made public. About $1 million of this cash was apparently spent via credit cards attached to the accounts, according to the documents Mr. Apandi held up.

SRC was a former unit of 1MDB. Its former head, Nik Faisal Ariff Kamil, was 1MDB’s head of investments. He also had power of attorney over Mr. Najib’s accounts, according to documents that were part of the earlier Malaysian government investigation. Attempts to reach Mr. Nik Faisal weren’t successful.

Genting Group and Tanjong

A Journal examination in June last year showed how 1MDB had paid what appeared to be an inflated price for a power plant owned by Genting, a conglomerate with interests in gambling and plantations. A unit of Genting then donated millions of dollars to a foundation chaired by Mr. Najib that was spent on schools and other projects that Mr. Najib was able to tout as he campaigned for elections in 2013.

A spokeswoman for Genting declined to comment on the allegations, and Mr. Najib declined to address them.

The 1MDB fund denied overpaying for the assets. It said its decisions were based on what was best for the business and not political considerations.

The 1MDB fund also paid what appeared to be an inflated price for power assets from Tanjong, which is controlled by Malaysian billionaire Ananda Krishnan.

The fund’s financial reports show it wrote down the value of the plants it bought from Genting and Tanjong only months after purchasing them.

Mr. Krishnan hasn’t commented on the asset purchases.

Abu Dhabi Malaysia Investment Co.

The 1MDB fund set up this joint venture with Aabar Investments PJS, an Abu Dhabi sovereign-wealth fund, to develop a new financial center for Kuala Lumpur. 1MDB raised $3 billion through a bond in 2013 to fund the venture. About half the money was put into offshore portfolio investments, according to 1MDB’s financial statements, and the development of the land made little progress. 1MDB is now in the process of selling off its land and power plants.

The Journal reported last year that 1MDB sent at least $850 million to an entity set up to appear that it was owned by Aabar, which is held by Abu Dhabi’s International Petroleum Investment Co., or IPIC. Investigators at IPIC and Aabar concluded that neither firm had ever received the money, which was sent to “Aabar Investments PJS Ltd.,” according to two people familiar with the matter. 1MDB, in a statement after the Journal article was published, said “The Wall Street Journal continues its campaign to malign 1MDB,” but didn’t address the allegations.

IPIC and Aabar haven’t made any statements about their relationship with 1MDB or the missing money. IPIC’s former managing director, Khadem Al Qubaisi, was dismissed in April by presidential decree. A reason wasn’t given.

The new management team of IPIC has been scrutinizing Mr. Al Qubaisi’s activity at the fund, according to the people familiar with the matter. In December last year, a London-based representative of Mr. Al Qubaisi said he declined to comment.

IPIC also controls Falcon Private Bank AG, a Swiss private lender. An anonymous British Virgin Islands-based company with an account at Falcon was the source for the bulk of the almost $700 million that was deposited into Mr. Najib’s accounts, according to the Malaysian government investigation carried out last year. Falcon hasn’t been accused of any wrongdoing and declined to comment.