Billion Dollar Whale: Details of the world’s greatest financial scandal

Ross Greenwood speaks to  Tom Wright, Asia Economics Editor at the Wall Street Journal and co-author of Billion Dollar Whale, about his new book  on one of the world’s greatest scandals comes out of Malaysia, and how it fooled Wall Street, Hollywood and the world.

Introduction: Billion Dollar Whale: Details of the world’s greatest financial scandal

Lee Lin Chin: Hello again Sydney, I’m Lee Lin Chin. Remember the train line between Epping and Chatswood is now closed so it can be upgraded for the Sydney Metro Northwest. In the meantime, there’s Station Link, a high frequency bus service that takes you from station to station on seven different routes. I know it’s a big change, but there’s light at the end of the tunnel. Plan your trip. Visit transportnsw.info.

Ross Greenwood: Great to have your company here on Money News right around Australia. For people who are regular listeners, you will know that over a very long period of time, we’ve told you about one of the great scandals of the world in terms of financial rip offs. This has come out of Malaysia. Of course, the former Prime Minister Najib Razak is right now under arrest facing charges for his part in a theft that runs into billions of dollars.

Consider Australia’s sovereign wealth fund, our Future Fund there future fund. Malaysia had set up one of those but what had happened over a period of time as the allegations now say, that Najib, parts of his family and associates stole more than $1 billion from the Malaysian wealth fund. How they did that, it’s not like a scheme where they were using some money to pay for other money. This was out and out theft is the allegation.

It’s interesting to note also that the Malaysian Prime Minister Mahathir Mohamad just in the last day, has basically expressed disappointment about the former Prime Minister Najib Razak. This is a big thing for Mahathir to do. He said, his father, who also was a significant politician, he held him in high regard. The issue that comes out of this is that Najib Razak was clearly a very greedy person, perhaps unlike his father, and indeed this ran right through his family.

One person who was instrumental in all of this is the subject of a new book. This particular bloke is a fellow called Jho Low. For Australians, you might remember for a period of time that Miranda Kerr, the model, when she broke up with Orlando Bloom for a period of time, apart from going up with James Packer, went out with an Asian fellow. That fellow was called Jho Low. Jho Low was mixed up in all of this right in the middle of it. He’s the subject of a book, which is called Billion Dollar Whale, has been written by to Wall Street Journal correspondents, Tom Wright and Bradley Hope. Tom Wright’s with me there. Many thanks for your time, Tom.

Interview with: Tom Wright, Asia Economics Editor, Wall Street Journal 

Tom Wright: Hello. It’s great to be here.

Ross Greenwood: This is subtitled, The Man Who Fooled Wall Street, Hollywood and the World. Why did he fool Wall Street, Hollywood in the world?

Tom Wright: Well, this guy was one of the most amazing con artists the world has ever seen. He came out of Wharton aged 27, and he convinced the Prime Minister of Malaysia to set up a sovereign wealth fund and let him run it from behind the scenes. This is an incredible situation. It’s as if your– you said it’s called the Future Fund here in Australia?

Ross Greenwood: Yes.

Tom Wright: It’s as if that was run by somebody with no business experience. The reason that Najib Razak let him do that was because Najib Razak needed a pot of political funding. He was facing elections and as you said, his father had been this politician, and he wanted to stay in power. Jho Low provided him with political financing from this fund. Now, how we fooled, let’s take them one by one, right, like how he fooled Wall Street. This wasn’t a typical–

Ross Greenwood: This is Goldman Sachs we’re talking about. We’re not talking about any Wall Street firm. We’re talking of the blue of the blue bloods in Wall Street.

Tom Wright: The most powerful. It wasn’t a typical sovereign wealth fund. It didn’t have oil wealth. It went out onto the public markets to raise money, and it did so with the help of Goldman Sachs. It was very easy to raise money. This is after the global financial crisis, global interest rates are very low, international investors are looking for yield. Jho was not running the fund by the way, he’s in the background. He has his associates who is the CEO of 1MDB was name of the fund. With Goldman’s help, they raised $6.5 billion on international markets. Then Jho Low steals the money. They just send it into a bunch of offshore accounts.

Ross Greenwood: This is the key. They went into the Middle East and basically parked the money in particular in places like Abu Dhabi and places such as these?

Tom Wright: They partner with other sovereign wealth funds in the Middle East, in Abu Dhabi and with a Saudi Prince’s son who owns this oil company. Because they have the cover of Najib Razak in Malaysia and in these sovereign wealth funds in the Middle East, they are able to hoodwink. Well, neither hoodwink or there’s willful ignorance amongst all the financial players in this, which are Goldman Sachs, which helps raise the money, Ernst and Young, KPMG, Deloitte too, sure the auditors for 1MDB, has three auditors they keep leaving, the Swiss private banks that were involved in moving the money.

The whole global financial system and they enabled this fraud. The question now that the Department of Justice in America is looking at, is was this willful ignorance? Were parts of Goldman Sachs more aware of it? There was a partner, a former partner called Tim Leissner who was close to Jho Low, what did he know? Was he party to the fraud or was he just careless? That’s what they’re looking at.

Ross Greenwood: When you’ve got a young man such as Jho Low, who suddenly has got access to tens of millions of dollars just unfettered, he then decides not to go low key as you point out, he goes the other way. He actually decides to flaunt the wealth. He does this in the most public ways, say for example, funding The Wolf of Wall Street movie starring Leonardo DiCaprio, and also, Margot Robbie. He finances the whole thing through these ill-gotten gains. Just explain how all these people came into his orbit.

Tom Wright: We call this book Billion Dollar Whale because a whale is a big spender in a nightclub or a casino and this guy was the biggest whale that anyone had ever encountered. He almost single handedly props up this nightclub Empire called the Strategic Group, which has this big marquee nightclub in New York and LAVO in Las Vegas, and if your listeners have been to these places.

We have the scene in the book where he invites Leonardo DiCaprio to this this hotel suite in Vegas with 22 playboy playmates. This is part of his attempt to get close to DiCaprio. He says, “Look,” he tells him, “I’ve got $400 million in film financing.” This is money that he’d taken from this fund. “We’re going to set up a film company and we’re going to bankroll all your projects.” They go on to make The Wolf of Wall Street.

Similarly, he gets to know Miranda Kerr at a time when she’s interested in IPO-ing her KORA organic skincare line. There’s a great skill about Jho Low as he works out what people are interested in and how his money can help them get that.

Ross Greenwood: Paris Hilton is another one, Busta Rhymes is one that gets really close to him. This is the rap artist and producer. The fact is we’re talking yachts in Monaco, we’re talking as you say, nightclubs in New York, we’re talking the most lavish lifestyle people can imagine, champagne shells all over the place.

Tom Wright: Yes, and he’s paying people just to turn up and MC. You mentioned Jamie Foxx turns up and gets big money just to spend a lunchtime MC-ing something. Paris Hilton gets paid. At one point, he gives her $250,000 in gambling chips on her birthday. Then there are lesser people. There was small models that no one’s ever heard of, unknown models who would get an $80,000 watch here, $100,000 gambling chips there. He changed people’s lives by just brushing up against them basically.

Ross Greenwood: Let’s go back to the film The Wolf of Wall Street because on this program several times we’ve spoken to Jordan Belfort about the film but about his life and what he’s done and the book as well. Jordan Belfort’s an interesting guy because Jordan Belfort who is the subject of The Wolf of Wall Street, he is The Wolf of Wall Street, well, he basically in his life has been a crock. He’s been a conman himself. He knows a conman when he seen one.

Tom Wright: There’s this great scene in the book in a chapter called Belfort Smells a Scam. Where they’re at Cannes, at the annual film festival and Red Granite puts on this big party.

Ross Greenwood: Red granite is?

Tom Wright: It’s the film company that Jho Low sets up. It’s actually run by Najib Razak’s stepson but Jho Low’s really behind it, funded by the 1MDB Fund. They put on this huge party to announce that they’ve won the rights to make The Wolf of Wall Street with Leonardo DiCaprio. It’s this big party, Kanye West is on the stage, he’s announcing Red Granite will change the way films are made forever. Jordan Belfort’s in the audience and he says, can I swear on air?

Ross Greenwood: Probably not, just–

Tom Wright: Well, he says it’s a ding scam. Jordan Belfort says, “No one would spend their own money like this. How is it that this film company is doing this?”

Ross Greenwood: Jordan Belfort, the conman from The Wolf of Wall Street himself looks at this and says, “There’s something not right about this.” He refuses to have anything to do with Jho Low as a result of this.

Tom Wright: Well, so he says. He was paid I think about a million dollars by Red Granite the film company for the rights to his memoir The Wolf of Wall Street. He was involved somewhat, but he made the point that he didn’t party with these guys and he didn’t receive money to go party with them as others did.

Ross Greenwood: How does this all start to unfold? How does it come undone ultimately?

Tom Wright: Well, there were three heists, one with the Saudi prince and then two involving the Goldman money and then a UAE sovereign wealth fund. The Saudi prince’s company, there was a disgruntled employee who stole or took the email servers of that company and he eventually gave them to an investigative journalists called Clare Rewcastle Brown.

Ross Greenwood: Years after he stole them though?

Tom Wright: Correct, and also The Edge, which is a Malaysian newspaper. In February of 2015, they reported on these emails, which basically showed how this first heist had worked, which was moving the money out of the sovereign wealth fund and funneling it around. Then, we got involved reporting after that, and we broke open the UAE parts of the story. We’ve been working on it for three years to try to read piece together-

– how did Jho Low rise up, and how did he get the trust of the Malaysian Prime Minister, which is another long involved story?

Ross Greenwood: Now we’ve got a situation where Najib Razak, who is desperate to hang on to power, because if he hangs on the power it means he won’t face charges all that type of thing, loses power. The old Prime Minister from decades ago Mahathir Mohamad comes back in and the first thing that happens is Najib Razak is charged. What happens to Jho Low though because Jho Low disappears?

Tom Wright: In 2015, when these first stories started to come out, Najib was still in power. He told Jho Low get out of town because there was a lot of focus on him in Malaysia, and Najib shuts down investigations. Meanwhile, investigations startup in America, the Department of Justice, in Singapore where some bankers have gone to jail over this, and in Switzerland. Jho Low moves to China where he– it’s almost unbelievable the story. In China, he persuades state owned companies to do these investment deals in Malaysia when Najib’s still in power.

According to the current Malaysian government, these are the padded contracts and they steal even more money. We believe he knows where the bodies are buried and that’s why the current Chinese government is giving him some asylum even though the new Malaysian government has charged him in absentia.

Ross Greenwood: Also, it’s fair to say that the Malaysian Prime Minister Mahathir is desperate to get him back out of China, has called upon China if they know where he is to hand it back over to authorities.

Tom Wright: Yes, we don’t for sure, but we believe that he made that request in a meeting with Xi Jinping, president of China. It’s an incredibly high priority for the Malaysians to get Jho Low back to face justice.

Ross Greenwood: Can I just say that anybody who is just looking for a sensational read, Billion Dollar Whale. Tom Wright and Bradley Hope have written this inside story of Jho Low and the one 1MDB scandal, which of course, as I say, we’ve covered on this program several times in the past. It is really a cracking read full of great names, names that you will know but also just an amazing story, which makes you raise your eyebrows as to just how they got away with it.

Tom Wright, as I say, correspondent with The Wall Street Journal in Southeast Asia. In fact, coincidentally, one of the very first people who ended up in Abbottabad after the Navy Seals killed Osama bin Laden. That’s a totally different story, we won’t go there now. Tom, I appreciate your time.

Tom Wright: Great to be here.

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Image source: 2GB

 

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