Ben Butler
The Australian
October 24, 2015

Sitting on the canals behind the glitzy towers that line Broadbeach, on Queensland’s Gold Coast, the low-rise Icon Corporate Park doesn’t look much like the kind of place you’d find a funds management company looking after billions of dollars caught up in a financial scandal that is rocking Malaysia.

But this modest address, at a modern low-rise located at 2 Miami Key, has emerged as host to Australian key players, some with colourful histories, caught up in the controversy engulfing Malaysia’s debt-ridden sovereign wealth fund, 1MDB.

In Malaysia, the scandal involving hundreds of millions of dollars allegedly paid into the bank account of the country’s Prime Minister, Najib Razak, has left behind a trail of arrests, accusations and alleged murder.

In August, police arrested three senior officials at the ­Malaysian Anti Corruption Commission, which has been investigating 1MDB, over alleged leaks to London-based website Sarawak Report.

The controversy has also touched Australia’s ANZ Bank: it owns a quarter of Malaysia’s AmBank, which loaned 2 billion ringgit ($660 million) to 1MDB and where Mr Najib kept the account in question.

AmBank’s founder, Hussain Ahmad Najadi, was shot dead in a Kuala Lumpur street in 2013. Before his death he hadn’t been involved with AmBank for years, but his family insists the murder is linked to his discovery of corruption at the bank. Police say he hadn’t made a report about the alleged graft before he was shot and the case has been solved, with a tow-truck driver sentenced to death by the High Court last year. ANZ, thousands of kilometres away in Melbourne, is more than just a passive shareholder in AmBank — incoming CEO Shayne Elliott, who takes up his post in January, was until last week one of three representatives on its board. Several ANZ executives also occupy key roles within the Malaysian bank.

Mr Elliott quit the Malaysian bank board earlier this month, citing the increased workload when he takes over from Mike Smith as head of ANZ in the new year.

While Mr Najib has denied any wrongdoing, the 1MDB scandal has sparked investigations in ­Malaysia, Switzerland and the US. It is believed corporate watchdog the Australian Securities & Investments Commission is aware of media coverage linking the Miami Key offices and 1MDB. But neither it or federal police are investigating whether there is an Australian connection to the scandal.

But in December last year ASIC launched a full-scale probe of an array of other goings-on at one of the companies doing business at 2 Miami Key. Avestra Asset Management, including alleged insider trading connected to a takeover bid for Harvest Court Industries, a company where Mr Najib’s son once sat on the board.

A 200-page affidavit sworn by senior ASIC investigator Glenn Childs, filed in the Federal Court last month and obtained by The Weekend Australian, reveals a complex web of transactions involving Avestra and other companies connected to 2 Miami Key.

The probe follows ASIC’s successful prosecution of Avestra in December for breaching takeover law by failing to tell the ASX it had acquired more than half of listed AG Financial — yet another company giving its address as 2 Miami Key. Avestra was fined $45,000. AG Financial owned AG Stockbroking, which despite going into administration last year still faces as many as a dozen Financial Ombudsman Service claims from customers, some dating back to when company was called Freeman Fox and controlled by “wealth educator” Peter Spann. Another company giving Miami Key as its address is Bridge Global Securities. It’s a subsidiary of Bridge Global Capital Management, which backdoor-listed on the ASX in June following a tussle with ASIC.

Reports in Singapore and Malaysia allege a Cayman Islands entity called Bridge Global Absolute Return SPC Fund (BGARF), which is linked to Bridge Global and Avestra, was used to cover up a $US2.23bn hole in 1MDB.

The money was supposed to be the capital plus profit from 1MDB’s joint venture with a Middle Eastern company called Petrosaudi Holdings.

Under the 2009 deal, 1MBD tipped in $US1bn in cash while Petrosaudi contributed assets in Turkmenistan and Argentina, ­valued at $US2.7bn. It is alleged about $US970m eventually flowed to a company controlled by Najib associate Jho Low.

While it’s not clear where the money came from, the Wall Street Journal and other outlets have ­reported some $US700m also ended up in Mr Najib’s account at AmBank, most of it coming from the account of a BVI company at Abu Dhabi-owned Falcon Bank.

Malaysian reports allege that in 2012 1MDB converted its investment in the joint venture into a half share in a Petrosaudi company, Petrosaudi Oil Services.

This was then sold to a company called Bridge Partners International, which despite its similar name doesn’t appear in any documentation issued by the Australian Bridge Global group.

Bridge Partners didn’t pay in cash but in promissory notes — IOUs — which 1MDB then invested in Bridge Global Absolute ­Return. According to Bridge Global’s prospectus, Bridge Global Absolute Return is managed by Hanhong, a Hong Kong securities company in which it planned to buy a half stake.

Bridge Global Absolute Return owns almost 10 per cent of Bridge Global, making it the company’s second-biggest shareholder behind another mysterious offshore entity, Merrill Capital, which owns 10.2 per cent.

Despite its name, Merrill Capital appears not to be linked to Merrill Lynch, according to Mr Childs’ affidavit. It is instead a UAE company associated with Mr Goh that owns some 8.5 per cent of Avestra.

To cover the Petrosaudi hole, it’s alleged that in 2012 1MDB signed a deal with Abu Dhabi’s International Petroleum Investment Corporation under which IPIC guaranteed $US3.5bn of bonds issued by 1MDB. In return, IPIC got an option over 50 per cent of 1MDB’s power assets in the event they listed on an exchange.

To unwind this deal, 1MDB paid out $US2.22bn between May and November last year. It’s alleged this money was then passed to Bridge Global Absolute Return, enabling 1MDB to redeem its ­investment in cash and covering the hole.

On October 13, Bridge Global told the ASX it had abandoned plans to buy out the manager Hanhong after “several key Hanhong personnel departed jeopardising the ongoing future of the business”. It also said it was aware of “unconfirmed offshore press reports as to Avestra’s management of funds from” 1MDB.

Bridge Global admitted key Avestra executive Paul Rowles, who’s a target of ASIC’s investigation, was involved in the management of some of its “proprietary trading and investments, and was a key part of the company’s capital raising activities”.

Until last month, the two ­companies also had a director in common, Jason Dixon. He quit Bridge Global on September 16 “to pursue his own business interests” and was replaced by Nathan ­Carbone, formerly an executive with the CBA in Hong Kong.

Bridge Global said it had not managed any Avestra funds since April 2013 and insisted Mr Rowles had “resigned from all aspects of the day to day business of the ­company”.

It said it “is not managing any funds on behalf of Avestra or 1MDB, nor is it aware that any shareholder funds invested in (Bridge Global) are associated with any funds from 1MDB”.

Bridge Global chairman Simon Lill told The Weekend Australian he “can’t rule out” an association between Bridge Global Absolute Return and 1MDB.

Bridge Global Absolute Return is “not a company I or the board of Bridge Global, ASX-listed, is ­responsible for the operations of,” he said. Mr Lill said he also did not know who was behind Hanhong’s owner, Bahamas-based M&A Ventures. Mr Lill said he was “not on the day-to-day operations”.

The Weekend Australian approached Bridge Global’s executive director, Neil Sheather. He referred inquiries to Mr Lill.

Avestra’s responsible managers, Paul Rowles and Clayton Dempsey could not be reached.