ABU DHABI/KUALA LUMPUR | BY STANLEY CARVALHO AND PRAVEEN MENON
Reuters
April 11, 2016

The mystery over who controlled a British Virgin Islands-registered company that received $3.5 billion from Malaysia’s scandal-tainted state fund 1MDB deepened on Monday when a company in the Middle East with an almost identical name said the BVI firm did not belong to it.

Abu Dhabi’s sovereign wealth fund, International Petroleum Investment Co (IPIC), and its subsidiary Aabar Investments PJS said in a joint statement the BVI firm with an almost identical name, Aabar Investments PJS Ltd, “was not an entity within either corporate group.”

They had neither received any payments from the BVI company, which was wound up last June, nor assumed any liabilities on its behalf, the statement said.

A Malaysian parliamentary committee investigating 1MDB said in a report released on Thursday that the Malaysian sovereign fund sent a total of $3.5 billion to “Aabar BVI”.

What happened to the money after it went to the British Virgin Islands could not be determined, the report said.

The 1MDB fund is solely owned by the Ministry of Finance. Malaysian Prime Minister Najib Razak, who is also finance minister, was authorized to sign off on the fund’s major transactions, according to the parliamentary report. Najib has consistently denied any wrongdoing.

The 1MDB transfers to “Aabar BVI” included about $1.4 billion from a privately placed bond that Goldman Sachs (GS.N) raised in 2012. The 1MDB fund also made payments of $855 million, $993 million and $295 million as security deposits and other guarantees for the bond to the BVI firm, the report said.

In response to IPIC’s statement, 1MDB said it was surprised that neither IPIC nor Aabar had any knowledge of payments 1MDB made to Aabar BVI.

The IMDB fund says its records show documentary evidence of the ownership of Aabar BVI and of each payment made. The statement did not say what that ownership was.

It added that legal agreements were negotiated with Khadem Al Qubaisi in his capacity as managing director of IPIC and chairman of Aabar or with Mohamed Badawy Al Husseiny, who was CEO of Aabar.

The United Arab Emirates’ central bank has ordered a freeze on the assets of Khadem and Mohamed Badawy, banking sources told Reuters last week. The reason for the freeze was unclear.

CORRUPTION PROBE

Investigators in at least five nations, in addition to Malaysia, are scrutinizing various transactions connected with 1MDB in a wide-ranging money-laundering, fraud and corruption probe.

The U.S. Justice Department has subpoenaed former Goldman Sachs banker Tim Leissner in its probe linked to 1MDB. Leissner helped 1MDB arrange two bonds in May and October 2012, valued at $1.75 billion each, which are also the focus of an inquiry by Luxembourg prosecutors.

Goldman raised a total of $6.5 billion for 1MDB between 2012 and 2013. Goldman has declined comment. Leissner, who could not be reached for comment, has not been charged with any offense.

The Malaysian parliamentary report said 1MDB’s senior management withheld crucial information from its executive board and made transactions without its knowledge or approval, resulting in debts amounting to about $11 billion. The 1MDB board collectively offered to resign following the report.

Najib has been fending off allegations he was a beneficiary of 1MDB’s funds after about $681 million was deposited into his personal bank account just before a general election in 2013.

Attorney-General Mohamed Apandi Ali said in January the transfer was a gift from Saudi Arabia’s royal family and that most of it was returned.

The 1MDB fund has denied any of its funds went to the prime minister. The parliamentary report did not name Najib or link any transaction from 1MDB to his private bank accounts.

Najib said the report showed the opposition’s allegations against him were false, but that “action will be taken if any evidence of wrongdoing is found”.

Opposition leader Tony Pua, who was part of the parliamentary probe, said “there was no way” the attorney general or the parliamentary inquiry could clear the prime minister of the allegations since billions of dollars that 1MDB sent overseas cannot be traced and investigations into them continue abroad.

(Additional reporting by Rozanna Latiff in Kuala Lumpur. Editing by Bill Tarrant.)