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Fund Lawyer Who Worked With Goldman Holds 1MDB Clues, U.S. Says

July 27, 2016, 9:39 PM

By Greg Farrell, Elffie Chew and Dakin Campbell, Bloomberg News

She was the general counsel for Malaysia’s 1MDB investment fund. She was also 1MDB’s liaison to Goldman Sachs Group Inc., the global bank that helped it raise $6 billion.

After one of the big sales led by Goldman Sachs, $5 million of the cash raised for 1MDB traveled through shell companies and ended up in her Swiss bank account, the U.S. said in complaints filed last week.

The U.S. government refers to the official only as “1MDB Officer 3.” According to people familiar with the matter, she is Jasmine Loo Ai Swan -- a Malaysian who studied law in the U.K. and worked for a Malaysian developer and an oil firm before joining 1MDB.

The U.S. doesn’t accuse Loo or anyone else of crimes in its complaints, which instead seek to seize assets the government says were “unlawfully misappropriated” from the fund. Loo hasn’t responded to requests for comment placed over several months in Malaysia and at an apartment she owns in New York’s Flatiron district.

While the amount is modest compared with others in the sweeping multiyear scheme, the alleged $5 million transfer is notable. The recipient was not only a lawyer and the fund’s point person with Goldman Sachs, but is also the only person at 1MDB whom the Justice Department singled out as having received a payment.

That money transfer, the U.S. government says, was one of dozens of illicit payments in a scheme controlled by a Malaysian man that ultimately drained as much as $3.5 billion from the fund, formally known as 1Malaysia Development Berhad.

Six-Figure Transfer

Unmentioned in the recent U.S. complaints is another transfer. About a year after Jasmine Loo left the fund, people familiar with the matter said in interviews, she sent a six-figure sum to an account of Goldman Sachs’s Tim Leissner, who was the lead banker on the 1MDB bond sales.

Leissner, who also isn’t accused of any crimes, resigned from Goldman after he was placed on administrative leave in January. Neither he nor his attorney have commented since then. The transfer from Loo was an investment in a start-up company that Leissner was backing with her, one of the people familiar with the matter has said.

Goldman Sachs isn’t accused of any wrongdoing. “We helped raise money for a sovereign wealth fund that was designed to invest in Malaysia,” Michael DuVally, a Goldman spokesman, said. “We had no visibility into whether some of those funds may have been subsequently diverted to other purposes.”

1MDB has said that it hasn’t benefited from transactions described by the U.S. and that it is cooperating with investigators. Malaysia’s government has said that it has no evidence that money was misappropriated and that it will cooperate with lawful investigations of its companies or citizens.

‘Personal Gratification’

The interviews and U.S. court filings flesh out details of the working relationships between Leissner, Loo and others at the heart of the 1MDB affair -- those who took a direct hand in opening taps that put billions of dollars into 1MDB accounts. Where the money went from there is the subject of probes into alleged corruption and money laundering by officials in places including Singapore, Switzerland and Luxembourg.

Both Leissner and Loo, according to the documents and people, intersect at several points with Taek Jho Low, the man whom U.S. prosecutors characterize as the scheme’s controller. Known as Jho Low, the Malaysian directed funds from 1MDB to connected individuals and for his and his associates’ “personal gratification” -- buying art and real estate and paying for lavish parties and gambling, the U.S. says.

Low didn’t return a call at his Hong Kong-based investment fund Jynwel Capital Ltd. or reply to an e-mail seeking comment. He has previously described his role with 1MDB as informal consulting work that didn’t break any laws.

Intersecting Paths

Clues about Loo’s intersections with Leissner and Low emerge from the court documents and corporate filings. Now 43 years old, Loo began working for a Malaysian law firm in the late 1990s. While working there, Jho Low persuaded her to join UBG Bhd, a holding company for construction and oil and gas exploration, in 2009, according to a person familiar with the situation.

Loo worked as UBG’s legal and compliance head, according to a UBG annual report.

While at UBG, Loo also held board posts at two other Malaysian firms. All three had investment ties to a company that Jho Low founded and later used, according to the U.S., to siphon money from 1MDB.

Timeline: Malaysia’s Spiraling 1MDB State Fund Controversy

Ties between Jasmine Loo and Jho Low continued at 1MDB, which was created in 2009 to fund national development. Low helped set up the fund but had no formal position there, according to the U.S. Loo joined in 2011, the person familiar with the matter said.

By 2012, Loo was the fund’s chief counsel. That March, the fund named Goldman Sachs as the “sole bookrunner and arranger” for a bond deal known within the bank as Project Magnolia. According to the U.S., Goldman’s engagement letter was signed by the bank’s managing director in Singapore -- a banker that people familiar with the matter identified as Leissner.

Jho Low’s Role

Inside Goldman, according to the U.S., there was some confusion about Jho Low’s role in the bond sale. In one internal e-mail cited by the government, Low was characterized as “the 1MDB operator or intermediary in Malaysia.” Leissner offered a mixed assessment, according to the U.S.: The Goldman managing director e-mailed that he wasn’t aware of Jho Low’s involvement in the deal but added that the Malaysian had been at a meeting with Abu Dhabi investors who guaranteed the bond, according to the U.S. filings.

The sale raised $1.56 billion for 1MDB. More than half was earmarked to buy a power-production company. According to the offering circular presented by Goldman, the remaining $744 million was designated for “general corporate purposes (which may include future acquisitions).”

It didn’t turn out that way. About $577 million was siphoned off to a shell company controlled by an ally of Jho Low, prosecutors say.

Within months, 1MDB returned to Goldman for a second fundraiser, dubbed Project Maximus. Loo again was Goldman’s main point of contact. As with Project Magnolia, about half of the money from Maximus -- or about $790 million -- went to the shell company controlled by Low’s associate, the U.S. says.

It was after that sale, according to the U.S., that the Swiss account of 1MDB’s lawyer received the $5 million infusion.

Project Catalyze

The biggest misappropriation from 1MDB, in the eyes of the U.S., was yet to come. Project Catalyze was the third and largest bond deal, a $2.7 billion sale intended to fund 1MDB’s share of a joint venture called the Abu Dhabi Malaysia Investment Company.

The March 2013 deal appeared to place speed over substance. Goldman told investors that the joint venture “has yet to adopt a formal investment plan or establish investment criteria,” according to the U.S. In a presentation for 1MDB and its partners, Goldman explained that the fund was seeking “maintenance of confidentiality during execution” and “speed of execution.”

Some $1.26 billion flowed into a new shell company that was set up by the Jho Low associate, the U.S. said. In a departure from the previous deals, the company added a new individual with authority to sign for transactions. It was, according to the government, 1MDB Officer 3, or Jasmine Loo.

While the U.S. didn’t say who signed off on the transfers, within days money started flowing out of the new shell company. That included $681 million that went to an account controlled by a person the U.S. called “Malaysian Official 1.”

The U.S. description of the Malaysian official matches that of Najib Razak, the Malaysian prime minister. The U.S. doesn’t accuse the official of doing anything wrong.

Najib has consistently denied wrongdoing, and he has been cleared by a Malaysian investigation. Najib has said he received $681 million from the Saudi royal family and later returned much of it, an explanation supported by the Saudi royals.

The U.S. offers a different narrative: About $620 million of the money, it says, went back to the shell account it had come from, which is unrelated to the Saudi royals.

Above Average

Goldman Sachs, all told, made about $590 million in fees and commissions from the three 1MDB bond sales -- as much as 11 percent of the deal value in one case, well above the industry average. Goldman has said the fees reflected market conditions at the time and its underwriting risks.

Loo is no longer at 1MDB, though the details surrounding her exit aren’t clear. By 2014, when 1MDB returned to fundraising, she wasn’t involved, according to one person familiar with the matter. In 2015, officials at Bank Negara, Malaysia’s central bank, posted a notice on its website saying that Loo and another former 1MDB official were wanted for questioning.

Roughly a year after Loo left the fund, another person said, she sent hundreds of thousands of dollars to a Leissner account.

Goldman, which conducted an internal review into Leissner’s activities, wasn’t aware of the payment, another person said at the time.

Leissner was placed on administrative leave in January and left the bank shortly afterward. In a filing about his dismissal with the Financial Industry Regulatory Authority, the bank said Leissner had written a reference letter that contained “inaccurate and unauthorized statements.”

The letter, people familiar with the matter have said, was on company letterhead and addressed to a bank in London. It was a recommendation, they said, for Jho Low.

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