BNR – A case related to the 1MDB scandal, with remarkable ramifications for the UAE’s reputation, goes to trial in Switzerland on 19 June.
Sheikh Yousef Otaiba, the Emirate’s current Ambassador to Washington, is named in court filings for the prosecution of a Lombard Odier bank manager as collecting $30 million through an offshore Jho Low firm, Pacific Harbor Global Growth Fund.
He has long been mentioned as a Jho Low business associate and potential beneficiary of bribes from the 1MDB fraudster. Otaiba’s business partner and key contact with Jho Low, Shaher Awartani, acquired $20 million as part of the same fake agreement.
Both Emirati businessmen created accounts at the bank at the same time, shortly prior to the money’s arrival in 2013.
This occurred soon after Najib secured $3 billion in Goldman Sachs bonds for 1MDB as part of an alleged strategic relationship with Abu Dhabi’s Aabar sovereign wealth fund, the source of the funds.
Tim Leissner testified in court that Otaiba was one of the actors named by Jho Low as being entitled to payment for his high-level assistance in the bond deal and two previous bonds raised in the same manner. The total amount raised from 2012 to 2013 was $6.5 billion.
Insufficient Documentation and Red Flags
The case is being brought against the bank’s compliance team. According to documents, the officers who investigated the purchase instantly recognised the traditional Red Flags linked to all of Jho Low’s showy scams using Political Exposed Persons (PEPs). Otaiba was clearly one of those PEPs.
The obvious issue that drew their attention was the insufficient and unprofessional paperwork supplied to explain the massive payouts. Those payments were allegedly for services provided to Pacific Habor. The funds were blocked for several weeks as the Lombard Odier team worked to authenticate the enormous payments.
One piece of evidence they gleaned from questioning their clients was that the funds came from work executed for 1MDB. However, when the bank requested that it be put in contact with specific officials listed on the 1MDB website for reassurance, it was rejected.
Another flaw in the documentation was the absence of identification for the beneficial ownership of the off-shore Pacific Habor firm. Jho’s ownership of the Pacific Habor firm has finally been proven. The bank received an invoice with a sloppy signature but no name attached.
Lombar Odier’s ‘due diligence’ on the transaction included scanning the internet for information regarding 1MDB and its bond problems. It did so in August 2013, and officials discussed a disturbing report published by Sarawak Report only a month prior. This was the first of several exposes on 1MDB that this site released. The exposes depended on a leaked copy of Goldman Sachs’ original Magnolia bond offer document from 2012.
Sarawak Report put Goldman Sachs’ excessive amount of fees and interest into question. It encouraged US regulators to look into America’s most powerful bank.
Risks of Involvement with 1MDB
The Swiss bankers anxiously quoted the menacing sentences from SR’s ending paragraphs in the article in emails to one another. The piece sent a stark warning to professionals considering future involvement with 1MDB.
These were writings they passed around while they debated what to do
“Under its Foreign Corrupt Practices Act the United States has prosecuted a number of corporations and banks who have failed to perform proper due diligence or have facilitated corrupt acts.
In Switzerland the authorities are already investigating the activities on UBS under parallel laws. And the German authorities have already looked once at Deutsche Bank’s involvement with Kenanga Holdings, the investment company which is co-owned by the Taib family’s CMS.
We suggest these authorities start checking through this series of Labuan deals, which have put such a huge and mysterious debt burden on the Malaysian people. The taxpayer has a right to transparency. [Sarawak Report July 2013]
The cautionary statements from this website have reinforced the message to the bankers about the danger and harm involved.
Nonetheless, they opted to evaluate those dangers against the rewards of continuing to interact with the rich fraudsters from 1MDB and their Abu Dhabi associates, according to court records.
They reassured one another that the Sarawak Report was “politically biased” and “lacked credibility.” It is unclear on what such claims were based. However, strict fact verification is meant to be the responsibility of the compliance department.
In 2013, there was no proof to back up such claims, except from allegations of biased parties that Sarawak Report had already properly exposed for corruption. FBC Media and their client Taib Mahmud are two of the biased parties.
Diplomatic Immunity and Unaddressed Issues
The Swiss bankers from Lombard Odier rejected the facts supplied by Sarawak Report, comforted by absurd justifications.
They went forward with the agreement, thus, guaranteeing their own doom. Because of greed and incompetence, one top officer has now been charged with money laundering by the bank.
In the meantime, the Gulf high rollers’ teflon characteristics in this story have left them relatively immune to the repercussions of the scandal until now. The role of Sheikh Otaiba has been established. There has been talk that his $50 million Malibu property is another prize from Malaysia’s multibillion-dollar crime.
Otaiba has simply avoided everything. This is due to his diplomatic immunity and Ambassador to Washington position.
Abu Dhabi has failed to address the humiliating problem that they have overlooked. The same lack of understanding can be seen in the purchase of Sheikh Mansour’s luxury yacht with the same funds. The sums used by Sheikh Mansour to acquire Manchester City and its many star players are still a point of dispute. Certainly, the fate of much of Malaysia’s lost 1MDB funds remains unknown.