Flamboyant Malaysian Jho Low’s real-estate deals in shell companies connected to Prime Minister Najib called into question

http://www.nytimes.com/2015/02/09/nyregion/jho-low-young-malaysian-has-an-appetite-for-new-york.html

Posted by Valerie NG, Year 3 undergrad at the School of Accountancy, Singapore Management University

Flamboyant Malaysian’s real-estate deals called into question

NEW YORK — In early 2010, a young Malaysian financier named Mr Jho Low began making some very expensive real-estate deals in the United States.

FEBRUARY 10

NEW YORK — In early 2010, a young Malaysian financier named Mr Jho Low began making some very expensive real-estate deals in the United States. First, a shell company connected to Mr Low, famous back home for partying with the likes of American socialite Paris Hilton, bought a US$24 million (S$32.5 million) apartment in the Park Laurel condominiums in Manhattan. Three years later, that shell company sold the condo to another shell company, this one controlled by someone even more prominent in Malaysia: The film-producing stepson of the Prime Minister.A similar transaction was playing out on the other side of the country. Mr Low bought a contemporary mansion in Beverly Hills for US$17.5 million, then turned around and sold it, once again to the Prime Minister’s stepson.

Mr Low also went shopping at the Time Warner Center condominiums overlooking Central Park in New York. He toured a 76th-floor penthouse, once home to celebrity couple Jay Z and Beyonce, then in early 2011, used yet another shell company to buy it for US$30.6 million, one of the highest prices in the building.

At the time, Mr Low said he represented a group of investors, said two people with direct knowledge of the transaction. Mr Low recently told The New York Times that he had not bought the penthouse for investors and that it was owned by his family’s trust.

One thing is clear: As with nearly two-thirds of the apartments at the Time Warner Center, a dark-glass symbol of New York’s luxury condominium boom, the people behind Penthouse 76B cannot be found in any public real-estate records. The trail ends with Mr Low.

Mr Low, 33, is a skilful, and more than occasionally flamboyant, iteration of the sort of operative essential to the economy of the global super-rich. Just as many of the wealthy use shell companies to keep the movement of money opaque, they also use people such as Mr Low. Whether shopping for new business opportunities or real estate, he has often done so on behalf of investors or, as he likes to say, friends. Whether the money belongs to others or is his own, the lines are frequently blurred and the identity of the buyer elusive.

Mr Low’s lavish spending has raised eyebrows and questions from Kuala Lumpur to New York, where he has made a boldface name for himself as a “whale” at clubs such as the Pink Elephant and 1Oak. The New York Post once called him “the mystery man of city club scene”, adding: “Speculation is brewing over where Low is getting his money from.”

One answer resides at least indirectly in his relationship, going back to his school days in London, with the family of Malaysian Prime Minister Najib Razak. Mr Low has played an important role in bringing Middle Eastern money into numerous deals involving the Malaysian government and he helped set up, and has continued to advise, a Malaysian sovereign wealth fund that Mr Najib oversees.

That relationship has now become part of an uproar gathering around the Prime Minister and threatening his already shaky hold on power. In Parliament, political cartoons and social media, Mr Najib’s critics tend to argue that he is too close to Mr Low.

Increasingly, the glare turns to Mr Najib’s stepson Riza Aziz and his friendship with Mr Low. With Mr Low’s help, Mr Aziz runs a Hollywood company that produced the films The Wolf Of Wall Street and Dumb And Dumber To. He has spent tens of millions more on homes in Manhattan and Beverly Hills — transactions that involved Mr Low, The Times found.

“That’s a lot of money,” Mr Sivarasa Rasiah, an opposition lawmaker, said of Mr Aziz’s spending. He added, “Every US report on him talks about family wealth. Family who?”

While Mr Aziz had previously said he was personally wealthy, he declined to explain how he had acquired his money. In a statement, Mr Najib’s office said: “The Prime Minister does not track how much Mr Aziz earns or how such earnings are reinvested.” As for the Prime Minister himself, the statement said he had “received inheritance”.

In a statement provided by a spokesman, Mr Low, whose full name is Low Taek Jho, said he was a friend of Mr Aziz and his family. His real-estate transactions with Mr Aziz were made “on an arm’s-length basis”, he said, adding that he had never bought real estate in the US for the Mr Najib’s family or “engaged in any wrongful conduct regarding any financial matters for the Prime Minister and his family”.

THE MAKING OF A FINANCIER

To mention Mr Low in Malaysia is to conjure the image of a baby-faced young man in rimless glasses and a loose black V-neck, holding a magnum of Cristal and surrounded by celebrities. But if he is sometimes derided as a tabloid party boy who once flew a group of bottle girls from New York to Malaysia, the reality is that the clubbing life, for Mr Low, was actually a way to build a booming business managing money for his friends.

“I think a relationship with an investor is not just about managing their money well,” he said in an extensive interview in 2010 with Malaysian newspaper The Star. “Although it is not in my job scope, if my friend says he wants a flight urgently to somewhere or he wants a dinner reservation at a well-known place, I’ll do my best to make it happen.”

He also said: “I am usually the concierge service that arranges everything and thus, my name is all over the place.”

Around George Town on Penang Island where he grew up, the Lows were seen as a family of somewhat deflated affluence, said several businessmen who have known them for years. The father, Larry, was an executive for an investment holding company called MWE Holdings, but he split with his partner in the mid-1990s and faded from the local business scene. Still only a teenager, Mr Jho Low, the youngest of three children, emerged as the family’s best hope for the future.

There was money for education abroad, and in London, while attending the ancient and elite Harrow school, Mr Low became friends with Mr Aziz who was studying at the London School of Economics. He also grew close to Mr Aziz’s mother Rosmah Mansor, who stayed for months at a time in an apartment she kept there.

In college, at the Wharton School of the University of Pennsylvania, Mr Low kept up his ties back home by running a Malaysian student group. But he also came to know the children of prominent Jordanian and Kuwaiti families. Even before graduating, he was managing money for what he later described as “my family and close Middle Eastern and South-east Asian friends”.

After college, many of his early business deals were based in Malaysia — helping a Kuwaiti bank buy a high-rise complex called the Oval and bringing Middle Eastern money into the country to finance a commercial zone in the south and a new financial district in the capital. By 2007, he had formed an investment group that included a Malaysian prince, a Kuwaiti sheikh and a friend from the United Arab Emirates who went on to become Ambassador to the US and Mexico.

Two years later, he was pitching his idea for a Malaysian sovereign wealth fund. His plan was to invest public money for the public good through a fund tied to one of the country’s oil-producing states, and so he began wooing the Sultan of Terengganu, who was also Malaysia’s king under the nation’s rotating monarchy.

It was all about making connections, making friends. Success, he told The Star, is “attributable to being at the right place and right time and meeting the right people coupled with a trusting relationship”.

In April 2009, those ingredients all came together for Mr Low. The stepfather of his friend Mr Aziz became Prime Minister of Malaysia.

THE 1MDB FUND

Mr Low’s business romance with Malaysia’s king, it turned out, was short-lived. But the new Prime Minister was happy to have a way to benefit the nation writ large and the sovereign wealth fund soon morphed into a new one, called 1Malaysia Development Berhad (1MDB).

Mr Najib became chairman of the board of advisers of 1MDB, which calls itself a “strategic development company”. A close Penang friend of Mr Low’s father became a director and two of Mr Low’s friends joined the staff. Mr Low himself was not given an official role, but he is regularly consulted on its actions, said three people who have had regular dealings with 1MDB, but who requested anonymity to preserve relationships.

In his statement to The Times, Mr Low played down his role in 1MDB, saying that “from time to time and without receiving compensation”, he had given his views on various matters.

While Mr Low has no official position with the fund, it emerged in British court documents in 2012 that he had presented a letter of support from 1MDB in his investors’ unsuccessful bid for the hotel group that includes Claridge’s. He also said the financing would be fully underwritten by Malaysian government investment funds, the documents showed.

Mr Low and 1MDB also had dealings with an oil-drilling company called PetroSaudi International, which had been founded by a Saudi businessman and a Saudi prince.

Soon after its creation, 1MDB invested US$1 billion in a joint venture with PetroSaudi. A few months later, a PetroSaudi subsidiary bought a Malaysian holding company, UBG, in which Mr Low and his investors held a substantial stake, public records showed. News media reports did not say so, but corporate records reviewed by The Times showed that a director of the PetroSaudi subsidiary was a close friend of Mr Low named Mr Geh Choh Hun.

PetroSaudi has told the Malaysian press that the deals were unrelated. And both men said Mr Geh was not representing Mr Low’s interest in the deal.

By 2011, 1MDB pulled out of the PetroSaudi joint venture. The proceeds, however, were not immediately returned to Malaysia. Instead, they ended up in a Cayman Islands company and managed by an investment firm that 1MDB only recently identified. The money was recently returned to 1MDB, the fund has said.

The Caymans manoeuvre has stirred an outcry even within Mr Najib’s own party. “I don’t understand why the government carries on with 1MDB,” Mr Daim Zainuddin, a former Finance Minister, said in an interview. “To me, it’s quite frightening because you don’t know what they’re doing,” he said, adding: “Why must government money be parked?”

There have been other criticisms as well — that the fund has taken on large amounts of debt and that some of its investments have benefited large donors to Mr Najib’s party.

The Prime Minister’s office said 1MDB was run by professional managers and that many blue-chip companies do business with funds registered in the Caymans. The criticisms, it added, “need to be examined for political motivation”.

A year ago, accounting firm KPMG refused to sign off on 1MDB’s financials, said Mr Nur Jazlan Mohamed, chairman of Parliament’s audit committee. KPMG declined to comment for this article. The fund, which described the parting as amicable, found a new auditor: Deloitte.

Mr Nur Jazlan, a member of Mr Najib’s party, said the Deloitte blessing gave him comfort. “They wouldn’t sanction the accounts if there was a problem,” he said. Still, he acknowledged that conditions were fertile for fraud, given the scant oversight of 1MDB.

Over the summer, former Prime Minister Mahathir Mohamad, who led the country for 22 years and retains considerable influence, publicly denounced Mr Najib and called on him to reform 1MDB.

LUXURY HOME PURCHASES

The year before Mr Low showed up at the Time Warner Center, the New York news media reported the US$24 million purchase of an apartment in the Park Laurel, a few blocks away on West 63rd Street.

The purchase, the reports said, had been made by a shell company on behalf of two residents of Switzerland. Those reports were mistaken. The Swiss “buyers” were actually Rothschild bankers. The real party behind the shell company was Mr Low, whose spokesman acknowledged to The Times that the condo had been bought by a trust benefiting his family.

Nearly three years later, the Lows sold it to Mr Aziz’s shell company for US$33.5 million in cash — a 40 per cent appreciation.

The sale involved a string of shell companies. In one spot on the property transfer, Mr Aziz is listed as the “sole director” of Sorcem Investments, a British Virgin Islands company that was behind the shell company that bought the Park Laurel condo.

The transfer of the Beverly Hills house from Mr Low to Mr Aziz was even more opaque. After Mr Low’s shell company, 912 North Hillcrest Road (BH) LLC, paid US$17.5 million for the home — 11,573sqf, with five bedrooms, 10 bathrooms, private gardens and a glowing pyramid in the reflecting pool — his trust sold ownership of that shell company to a corporate entity controlled by Mr Aziz, both men acknowledged to The Times.

Legally, however, the property itself never changed hands. The same shell company appears as owner in the public property records of Los Angeles County. It is as if nothing ever happened.

Mr Aziz confirmed that he owned the New York condo as well as the Beverly Hills house.

Mr Low said the transactions were done at fair-market value. He sold the Beverly Hills property, he said, because he had found another nearby. That house cost US$39 million.

Back in New York, the Time Warner Center was a natural destination because Mr Low’s friends already owned apartments there. With the penthouses on the top five floors of the north tower came wraparound views — the Catskill Mountains far off to the north-west, the Statue of Liberty just beyond the southern tip of Manhattan and Central Park right next door. Mr Low went to view Penthouse 76B with a retinue of women and told people involved in the deal that he would pay US$30.6 million — all cash, as in his other real estate purchases.

One member of the condominium board and another person with direct knowledge of the deal said they believed Mr Low was buying for a group of investors. One of them recalled Mr Low saying a main investor was the family of Mr Najib.

In its statement to The Times, the Prime Minister’s office said Mr Najib had no financial interest or any agreement related to any Time Warner condominiums.

Mr Low’s statement said the condo was owned by his family’s trust and that he and other family members stayed there from time to time when they are in New York.

Lately, Mr Low has been emphasising that he is investing his family’s money and no longer managing money for investors and friends.

After portraying himself for years as a friend of people with money — and saying in the 2010 interview with The Star that he came from a “fairly okay family” — he has started to say that he was born with it himself. Last year, he did an interview with The Wall Street Journal, which reported that his grandfather had made a fortune in mining and liquor investments in Thailand. The Journal’s account — which said the Low family had a US$1.75 billion fortune and called Mr Low a scion — was immediately picked up in Malaysia.

As befits the modern scion, Mr Low has lately begun trading in another asset class: Contemporary art. His entry into the art market has generated buzz both for his youth and for the fact that he has become such a significant force so fast. Last year, he made the ARTnews list of the world’s 200 leading private collectors.

The art market is even more opaque than real estate, so that list is based not on actual sales data but on the assessments of people in the industry who know about collectors’ holdings. But two people familiar with Mr Low’s activities in the art world said he had taken a liking to pop art.

“Inserting a Jho Low at the top of the market — who buys pictures over US$20 million, US$30 million, US$40 million — it swings the market,” one of them said.

To the public, of course, the buyer is anonymous. But among the purchases Mr Low has been involved in, they said, is Jean-Michel Basquiat’s Dustheads, for US$48.8 million.

Asked if his family owned the painting, Mr Low said he did not buy Dustheads on behalf of any investor. Asked about his involvement in the art market, he replied: “The Low family is interested in fine art.”

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