Positive lessons from a negative situation
THE quality of life for most Malaysians will suffer somewhat because of the national debt overhang associated with 1MDB. We should, therefore, know what happened. None of us can wholly prepare for the future. Nonetheless, nurturing humility can help a lot. For instance, if we’re open to deriving positive lessons on managing money honestly, even from unlikely sources, then it’s possible for us to end up less stressed about our future finances than most others. Let me explain:
You may have read my column last week, entitled Anger, Curiosity and Personal Reinvention. If not, do access it here: www. nst.com.my/authors/rajen-devadason
I’m ecstatic that Finance Minister Lim Guan Eng went easier on us than I expected in his Nov 2, 2018 Budget speech. I was right about subsidy removals and fresh taxes being imposed, but I was pleasantly surprised our income tax rates were not raised. In that column I referenced P. Gunasegaram’s analytical book 1MDB — the Scandal that Brought Down a Government, and mentioned Guna’s explanation of the US Department of Justice’s (DOJ’s) filings in mid-2016 and mid-2017 that painstakingly outlined four phases of misappropriation of 1MDB money totalling US$4.507 billion, worth about RM18 billion now.
FOUR PHASES OF MISAPPROPRIATION
Those four phases took place between 2009 and 2014. They have different names, so to make chronological sense of the convoluted money trail I’m also labelling them Thefts 1 through 4.
Theft 1, officially called the Good Star Phase, occurred between 2009 and 2011. A 1MDB bond issue worth RM5 billion (roughly US$1.25 billion based on the prevailing exchange rate then) was created. Then US$1.03 billion or 82% of the money raised was funnelled to rogue Malaysian financier Low Taek Jho, better known as Jho Low. (A bond is a debt instrument, so each time 1MDB issued a bond, it created a liability. With the Malaysian government, specifically the previous administration, providing promises of financial support to 1MDB for both bonds and straightforward bank borrowings, those eye-watering loans became liabilities of the Malaysian government and thus ultimately the rakyat’s! Feel free to be enraged.)
Theft 2 is referred to as the Aabar-BVI Phase. That involved the issuance of two different bond issues totalling US$3.5 billion in 2012. Of that sum, US$1.367 billion flowed to Jho Low-controlled bank accounts in Switzerland and Singapore. (This Second theft is of greatest interest to Malaysians; as Guna writes: “This was the blockbuster revelation which finally tied then PM Najib with 1MDB. It was the Wall Street Journal (WSJ) which first reported this on July 2, 2015, a year before the US DOJ’s preliminary investigations into money laundered by 1MDB.
The shocking exposé was the biggest bombshell ever dropped on a sitting Malaysian prime minister in recent memory. The WSJ story revealed that Najib had received US$700 million in his AmIslamic Bank account.” Incidentally, that figure was rounded up; Guna shows a (literal) flowchart of US$681 million being deposited in Najib’s bank account in March 2013 from another bank account owned by Tanore Finance, and then US$620 million inexplicably flowing back from Najib to Tanore Finance five months later.)
Theft 3 is actually called Tanore! A US$3 billion bond was issued in 2013, from which US$1.26 billion flowed to accounts linked to one Eric Tan Kim Lim Loong (also known as Fat Eric, a close friend of Jho Low).
Theft 4 involved bank borrowings of US$1.225 billion in 2014 raised for an ‘Options Buyback’. (Options are derivative instruments.) Of that sum, US$0.85 billion was misappropriated and found its way to Jho Low.
The total stolen, in USD terms, according to the DOJ, which tracks funds flowing through the US banking system, was US$4.507 billion.
HANDLING OUR MONEY WITH CARE
Readers eager to better understand the specifics and the scale of those sophisticated thefts should clear a full week to study Guna’s book with pen and paper in hand; later, to corroborate what they read there, they should go online to cross reference DOJ pronouncements on the 1MDB kleptocracy issue.
Now, for Malaysians who may live comfortably yet are unable to party with Hollywood stars on luxury yachts the way Jho Low and Fat Eric did using money stolen from us, we may extract three salutary lessons about handling our money from those complex negative examples of money laundering, hubris and greed:
1. The authorities are monitoring our money trails through the globally integrated banking system. Therefore, stay clean in our personal transactions.
2. PEPs or Politically Exposed Persons are of special interest to the world’s financial authorities. Therefore, avoid political entanglements unless you genuinely wish to serve with honour, transparency and integrity and not to enrich yourself through corruption.
3. Complex money flows that appear opaque and perhaps even migraineinducing are no guarantee of personal privacy. So err on the side of simplicity and true equanimity when organising (or reorganising) your financial life.
Our 21st century is challenging enough; we would be wise to heed sound financial planning guidelines to live clean, uncomplicated lives. Toward that end, if you happen to feel unjustly treated by Malaysian financial institutions or financial intermediaries, in next week’s column I plan to tell you about SIDREC, the Securities Industry Dispute Resolution Center. SIDREC’s goals involve helping people deal with disagreements or disputes with their brokers, banks or even financial intermediaries. Please stay tuned.