It's one of the biggest financial frauds in history, and involves bankers, politicians, Hollywood celebrities, and The Wolf of Wall Street.
It's time to find out what happened to the missing Malaysian billions.
[00:00:00] Hello, hello, hello, and welcome to English Learning for Curious Minds by Leonardo English, the show where you can listen to fascinating stories and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:21] I'm Alastair Budge and today we are going to be talking about the 1MDB scandal, and the group of people who allegedly stole billions of dollars from the Malaysian government.
[00:00:35] The tale of 1MDB takes us from Malaysia to the United Kingdom, from the Middle East to Hollywood, and involves everyone from greedy bankers, Prime Ministers, Paris Hilton and Leonardo di Caprio.
[00:00:50] It’s an ongoing story, but it looks like it will go down as one of the biggest thefts in history.
[00:00:58] And at the centre of it all is a small, slightly overweight, young Malaysian man called Jho Low.
[00:01:06] Before we get right into it though, let me remind you that you can get all of the bonus episodes, plus subtitles, transcripts, and key vocabulary, over on the website, which is leonardoenglish.com.
[00:01:19] This is also where you can check out becoming a member of Leonardo English, and join a community of curious minds from all over the world, doing meetups, exchanging ideas, and generally, improving their English in a more interesting way.
[00:01:35] So if that's of interest, and I hope it is, then the place to go to is leonardoenglish.com.
[00:01:43] OK then, 1MDB.
[00:01:46] Our story starts in around 2009, shortly after Malaysia had just appointed a new Prime Minister, a man called Najib Razak.
[00:01:58] Malaysia was still a ‘developing country’, and still lacked a lot of the kind of infrastructure that was enjoyed by neighbours like Singapore.
[00:02:07] So Malaysia needed a lot of foreign investment to pump into things like power stations, roads, airports, and all the kinds of things that help a country develop economically.
[00:02:21] One way in which countries do this is by creating big funds where they borrow money from private investors.
[00:02:31] Investors are normally happy to lend money to a country, because they are pretty sure that they’ll get their money back, and for a country like Malaysia, doing something like this would be a way of raising money that could be invested into things like infrastructure, services, and industries that would help Malaysia develop economically.
[00:02:54] So, in 2009, shortly after Razak’s election, he created this kind of Malaysian fund, a development fund that would invest in Malaysian projects.
[00:03:07] It started out with a relatively small amount of money, just $1 billion. Now, that obviously is a huge amount of money, but when thinking about it on a country level, it’s not so huge.
[00:03:23] This new fund was to be called 1MDB, short for 1 Malaysia Development Berhad. Berhad is just a suffix that’s used by Malaysian companies to show that they are limited companies, so like Ltd in the UK, or Gmbh in Germany.
[00:03:42] So, this 1MDB was set up, it hired employees and it had a mandate to invest in various different types of industries that would benefit the Malaysian people.
[00:03:55] All good so far.
[00:03:57] But there was a character who seemed to be involved with the fund, who seemed to be managing everything and have the complete trust of Razak, the Prime Minister, but this man had no official role in the fund.
[00:04:14] His name was Jho Low.
[00:04:15] Jho Low, at the time that the fund was set up, was only 27 years old.
[00:04:24] He came from a relatively wealthy Malaysian family, from an area of Malaysia called Penang.
[00:04:32] He had been educated at one of the most elite private schools in the United Kingdom, called Harrow, and he then went to university at the University of Pennsylvania’s Wharton School of Business.
[00:04:45] At both of these institutions, he got acquainted with the lifestyle of the super rich, befriending people from various Middle Eastern families.
[00:04:57] Low, although he was rich by any normal person’s standards, was nothing compared to Middle Eastern royalty.
[00:05:05] Despite this, Low managed to get a reputation as a person who had access to a lot of money, and while he was at Wharton he would host large, flamboyant parties, and generally be seen to be spending large amounts of money.
[00:05:24] He hung around with princes and royalty, and fresh out of university he carved out a niche for himself as someone who was a bit of a fixer - he was good at connecting people who had money to people who wanted investment, and of course, pocketing a little commission when this happened.
[00:05:47] When 1MDB was formed, it was said that Low managed to get this strange advisory role partly because of his connections to the Middle East.
[00:05:59] He knew people in high places, especially people with lots of money to invest in the fund, and seemed to be trusted completely by Razak.
[00:06:10] Jho Low, and 1MDB got to work, and the main work they seemed to be doing was spending money, and then raising more money to add to their fund.
[00:06:22] From its little initial investment of $1 billion dollars, 1MDB managed to raise more and more money, and by March of 2014, under 5 years after it had started, 1MDB had reportedly raised $10 billion dollars.
[00:06:42] Now, it’s important to clarify that this money was money that foreign investors had lent to 1MDB because they thought that they would be able to make a profit. That 1MDB would make investments in Malaysia, and abroad, would make a profit on these investments, and everyone would make money.
[00:07:03] 1MDB, and Jho Low, had managed to raise all of this money because the debt was, effectively, guaranteed by the Malaysian government. People were happy to lend it more, and it had no problem raking in more and more money.
[00:07:21] There were a lot of question marks emerging about what this money was actually going towards though.
[00:07:29] 1MDB had made a series of investments in Malaysian infrastructure projects, from power stations to airports, but people were saying that it had paid far too much money for them, and that in exchange for paying too much money, politicians had received kickbacks, they had received payments or favours from the sellers.
[00:07:54] There were rumours going around that Razak was using some of the funds himself, both that he was using them as a way to bribe other politicians and try to influence the upcoming elections, and that he was just stealing the funds and using them for himself.
[00:08:11] It didn’t help that his wife, Rosmah, had incredibly lavish taste in jewellery, and would go on huge shopping sprees in Paris, London, and New York. We’re not talking about a few thousand dollars here, we are talking millions.
[00:08:29] But what was perhaps more concerning was what was going on with the central character in our story, Jho Low.
[00:08:38] Jho Low had always been quite a big spender, but ever since he started to get involved with 1MDB, the spending hit new levels.
[00:08:50] There was a headline from the New York Post in November 2009, just months after 1MDB was launched, which read “Big-spending Malaysian is the mystery man of city club scene”, and talked about how this man, Jho Low, had spent $160,000 in one night.
[00:09:11] But this was small fry, it was small potatoes, compared to what Jho Low went on to do.
[00:09:19] He bought penthouses, mansions, yachts, fine art, and threw huge parties with celebrities like Paris Hilton and Kim Kardashian.
[00:09:30] For his 31st birthday, in 2012, he threw the wildest party that Las Vegas has ever seen - and I imagine it has seen quite a few wild parties. For this party, Kanye West performed, Britney Spears burst out of a cake, and there were performances from Jamie Foxx, Busta Rhymes, Pharrel Williams, Chris Brown, and Psy, the guy who sang Gangnam Style.
[00:09:57] This event apparently cost millions of dollars, and it was really just a drop in the ocean for Jho Low.
[00:10:05] He had private jets, and bought art by Picasso, Van Gogh and Monet.
[00:10:11] He would fly around the world on a private jet, stopping to spend weeks on his yacht with Middle Eastern royalty, then jetting into Vegas to gamble millions of dollars, and essentially just living the life of the world’s biggest international playboy.
[00:10:28] He invested in a film studio, and spent $100 million to produce the film The Wolf of Wall Street, ironically enough a film about financial fraud.
[00:10:40] If you remember The Wolf of Wall Street, there is a scene in it where the central character crashes a Lamborghini. While in most normal films, they wouldn’t crash a real Lamborghini, they’d find a model one or something like that, apparently Jho Low said it was fine to buy a real one, then completely wreck it.
[00:11:03] So, the question was, where did he get all this money?
[00:11:08] At the start, Jho Low said that it was all family wealth, and that he had inherited this money from his grandfather. Low had certainly inherited some money from his family, but it was a tiny percentage of what he was now spending.
[00:11:26] Strangely enough, it seemed that not that many people asked tough questions about where the money really came from.
[00:11:35] Everyone was enjoying the ride - Jho Low was very generous, and would shower his friends with gifts and holidays. And of course, he would always pick up the bar tab.
[00:11:47] Who wouldn’t like a friend like that, right?
[00:11:50] But, as you might have guessed, the money didn’t really belong to Jho Low.
[00:11:56] He had stolen billions of dollars from 1MDB in one of the largest financial thefts in modern history.
[00:12:06] Low, despite his young age, had developed a sophisticated understanding of how the global financial system works, and more importantly, how he could transfer large amounts of money from 1MDB into his own pockets.
[00:12:22] He used a variety of methods and tricks to achieve this.
[00:12:27] Firstly, he made sure that everyone who was involved in this theft was very adequately compensated. From Emirati businessmen to private bankers, he made sure that everyone was also making lots of money.
[00:12:44] Secondly, this whole scheme wouldn’t have worked without offshore companies, which are very effective ways of hiding who actually owns something.
[00:12:55] Jho Low knew how offshore companies work, and how he could manage to transfer billions of dollars around the world without people noticing.
[00:13:04] He would create different shell companies in places like the Cayman Islands or Curacao, which would often have names that were very similar to the companies that 1MDB was supposedly dealing with.
[00:13:18] Then he would instruct the bankers to make payments into these shell companies, which were ultimately controlled by him.
[00:13:26] When that company received the money, he would then send the money on to various different anonymous bank accounts, or bank accounts that were held by anonymous companies, meaning that where the money came from, and whose money it actually was, was very hard to trace.
[00:13:46] Jho Low knew how to confuse the financial system, he knew all the tricks of the trade. He knew how the ultra-rich often hide their money, even money that is legally acquired, but he exploited all of these tricks to the maximum.
[00:14:03] And finally, Jho Low had an innate understanding of human greed.
[00:14:09] In the world of the ultra rich, he knew that people were always looking for more.
[00:14:15] If you make 10 million dollars, then you want to make 50, 10 million suddenly isn’t so interesting anymore.
[00:14:23] If you make 50, then you want to make 100. For many people, there was no limit to their greed.
[00:14:31] Low realised this with one of the bankers that he used to help raise money for 1MDB, a man called Tim Leissner.
[00:14:40] Now, Leissner was a partner at the prestigious Wall Street bank, Goldman Sachs.
[00:14:46] He was one of the senior dealmakers in Asia, and had managed to befriend Jho Low, and make Goldman Sachs the bank of choice for helping 1MDB raise money.
[00:14:59] Goldman Sachs made huge amounts of money from 1MDB, reportedly $600 million in commission, and for his part in this, Leissner was paid millions of dollars a year by the bank.
[00:15:14] But, millions of dollars a year, when you are hanging around with people spending billions, makes you look like a bit of a nobody.
[00:15:24] Leissner got greedy, and started siphoning off, taking large amounts of money for himself, reportedly taking $200 million dollars that he then spent on things like luxury property, yachts, and fine art.
[00:15:40] When you hear this story, and think about quite how brazen, quite how open, this theft was, you might think ‘how did they ever think they’d get away with it?’
[00:15:52] Low and his associates were stealing literally billions of dollars every single year, spending very heavily and very much in the public eye.
[00:16:03] Surely someone, somewhere was going to find out?
[00:16:08] Of course, this is easy to say with hindsight, but at the time, I guess they felt invincible.
[00:16:15] And who knows, maybe the party would still be going on were it not for a Swiss man called Xavier Justo. Justo had been an executive at a company called Petrosaudi, which was a former partner of 1MDB’s, and was heavily implicated in the theft of the money from the fund.
[00:16:36] Justo had been sacked by the company under circumstances that he felt were unfair, and had made copies of incriminating emails that showed the huge fraud that was going on. He had threatened to release the emails unless he was paid $2 million, which was the money that he felt he was owed by PetroSaudi.
[00:17:00] Long story short, Justo released these emails to a journalist, and the story broke.
[00:17:07] The curtain was lifted on this mysterious entity. The scale of the theft was bigger than anyone had imagined, and it looked like it wasn’t just Jho Low, but Najib Razak, the Malaysian Prime Minister, who was directly implicated.
[00:17:22] The emails revealed that a payment of $681 million was made directly into Razak’s personal bank account. Now, I should say that Razak denies that this was from 1MDB, and says that it was a personal donation from the Saudi royal family, but it does look very suspicious.
[00:17:45] There was a huge political scandal in Malaysia. Nabib Razak was kicked out of office after the general election of 2018, and just a few weeks ago, on July 28th, he was sentenced to 12 years in prison.
[00:18:00] Leissner, the Goldman Sachs banker, was made to pay a fine of 43.7 million in 2018, and is currently awaiting sentencing.
[00:18:13] His employer, Goldman Sachs, is on the hook for a huge compensation payout to the Malaysian government for its role in the fraud, and on July the 24th agreed to pay 1MDB 3.7 billion dollars.
[00:18:30] And Jho Low, our chubby protagonist?
[00:18:33] Nobody actually knows where he is, although he is rumoured to be living in China. His assets in the US have mainly been frozen, but he still likely has assets to tens, if not hundreds, of millions, if not billions of dollars that he stole from 1MDB.
[00:18:54] Unlike the bank account that you or I might have, Low’s money is hidden all over the world, in secret accounts in different countries, held at law firms, private banks, and is very hard to trace.
[00:19:08] He protests his innocence, saying that this is all a mistake and a misunderstanding, and he has hired expensive PR agencies to try and tell his story, and portray himself as a philanthropist and businessman, and not as the criminal that almost every government believes he is.
[00:19:29] So, this is a story that is ongoing. Jho Low is still at large, his yacht, penthouses and mansions may have been captured, but the nature of the global financial system means that he certainly isn’t without funds.
[00:19:45] And who, ultimately pays the price for all this?
[00:19:49] The sad thing is that it’s the Malaysian people.
[00:19:53] This money didn’t just come from nowhere. It’s the Malaysian people who are on the hook for it, and they will continue to pay the price for Low and Razak’s corruption for decades to come.
[00:20:06] Jho Low may have been the guy who always threw the best parties, and always picked up the bill at the end of the night. But unfortunately, with this story, this time, he has left the Malaysian people to pick up the bill.
[00:20:21] OK then, that is it for today’s episode on 1MDB, and the missing Malaysian billions.
[00:20:29] It is a fascinating story, and one that brings together high finance, greedy bankers, Hollywood celebrities, and politicians.
[00:20:38] It just makes you realise quite how intertwined all of these things are.
[00:20:44] As always, I would love to know what you thought of the show. You can email hi - hi@leonardoenglish.com
[00:20:52] And as a final reminder, if you are looking to improve your English in a more interesting way, to join a community of curious minds from all over the world, and to unlock the transcripts, subtitles, and key vocabulary, then the place to go to is leonardoenglish.com
[00:21:10] You've been listening to English Learning for Curious Minds by Leonardo English.
[00:21:15] I'm Alastair Budge. You stay safe and I'll catch you in the next episode.
[END OF PODCAST]
[00:00:00] Hello, hello, hello, and welcome to English Learning for Curious Minds by Leonardo English, the show where you can listen to fascinating stories and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:21] I'm Alastair Budge and today we are going to be talking about the 1MDB scandal, and the group of people who allegedly stole billions of dollars from the Malaysian government.
[00:00:35] The tale of 1MDB takes us from Malaysia to the United Kingdom, from the Middle East to Hollywood, and involves everyone from greedy bankers, Prime Ministers, Paris Hilton and Leonardo di Caprio.
[00:00:50] It’s an ongoing story, but it looks like it will go down as one of the biggest thefts in history.
[00:00:58] And at the centre of it all is a small, slightly overweight, young Malaysian man called Jho Low.
[00:01:06] Before we get right into it though, let me remind you that you can get all of the bonus episodes, plus subtitles, transcripts, and key vocabulary, over on the website, which is leonardoenglish.com.
[00:01:19] This is also where you can check out becoming a member of Leonardo English, and join a community of curious minds from all over the world, doing meetups, exchanging ideas, and generally, improving their English in a more interesting way.
[00:01:35] So if that's of interest, and I hope it is, then the place to go to is leonardoenglish.com.
[00:01:43] OK then, 1MDB.
[00:01:46] Our story starts in around 2009, shortly after Malaysia had just appointed a new Prime Minister, a man called Najib Razak.
[00:01:58] Malaysia was still a ‘developing country’, and still lacked a lot of the kind of infrastructure that was enjoyed by neighbours like Singapore.
[00:02:07] So Malaysia needed a lot of foreign investment to pump into things like power stations, roads, airports, and all the kinds of things that help a country develop economically.
[00:02:21] One way in which countries do this is by creating big funds where they borrow money from private investors.
[00:02:31] Investors are normally happy to lend money to a country, because they are pretty sure that they’ll get their money back, and for a country like Malaysia, doing something like this would be a way of raising money that could be invested into things like infrastructure, services, and industries that would help Malaysia develop economically.
[00:02:54] So, in 2009, shortly after Razak’s election, he created this kind of Malaysian fund, a development fund that would invest in Malaysian projects.
[00:03:07] It started out with a relatively small amount of money, just $1 billion. Now, that obviously is a huge amount of money, but when thinking about it on a country level, it’s not so huge.
[00:03:23] This new fund was to be called 1MDB, short for 1 Malaysia Development Berhad. Berhad is just a suffix that’s used by Malaysian companies to show that they are limited companies, so like Ltd in the UK, or Gmbh in Germany.
[00:03:42] So, this 1MDB was set up, it hired employees and it had a mandate to invest in various different types of industries that would benefit the Malaysian people.
[00:03:55] All good so far.
[00:03:57] But there was a character who seemed to be involved with the fund, who seemed to be managing everything and have the complete trust of Razak, the Prime Minister, but this man had no official role in the fund.
[00:04:14] His name was Jho Low.
[00:04:15] Jho Low, at the time that the fund was set up, was only 27 years old.
[00:04:24] He came from a relatively wealthy Malaysian family, from an area of Malaysia called Penang.
[00:04:32] He had been educated at one of the most elite private schools in the United Kingdom, called Harrow, and he then went to university at the University of Pennsylvania’s Wharton School of Business.
[00:04:45] At both of these institutions, he got acquainted with the lifestyle of the super rich, befriending people from various Middle Eastern families.
[00:04:57] Low, although he was rich by any normal person’s standards, was nothing compared to Middle Eastern royalty.
[00:05:05] Despite this, Low managed to get a reputation as a person who had access to a lot of money, and while he was at Wharton he would host large, flamboyant parties, and generally be seen to be spending large amounts of money.
[00:05:24] He hung around with princes and royalty, and fresh out of university he carved out a niche for himself as someone who was a bit of a fixer - he was good at connecting people who had money to people who wanted investment, and of course, pocketing a little commission when this happened.
[00:05:47] When 1MDB was formed, it was said that Low managed to get this strange advisory role partly because of his connections to the Middle East.
[00:05:59] He knew people in high places, especially people with lots of money to invest in the fund, and seemed to be trusted completely by Razak.
[00:06:10] Jho Low, and 1MDB got to work, and the main work they seemed to be doing was spending money, and then raising more money to add to their fund.
[00:06:22] From its little initial investment of $1 billion dollars, 1MDB managed to raise more and more money, and by March of 2014, under 5 years after it had started, 1MDB had reportedly raised $10 billion dollars.
[00:06:42] Now, it’s important to clarify that this money was money that foreign investors had lent to 1MDB because they thought that they would be able to make a profit. That 1MDB would make investments in Malaysia, and abroad, would make a profit on these investments, and everyone would make money.
[00:07:03] 1MDB, and Jho Low, had managed to raise all of this money because the debt was, effectively, guaranteed by the Malaysian government. People were happy to lend it more, and it had no problem raking in more and more money.
[00:07:21] There were a lot of question marks emerging about what this money was actually going towards though.
[00:07:29] 1MDB had made a series of investments in Malaysian infrastructure projects, from power stations to airports, but people were saying that it had paid far too much money for them, and that in exchange for paying too much money, politicians had received kickbacks, they had received payments or favours from the sellers.
[00:07:54] There were rumours going around that Razak was using some of the funds himself, both that he was using them as a way to bribe other politicians and try to influence the upcoming elections, and that he was just stealing the funds and using them for himself.
[00:08:11] It didn’t help that his wife, Rosmah, had incredibly lavish taste in jewellery, and would go on huge shopping sprees in Paris, London, and New York. We’re not talking about a few thousand dollars here, we are talking millions.
[00:08:29] But what was perhaps more concerning was what was going on with the central character in our story, Jho Low.
[00:08:38] Jho Low had always been quite a big spender, but ever since he started to get involved with 1MDB, the spending hit new levels.
[00:08:50] There was a headline from the New York Post in November 2009, just months after 1MDB was launched, which read “Big-spending Malaysian is the mystery man of city club scene”, and talked about how this man, Jho Low, had spent $160,000 in one night.
[00:09:11] But this was small fry, it was small potatoes, compared to what Jho Low went on to do.
[00:09:19] He bought penthouses, mansions, yachts, fine art, and threw huge parties with celebrities like Paris Hilton and Kim Kardashian.
[00:09:30] For his 31st birthday, in 2012, he threw the wildest party that Las Vegas has ever seen - and I imagine it has seen quite a few wild parties. For this party, Kanye West performed, Britney Spears burst out of a cake, and there were performances from Jamie Foxx, Busta Rhymes, Pharrel Williams, Chris Brown, and Psy, the guy who sang Gangnam Style.
[00:09:57] This event apparently cost millions of dollars, and it was really just a drop in the ocean for Jho Low.
[00:10:05] He had private jets, and bought art by Picasso, Van Gogh and Monet.
[00:10:11] He would fly around the world on a private jet, stopping to spend weeks on his yacht with Middle Eastern royalty, then jetting into Vegas to gamble millions of dollars, and essentially just living the life of the world’s biggest international playboy.
[00:10:28] He invested in a film studio, and spent $100 million to produce the film The Wolf of Wall Street, ironically enough a film about financial fraud.
[00:10:40] If you remember The Wolf of Wall Street, there is a scene in it where the central character crashes a Lamborghini. While in most normal films, they wouldn’t crash a real Lamborghini, they’d find a model one or something like that, apparently Jho Low said it was fine to buy a real one, then completely wreck it.
[00:11:03] So, the question was, where did he get all this money?
[00:11:08] At the start, Jho Low said that it was all family wealth, and that he had inherited this money from his grandfather. Low had certainly inherited some money from his family, but it was a tiny percentage of what he was now spending.
[00:11:26] Strangely enough, it seemed that not that many people asked tough questions about where the money really came from.
[00:11:35] Everyone was enjoying the ride - Jho Low was very generous, and would shower his friends with gifts and holidays. And of course, he would always pick up the bar tab.
[00:11:47] Who wouldn’t like a friend like that, right?
[00:11:50] But, as you might have guessed, the money didn’t really belong to Jho Low.
[00:11:56] He had stolen billions of dollars from 1MDB in one of the largest financial thefts in modern history.
[00:12:06] Low, despite his young age, had developed a sophisticated understanding of how the global financial system works, and more importantly, how he could transfer large amounts of money from 1MDB into his own pockets.
[00:12:22] He used a variety of methods and tricks to achieve this.
[00:12:27] Firstly, he made sure that everyone who was involved in this theft was very adequately compensated. From Emirati businessmen to private bankers, he made sure that everyone was also making lots of money.
[00:12:44] Secondly, this whole scheme wouldn’t have worked without offshore companies, which are very effective ways of hiding who actually owns something.
[00:12:55] Jho Low knew how offshore companies work, and how he could manage to transfer billions of dollars around the world without people noticing.
[00:13:04] He would create different shell companies in places like the Cayman Islands or Curacao, which would often have names that were very similar to the companies that 1MDB was supposedly dealing with.
[00:13:18] Then he would instruct the bankers to make payments into these shell companies, which were ultimately controlled by him.
[00:13:26] When that company received the money, he would then send the money on to various different anonymous bank accounts, or bank accounts that were held by anonymous companies, meaning that where the money came from, and whose money it actually was, was very hard to trace.
[00:13:46] Jho Low knew how to confuse the financial system, he knew all the tricks of the trade. He knew how the ultra-rich often hide their money, even money that is legally acquired, but he exploited all of these tricks to the maximum.
[00:14:03] And finally, Jho Low had an innate understanding of human greed.
[00:14:09] In the world of the ultra rich, he knew that people were always looking for more.
[00:14:15] If you make 10 million dollars, then you want to make 50, 10 million suddenly isn’t so interesting anymore.
[00:14:23] If you make 50, then you want to make 100. For many people, there was no limit to their greed.
[00:14:31] Low realised this with one of the bankers that he used to help raise money for 1MDB, a man called Tim Leissner.
[00:14:40] Now, Leissner was a partner at the prestigious Wall Street bank, Goldman Sachs.
[00:14:46] He was one of the senior dealmakers in Asia, and had managed to befriend Jho Low, and make Goldman Sachs the bank of choice for helping 1MDB raise money.
[00:14:59] Goldman Sachs made huge amounts of money from 1MDB, reportedly $600 million in commission, and for his part in this, Leissner was paid millions of dollars a year by the bank.
[00:15:14] But, millions of dollars a year, when you are hanging around with people spending billions, makes you look like a bit of a nobody.
[00:15:24] Leissner got greedy, and started siphoning off, taking large amounts of money for himself, reportedly taking $200 million dollars that he then spent on things like luxury property, yachts, and fine art.
[00:15:40] When you hear this story, and think about quite how brazen, quite how open, this theft was, you might think ‘how did they ever think they’d get away with it?’
[00:15:52] Low and his associates were stealing literally billions of dollars every single year, spending very heavily and very much in the public eye.
[00:16:03] Surely someone, somewhere was going to find out?
[00:16:08] Of course, this is easy to say with hindsight, but at the time, I guess they felt invincible.
[00:16:15] And who knows, maybe the party would still be going on were it not for a Swiss man called Xavier Justo. Justo had been an executive at a company called Petrosaudi, which was a former partner of 1MDB’s, and was heavily implicated in the theft of the money from the fund.
[00:16:36] Justo had been sacked by the company under circumstances that he felt were unfair, and had made copies of incriminating emails that showed the huge fraud that was going on. He had threatened to release the emails unless he was paid $2 million, which was the money that he felt he was owed by PetroSaudi.
[00:17:00] Long story short, Justo released these emails to a journalist, and the story broke.
[00:17:07] The curtain was lifted on this mysterious entity. The scale of the theft was bigger than anyone had imagined, and it looked like it wasn’t just Jho Low, but Najib Razak, the Malaysian Prime Minister, who was directly implicated.
[00:17:22] The emails revealed that a payment of $681 million was made directly into Razak’s personal bank account. Now, I should say that Razak denies that this was from 1MDB, and says that it was a personal donation from the Saudi royal family, but it does look very suspicious.
[00:17:45] There was a huge political scandal in Malaysia. Nabib Razak was kicked out of office after the general election of 2018, and just a few weeks ago, on July 28th, he was sentenced to 12 years in prison.
[00:18:00] Leissner, the Goldman Sachs banker, was made to pay a fine of 43.7 million in 2018, and is currently awaiting sentencing.
[00:18:13] His employer, Goldman Sachs, is on the hook for a huge compensation payout to the Malaysian government for its role in the fraud, and on July the 24th agreed to pay 1MDB 3.7 billion dollars.
[00:18:30] And Jho Low, our chubby protagonist?
[00:18:33] Nobody actually knows where he is, although he is rumoured to be living in China. His assets in the US have mainly been frozen, but he still likely has assets to tens, if not hundreds, of millions, if not billions of dollars that he stole from 1MDB.
[00:18:54] Unlike the bank account that you or I might have, Low’s money is hidden all over the world, in secret accounts in different countries, held at law firms, private banks, and is very hard to trace.
[00:19:08] He protests his innocence, saying that this is all a mistake and a misunderstanding, and he has hired expensive PR agencies to try and tell his story, and portray himself as a philanthropist and businessman, and not as the criminal that almost every government believes he is.
[00:19:29] So, this is a story that is ongoing. Jho Low is still at large, his yacht, penthouses and mansions may have been captured, but the nature of the global financial system means that he certainly isn’t without funds.
[00:19:45] And who, ultimately pays the price for all this?
[00:19:49] The sad thing is that it’s the Malaysian people.
[00:19:53] This money didn’t just come from nowhere. It’s the Malaysian people who are on the hook for it, and they will continue to pay the price for Low and Razak’s corruption for decades to come.
[00:20:06] Jho Low may have been the guy who always threw the best parties, and always picked up the bill at the end of the night. But unfortunately, with this story, this time, he has left the Malaysian people to pick up the bill.
[00:20:21] OK then, that is it for today’s episode on 1MDB, and the missing Malaysian billions.
[00:20:29] It is a fascinating story, and one that brings together high finance, greedy bankers, Hollywood celebrities, and politicians.
[00:20:38] It just makes you realise quite how intertwined all of these things are.
[00:20:44] As always, I would love to know what you thought of the show. You can email hi - hi@leonardoenglish.com
[00:20:52] And as a final reminder, if you are looking to improve your English in a more interesting way, to join a community of curious minds from all over the world, and to unlock the transcripts, subtitles, and key vocabulary, then the place to go to is leonardoenglish.com
[00:21:10] You've been listening to English Learning for Curious Minds by Leonardo English.
[00:21:15] I'm Alastair Budge. You stay safe and I'll catch you in the next episode.
[END OF PODCAST]
[00:00:00] Hello, hello, hello, and welcome to English Learning for Curious Minds by Leonardo English, the show where you can listen to fascinating stories and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:21] I'm Alastair Budge and today we are going to be talking about the 1MDB scandal, and the group of people who allegedly stole billions of dollars from the Malaysian government.
[00:00:35] The tale of 1MDB takes us from Malaysia to the United Kingdom, from the Middle East to Hollywood, and involves everyone from greedy bankers, Prime Ministers, Paris Hilton and Leonardo di Caprio.
[00:00:50] It’s an ongoing story, but it looks like it will go down as one of the biggest thefts in history.
[00:00:58] And at the centre of it all is a small, slightly overweight, young Malaysian man called Jho Low.
[00:01:06] Before we get right into it though, let me remind you that you can get all of the bonus episodes, plus subtitles, transcripts, and key vocabulary, over on the website, which is leonardoenglish.com.
[00:01:19] This is also where you can check out becoming a member of Leonardo English, and join a community of curious minds from all over the world, doing meetups, exchanging ideas, and generally, improving their English in a more interesting way.
[00:01:35] So if that's of interest, and I hope it is, then the place to go to is leonardoenglish.com.
[00:01:43] OK then, 1MDB.
[00:01:46] Our story starts in around 2009, shortly after Malaysia had just appointed a new Prime Minister, a man called Najib Razak.
[00:01:58] Malaysia was still a ‘developing country’, and still lacked a lot of the kind of infrastructure that was enjoyed by neighbours like Singapore.
[00:02:07] So Malaysia needed a lot of foreign investment to pump into things like power stations, roads, airports, and all the kinds of things that help a country develop economically.
[00:02:21] One way in which countries do this is by creating big funds where they borrow money from private investors.
[00:02:31] Investors are normally happy to lend money to a country, because they are pretty sure that they’ll get their money back, and for a country like Malaysia, doing something like this would be a way of raising money that could be invested into things like infrastructure, services, and industries that would help Malaysia develop economically.
[00:02:54] So, in 2009, shortly after Razak’s election, he created this kind of Malaysian fund, a development fund that would invest in Malaysian projects.
[00:03:07] It started out with a relatively small amount of money, just $1 billion. Now, that obviously is a huge amount of money, but when thinking about it on a country level, it’s not so huge.
[00:03:23] This new fund was to be called 1MDB, short for 1 Malaysia Development Berhad. Berhad is just a suffix that’s used by Malaysian companies to show that they are limited companies, so like Ltd in the UK, or Gmbh in Germany.
[00:03:42] So, this 1MDB was set up, it hired employees and it had a mandate to invest in various different types of industries that would benefit the Malaysian people.
[00:03:55] All good so far.
[00:03:57] But there was a character who seemed to be involved with the fund, who seemed to be managing everything and have the complete trust of Razak, the Prime Minister, but this man had no official role in the fund.
[00:04:14] His name was Jho Low.
[00:04:15] Jho Low, at the time that the fund was set up, was only 27 years old.
[00:04:24] He came from a relatively wealthy Malaysian family, from an area of Malaysia called Penang.
[00:04:32] He had been educated at one of the most elite private schools in the United Kingdom, called Harrow, and he then went to university at the University of Pennsylvania’s Wharton School of Business.
[00:04:45] At both of these institutions, he got acquainted with the lifestyle of the super rich, befriending people from various Middle Eastern families.
[00:04:57] Low, although he was rich by any normal person’s standards, was nothing compared to Middle Eastern royalty.
[00:05:05] Despite this, Low managed to get a reputation as a person who had access to a lot of money, and while he was at Wharton he would host large, flamboyant parties, and generally be seen to be spending large amounts of money.
[00:05:24] He hung around with princes and royalty, and fresh out of university he carved out a niche for himself as someone who was a bit of a fixer - he was good at connecting people who had money to people who wanted investment, and of course, pocketing a little commission when this happened.
[00:05:47] When 1MDB was formed, it was said that Low managed to get this strange advisory role partly because of his connections to the Middle East.
[00:05:59] He knew people in high places, especially people with lots of money to invest in the fund, and seemed to be trusted completely by Razak.
[00:06:10] Jho Low, and 1MDB got to work, and the main work they seemed to be doing was spending money, and then raising more money to add to their fund.
[00:06:22] From its little initial investment of $1 billion dollars, 1MDB managed to raise more and more money, and by March of 2014, under 5 years after it had started, 1MDB had reportedly raised $10 billion dollars.
[00:06:42] Now, it’s important to clarify that this money was money that foreign investors had lent to 1MDB because they thought that they would be able to make a profit. That 1MDB would make investments in Malaysia, and abroad, would make a profit on these investments, and everyone would make money.
[00:07:03] 1MDB, and Jho Low, had managed to raise all of this money because the debt was, effectively, guaranteed by the Malaysian government. People were happy to lend it more, and it had no problem raking in more and more money.
[00:07:21] There were a lot of question marks emerging about what this money was actually going towards though.
[00:07:29] 1MDB had made a series of investments in Malaysian infrastructure projects, from power stations to airports, but people were saying that it had paid far too much money for them, and that in exchange for paying too much money, politicians had received kickbacks, they had received payments or favours from the sellers.
[00:07:54] There were rumours going around that Razak was using some of the funds himself, both that he was using them as a way to bribe other politicians and try to influence the upcoming elections, and that he was just stealing the funds and using them for himself.
[00:08:11] It didn’t help that his wife, Rosmah, had incredibly lavish taste in jewellery, and would go on huge shopping sprees in Paris, London, and New York. We’re not talking about a few thousand dollars here, we are talking millions.
[00:08:29] But what was perhaps more concerning was what was going on with the central character in our story, Jho Low.
[00:08:38] Jho Low had always been quite a big spender, but ever since he started to get involved with 1MDB, the spending hit new levels.
[00:08:50] There was a headline from the New York Post in November 2009, just months after 1MDB was launched, which read “Big-spending Malaysian is the mystery man of city club scene”, and talked about how this man, Jho Low, had spent $160,000 in one night.
[00:09:11] But this was small fry, it was small potatoes, compared to what Jho Low went on to do.
[00:09:19] He bought penthouses, mansions, yachts, fine art, and threw huge parties with celebrities like Paris Hilton and Kim Kardashian.
[00:09:30] For his 31st birthday, in 2012, he threw the wildest party that Las Vegas has ever seen - and I imagine it has seen quite a few wild parties. For this party, Kanye West performed, Britney Spears burst out of a cake, and there were performances from Jamie Foxx, Busta Rhymes, Pharrel Williams, Chris Brown, and Psy, the guy who sang Gangnam Style.
[00:09:57] This event apparently cost millions of dollars, and it was really just a drop in the ocean for Jho Low.
[00:10:05] He had private jets, and bought art by Picasso, Van Gogh and Monet.
[00:10:11] He would fly around the world on a private jet, stopping to spend weeks on his yacht with Middle Eastern royalty, then jetting into Vegas to gamble millions of dollars, and essentially just living the life of the world’s biggest international playboy.
[00:10:28] He invested in a film studio, and spent $100 million to produce the film The Wolf of Wall Street, ironically enough a film about financial fraud.
[00:10:40] If you remember The Wolf of Wall Street, there is a scene in it where the central character crashes a Lamborghini. While in most normal films, they wouldn’t crash a real Lamborghini, they’d find a model one or something like that, apparently Jho Low said it was fine to buy a real one, then completely wreck it.
[00:11:03] So, the question was, where did he get all this money?
[00:11:08] At the start, Jho Low said that it was all family wealth, and that he had inherited this money from his grandfather. Low had certainly inherited some money from his family, but it was a tiny percentage of what he was now spending.
[00:11:26] Strangely enough, it seemed that not that many people asked tough questions about where the money really came from.
[00:11:35] Everyone was enjoying the ride - Jho Low was very generous, and would shower his friends with gifts and holidays. And of course, he would always pick up the bar tab.
[00:11:47] Who wouldn’t like a friend like that, right?
[00:11:50] But, as you might have guessed, the money didn’t really belong to Jho Low.
[00:11:56] He had stolen billions of dollars from 1MDB in one of the largest financial thefts in modern history.
[00:12:06] Low, despite his young age, had developed a sophisticated understanding of how the global financial system works, and more importantly, how he could transfer large amounts of money from 1MDB into his own pockets.
[00:12:22] He used a variety of methods and tricks to achieve this.
[00:12:27] Firstly, he made sure that everyone who was involved in this theft was very adequately compensated. From Emirati businessmen to private bankers, he made sure that everyone was also making lots of money.
[00:12:44] Secondly, this whole scheme wouldn’t have worked without offshore companies, which are very effective ways of hiding who actually owns something.
[00:12:55] Jho Low knew how offshore companies work, and how he could manage to transfer billions of dollars around the world without people noticing.
[00:13:04] He would create different shell companies in places like the Cayman Islands or Curacao, which would often have names that were very similar to the companies that 1MDB was supposedly dealing with.
[00:13:18] Then he would instruct the bankers to make payments into these shell companies, which were ultimately controlled by him.
[00:13:26] When that company received the money, he would then send the money on to various different anonymous bank accounts, or bank accounts that were held by anonymous companies, meaning that where the money came from, and whose money it actually was, was very hard to trace.
[00:13:46] Jho Low knew how to confuse the financial system, he knew all the tricks of the trade. He knew how the ultra-rich often hide their money, even money that is legally acquired, but he exploited all of these tricks to the maximum.
[00:14:03] And finally, Jho Low had an innate understanding of human greed.
[00:14:09] In the world of the ultra rich, he knew that people were always looking for more.
[00:14:15] If you make 10 million dollars, then you want to make 50, 10 million suddenly isn’t so interesting anymore.
[00:14:23] If you make 50, then you want to make 100. For many people, there was no limit to their greed.
[00:14:31] Low realised this with one of the bankers that he used to help raise money for 1MDB, a man called Tim Leissner.
[00:14:40] Now, Leissner was a partner at the prestigious Wall Street bank, Goldman Sachs.
[00:14:46] He was one of the senior dealmakers in Asia, and had managed to befriend Jho Low, and make Goldman Sachs the bank of choice for helping 1MDB raise money.
[00:14:59] Goldman Sachs made huge amounts of money from 1MDB, reportedly $600 million in commission, and for his part in this, Leissner was paid millions of dollars a year by the bank.
[00:15:14] But, millions of dollars a year, when you are hanging around with people spending billions, makes you look like a bit of a nobody.
[00:15:24] Leissner got greedy, and started siphoning off, taking large amounts of money for himself, reportedly taking $200 million dollars that he then spent on things like luxury property, yachts, and fine art.
[00:15:40] When you hear this story, and think about quite how brazen, quite how open, this theft was, you might think ‘how did they ever think they’d get away with it?’
[00:15:52] Low and his associates were stealing literally billions of dollars every single year, spending very heavily and very much in the public eye.
[00:16:03] Surely someone, somewhere was going to find out?
[00:16:08] Of course, this is easy to say with hindsight, but at the time, I guess they felt invincible.
[00:16:15] And who knows, maybe the party would still be going on were it not for a Swiss man called Xavier Justo. Justo had been an executive at a company called Petrosaudi, which was a former partner of 1MDB’s, and was heavily implicated in the theft of the money from the fund.
[00:16:36] Justo had been sacked by the company under circumstances that he felt were unfair, and had made copies of incriminating emails that showed the huge fraud that was going on. He had threatened to release the emails unless he was paid $2 million, which was the money that he felt he was owed by PetroSaudi.
[00:17:00] Long story short, Justo released these emails to a journalist, and the story broke.
[00:17:07] The curtain was lifted on this mysterious entity. The scale of the theft was bigger than anyone had imagined, and it looked like it wasn’t just Jho Low, but Najib Razak, the Malaysian Prime Minister, who was directly implicated.
[00:17:22] The emails revealed that a payment of $681 million was made directly into Razak’s personal bank account. Now, I should say that Razak denies that this was from 1MDB, and says that it was a personal donation from the Saudi royal family, but it does look very suspicious.
[00:17:45] There was a huge political scandal in Malaysia. Nabib Razak was kicked out of office after the general election of 2018, and just a few weeks ago, on July 28th, he was sentenced to 12 years in prison.
[00:18:00] Leissner, the Goldman Sachs banker, was made to pay a fine of 43.7 million in 2018, and is currently awaiting sentencing.
[00:18:13] His employer, Goldman Sachs, is on the hook for a huge compensation payout to the Malaysian government for its role in the fraud, and on July the 24th agreed to pay 1MDB 3.7 billion dollars.
[00:18:30] And Jho Low, our chubby protagonist?
[00:18:33] Nobody actually knows where he is, although he is rumoured to be living in China. His assets in the US have mainly been frozen, but he still likely has assets to tens, if not hundreds, of millions, if not billions of dollars that he stole from 1MDB.
[00:18:54] Unlike the bank account that you or I might have, Low’s money is hidden all over the world, in secret accounts in different countries, held at law firms, private banks, and is very hard to trace.
[00:19:08] He protests his innocence, saying that this is all a mistake and a misunderstanding, and he has hired expensive PR agencies to try and tell his story, and portray himself as a philanthropist and businessman, and not as the criminal that almost every government believes he is.
[00:19:29] So, this is a story that is ongoing. Jho Low is still at large, his yacht, penthouses and mansions may have been captured, but the nature of the global financial system means that he certainly isn’t without funds.
[00:19:45] And who, ultimately pays the price for all this?
[00:19:49] The sad thing is that it’s the Malaysian people.
[00:19:53] This money didn’t just come from nowhere. It’s the Malaysian people who are on the hook for it, and they will continue to pay the price for Low and Razak’s corruption for decades to come.
[00:20:06] Jho Low may have been the guy who always threw the best parties, and always picked up the bill at the end of the night. But unfortunately, with this story, this time, he has left the Malaysian people to pick up the bill.
[00:20:21] OK then, that is it for today’s episode on 1MDB, and the missing Malaysian billions.
[00:20:29] It is a fascinating story, and one that brings together high finance, greedy bankers, Hollywood celebrities, and politicians.
[00:20:38] It just makes you realise quite how intertwined all of these things are.
[00:20:44] As always, I would love to know what you thought of the show. You can email hi - hi@leonardoenglish.com
[00:20:52] And as a final reminder, if you are looking to improve your English in a more interesting way, to join a community of curious minds from all over the world, and to unlock the transcripts, subtitles, and key vocabulary, then the place to go to is leonardoenglish.com
[00:21:10] You've been listening to English Learning for Curious Minds by Leonardo English.
[00:21:15] I'm Alastair Budge. You stay safe and I'll catch you in the next episode.
[END OF PODCAST]
