COLUMN | Loose ends, part two: 1MDB convictions; British Virgin Islands convictions; Trafigura trial [Offshore Accounts]

We opened the week with the vindication in court of SBM’s much persecuted whistleblower who exposed the company’s massive corruption. Now we look at some more companies and individuals convicted of bribery, money laundering and embezzlement.

We close by asking “Why?”

Swiss court finds “obscenely greedy” duo guilty of US$1.8 billion 1MDB embezzlement

In August, the Swiss federal court finally found two former PetroSaudi executives guilty of the embezzlement of US$1.8 billion (with a “b”) from Malaysia’s sovereign wealth fund 1MDB, and guilty of over 600 counts of money laundering between 2009 and 2015.

Tarek Obaid, the former chief executive of a Geneva-based company called PetroSaudi, and Patrick Mahony, another executive at PetroSaudi, colluded with the notoriously brazen fugitive, Jho Low, and accomplices, including the former Prime Minister of Malaysia, Najib Razak, to plunder the fund through a series of fraudulent transactions. Despite its name, PetroSaudi was not exactly a major oil and gas producer, but its executives were masters of self-enrichment.

The judges sentenced Mr Obaid to seven years in prison and Mr Mahony received a six-year prison sentence. We should emphasise, like the Financial Times, that “under Swiss law, the judgment from the country’s central criminal court will not have full legal force until the defendants have exhausted their rights of appeal.”

Given their, er, “deep pockets,” this may take some time, but this conviction at least provides some relief to the long-suffering taxpayers of Malaysia whose cash was stolen in the US$6 billion 1MDB fraud. The court in Bellinzona ordered the duo to pay US$2 billion, plus interest, back to 1MDB, along with other fees.

Alice? Who is Alice de Chambrier?

Prosecutor Alice de Chambrier denounced the plunder of 1MDB as “the fraud of the century,” which is a little optimistic, given that there are still more than 75 years left. The prosecutor said that the PetroSaudi pair were “calculating and arrogant manipulators, with no scruples, and obscenely greedy.” We won’t disagree with that.

She claimed Mr Obaid and Mr Mahony used the stolen money to fund lavish personal lifestyles. Mme de Chambrier stated that they acquired gemstones and luxury properties in London and Geneva, and spent heavily on private jets and high-end yachts.

In 2009 the newly created Malaysian fund had invested US$1 billion in what its directors had been told was a legitimate joint venture with PetroSaudi, following a meeting on board the superyacht Alfa Nero off the south of France. Here the Malaysians were introduced to PetroSaudi’s founder, Saudi Arabian Prince Turki bin Abdullah al Saud, who has always maintained that he was unaware of the crimes that PetroSaudi’s executives were perpetrating.

The Edge has the edge over Alice

Malaysia’s The Edge ran a detailed forensic analysis of the transactions between PetroSaudi and 1MDB in 2015 (we repeat, in 2015, nine years ago), and named the different parties involved, which included some of the most distinguished legal and financing entities in the region.

I understand that Mme de Chambrier and her Swiss colleagues may not read every edition of The Edge, but it should not take nine years to convict the PetroSaudi leadership team of such a blatant and obvious fraud. Malaysia even managed to convict Mr Razak, its former prime minister, in 2020, and his wife Rosmah Mansor two years ago, before Switzerland had even indicted Mr Obaid and Mr Mahony.

We remind readers of Madam Mansor’s epic statement after her conviction in 2022, which we covered: "Nobody saw me taking the money, nobody saw me counting the money.... but if that's the conclusion, I leave it to God."

Mr Obaid was not so sanguine. His lawyer, Daniel Zappelli, said his client had “always contested the commission of any offence and will plead for a full acquittal before the Court of Appeal”.

Enough!

Former British Virgin Islands Premier behind bars

Another country, another crooked leader convicted. August also saw the former premier and finance minister of the British Virgin Islands (BVI), Andrew Fahie, sentenced in Florida to more than 11 years in prison for attempting to traffic cocaine, and for money laundering conspiracies.

We highlighted his arrest in 2022 when he blabbed all in Miami to a wiretapped American law enforcement official, whom he believed was a Mexican cartel member. He was arrested after stepping off a private jet there, which he thought contained US$700,000 as pre-payment from the Sinaloa narcotraffickers for a first cocaine shipment to the BVI, prosecutors said. 

Along with the former managing director of the BVI Ports Authority, Oleanvine Pickering Maynard, Mr Fahie had conspired to ship at least 3,000 kilograms of cocaine from Tortola to Miami. In intercepted communications, the pair had discussed setting up BVI shell companies to conceal the payments from the drug smugglers.

St Thomas Record reported that “each shipment of cocaine would generate US$78 million in revenue, and roughly US$7 million of that would be paid to Fahie and friends, prosecutors said. If the eight shipments made over four months were real, Fahie expected to be paid roughly US$56 million for helping transit 24,000 kilograms of cocaine. On top of the US$56 million, Fahie asked for US$500,000 to spread around as bribes.”

Nice work if you can get it.

In a deal with federal prosecutors in Florida, Ms Maynard pleaded guilty to a single count of conspiracy to import more than five kilograms of cocaine and was sentenced to nine years in jail. The prosecutors agreed to drop money laundering and racketeering charges against her after she agreed to testify against her former boss, Mr Fahie.

Her son Kadeem Maynard was also convicted and sentenced to 57 months in prison for his part in the conspiracy.

Micro-states, macro-problems

We remain concerned that micro-states like BVI are prone to capture by vested interests and organised crime.

Our recent research into the Dark Fleet of dangerous and aged oil tankers found that numerous micro-states, including the Cook Islands, Palau, Sao Tome and Principe, the Comoros, and Gabon lie at the heart of the illicit oil smuggling business.

The 1MDB fraudsters were also adept at using Caribbean shell companies to receive and launder the proceeds of their embezzlement. Leading crook Jho-Low even managed to acquire a Cypriot passport upon the recommendation of the archbishop of the island after paying US$5.6 million to the government.

In September 2020, Mr Fahie had pledged that BVI would introduce a public register of company owners in the territory. Surprise! That has still not happened, and secrecy continues to conceal the owners of shell companies there and in many of the neighbouring Caribbean islands, including the Cayman Islands and Antigua and Barbuda.

Oil trading companies: drowning in malfeasance

Back in 2022, we noted that in oil trading house Glencore had been fined a total of around US$1.5 billion (with a “b”) for bribery and corruption over several years around 2010 in multiple jurisdictions in Africa. In April, we covered the US$661 million in fines and redress paid by oil trader Gunvor for bribery in Ecuador.

Reuters reported that Javier Aguilar, a former oil trader at Vitol, had been convicted of corruption charges in New York earlier this year after he paid more than US$1 million in bribes to officials at the state-owned oil companies in Ecuador and Mexico. Two Pemex staff testified that Mr Aguilar had paid them around US$600,000 in bribes to ensure that a US$200 million contract for the supply of ethane was awarded to Vitol and he faces further charges in Houston.

Then, in August, we reported how the UK authorities had charged Alex Beard, Glencore’s former head of oil, and four of his former colleagues, with… corruption.

One more big case ahead: Trafigura trial in December

Now there is a trial due in December in Switzerland for oil trading house Trafigura Group and its former Chief Operating Officer Mike Wainwright. They face corruption charges for allegedly paying US$5 million in bribes to an unnamed former chief executive of Angola’s state-owned oil company Sonangol for preferential vessel chartering and bunkering deals for Trafigura. It’s always Sonangol, isn’t it?

The case has been scheduled to go to court in December. Mr Wainwright has denied the charges against him. Trafigura pleaded guilty to separate corruption charges in the USA in March, but has said it will defend itself in court in Switzerland.

Why do we see so many corruption cases involving oil trading houses?

We see so many cases because the profits from oil trading can be so large.

The Financial Times recently reported that Vitol paid its 450 partners US$14 million each as bonuses for the company’s record profits in 2023. You read that right; 450 Vitol partners shared US$6.4 billion (with a “b”) and received fourteen million US dollars each for one year of work.

That is more than the English Premier League paid out to all its footballers, and just less than the US$6.6 billion X-rated website OnlyFans paid out to all its adult content producers in 2023. But there were four million OnlyFans content creators, and just 450 Vitol partners.

Vitol, Trafigura, and Gunvor together made a total of US$46 billion in profits in 2022 and 2023, according to calculations by the Financial Times.

Big money attracts greedy people, and greedy people are drawn to corruption to make more money ~ whether in stealing from the Malaysian sovereign wealth fund, from attempting to smuggle drugs to a Caribbean tax haven, or paying off poorly paid officials in state oil companies.

Regardless of what happens in court in December, the prospect of a US$14 million annual bonus will always attract the unscrupulous to an industry, unfortunately, whilst those who drill, produce, and transport the product, often at great personal risk, are paid a pittance.

Background reading

We urge all readers to refresh themselves on the 1MDB scandal through the excellent coverage by The Edge. The book Billion Dollar Whale by reporters Tom Wright and Bradley Hope digs in depth into how fat-faced fraudster Jho-Low siphoned billions of dollars from 1MDB assisted by PetroSaudi’s crooked management.

Clare Rewcastle-Brown’s excellent The Sarawak Report: Inside the story of the 1MDB expose highlights the work the author performed to followed a trail of corruption in 1MDB what led her to Prime Minister Najib Razak himself. If it has happened once, it will happen again with another sovereign wealth fund.

The St Thomas Record has done sterling work on the Andrew Fahie case (here and here).

It is not just the trading houses that have been accused of paying bribes. See our coverage of shipyard Seatrium and offshore and onshore fabricator McDermott here for a reminder of the rampant bribery which has blighted the industry for too long.