On 22 June 2015, a squad of armed Thai police burst through the unlocked door, bundling Xavier Justo to the ground. The officers tied their plastic cuffs so tightly around Justo’s wrists that he bled on the dark tiled floor. The police quickly moved into his office, ripping out the computers and emptying the filing cabinets. Justo was charged with an attempt to blackmail his former employer, a little-known London-based oil-services company named PetroSaudi. But behind this seemingly mundane charge lay a much bigger story.
Justo had arrived in Thailand four years earlier, having fled the drab world of finance in London. According to his wife, Laura, the first sign of discontent was his discovery that his salary payments were only about half of what Justo said Tarek Obaid, PetroSaudi co-founder, had offered him. A slight that was compounded when he learned that the promised multimillion-pound bonus would be considerably less than that – more like six figures than seven.
When Justo left Geneva in 2009, PetroSaudi was little more than a name on a business card, formally incorporated in London with an address at an anonymous business unit near Victoria. Two years later, it had taken in $1.83 billion. PetroSaudi told potential partners that it controlled oil fields in central Asia, which it would put up as collateral to secure cash from state investors. This was the pitch that landed PetroSaudi’s founders a meeting with the Malaysian prime minister in August 2009.
Aboard a 92-meter long megayacht off the coast of Monaco, Obaid and Prince Turki spent the day with prime minister Najib, his adviser Jho Low, and other members of the prime minister’s family.
The multibillion-dollar joint venture deal was completed with extraordinary speed – in less than a month:
Shortly after the yacht meeting, on 28 August 2009, Obaid had introduced Low to Patrick Mahony – the company director who handled PetroSaudi’s business affairs.
According to documents seen by the Guardian, Low and Mahony met for lunch in New York on 9 September to discuss the joint venture.
After dining at Masa – a sushi restaurant where the set menu costs $540 a head – Mahony emailed Low the next day with an offer: “We know there are deals you are looking at where you may want to use PSI [PetroSaudi] … we would be happy to do that. You need to let us know where.”
In documents seen by the Guardian, on 30 September 2009 PetroSaudi appears to direct that the $700m be paid into an account controlled by the company
but three days later, when the compliance department at RBS Coutts requested further details about the name of the beneficiary account, the address given by 1MDB was the Good Star account.
On the same day, 2 October, Low emailed Mahony to say “Shld be cleared soon”.
But, according to the US justice department, the deal was merely a “pretense” for “the fraudulent transfer of more than $1bn from 1MDB to a Swiss bank account” controlled by Low – “a 29-year-old with no official position with 1MDB or PetroSaudi”. PetroSaudi has always maintained that all 1MDB funds were paid to entities owned by its shareholders.
PetroSaudi said the documents seen by the Guardian
are unreliable, stolen, fake and that they have been selectively quoted.
Six months earlier, Xavier Justo, a 48-year-old retired Swiss banker, was trying to broker a deal of cash for 90GB of data with a British journalist named Clare Rewcastle Brown. She had previously published story after story exposing corruption in the timber and oil industries that were despoiling the country’s rainforests for profit. Her email was hacked, Malaysian politicians labeled her an “enemy of the state,” and she received death threats, but she persisted.
Justo told Rewcastle Brown that he wanted $2m in exchange for the PetroSaudi-1MDB documents. It was, he said, the money he should have been paid when he left PetroSaudi.
She noticed that some of the most searching reporting on the scandal had appeared in Malaysia’s best-selling business weekly, the Edge. Sensing that she may have found a wealthy ally, Rewcastle Brown contacted the Edge’s owner, Tong Kooi Ong, a former banker turned media tycoon, who owned a number of business publications. Tong agreed to pay Justo $2m. Tong and Rewcastle Brown were immediately handed disk drives with the data. But the payment was never made. Justo did not want the money in cash, and he worried that a large transfer of funds into his account would look suspicious. Tong offered Justo one of his Monets as collateral – but Justo declined, and said “no, I trust you”. Rewcastle Brown finally had the documents she had been chasing for more than six months.
The data leaked included thousands of documents, 227,000 emails from the servers of his former employer, PetroSaudi, an oil services company that had signed the first major deal with 1MDB. PetroSaudi denies any wrongdoing. Without these files, there would have been no reckoning. The documents that Justo leaked have set off a chain reaction of investigations in at least half a dozen countries
PetroSaudi told the Guardian that Justo had “illegally obtained commercially sensitive, confidential and private documentation” and was in prison for “blackmail and extortion”. Justo was sentenced on 17 August 2015 at Southern Bangkok criminal court. At the trial he was granted a translator, but his lawyer did not turn up, sending an assistant instead. The trial and sentencing took 15 minutes. Justo got three years in a Thai jail for attempting to blackmail a UK company out of $2m.
“The Malaysian people were defrauded on an enormous scale,” said Andrew McCabe,
the FBI’s deputy director.
Najib has said that he did not commit “any offense or malpractice” and tightened his grip on power.
As prime minister and finance minister, he wielded enormous authority:
His attorney general cleared him of corruption earlier this year.
In April, the government pushed through harsh penalties and restrictions on free speech, particularly on social media.
Five executives of Tong’s The Edge Media Group – which had also published details of the PetroSaudi deal – were arrested for sedition.
The government also introduced a new law, ostensibly aimed at terrorists, which allowed suspects to be detained indefinitely.
In July 2015, the Edge weekly was banned from publishing.
On 1 August, a draconian national security act introduced by Najib comes into force – allowing the Malaysian government to establish martial law in any designated geographic area.
The law will dramatically expand the powers of Malaysia’s security forces – allowing for arrests, searches and seizures without warrants and the bulldozing of buildings.
During an investigation into the 1MDB scandal in January 2020, Najib Tun Razak asked the then UAE crown prince, Mohammed Bin Zayed to help fabricate a loan agreement showing his stepson had received financing from IPIC and not from 1MDB in an attempt to cover up the scandal, according to the audio clips revealed by Malaysian anti-corruption officials.
Four members of the investigating parliamentary accounts committee were promoted, without any choice, to cabinet positions, which left them with no power to continue investigating,
and the committee’s work was declared suspended.
The next day, a mysterious fire swept through police headquarters, where records of white-collar crimes were kept.
PetroSaudi claimed that the $700m had all gone to “PetroSaudi-owned entities” – denying, in other words, that companies controlled by Jho Low had received payments in the deal.
Goldman Sachs denied any wrongdoing. The bank told the Guardian: “We helped raise money for a sovereign wealth fund that was designed to invest in Malaysia. We had no visibility into whether some of those funds may have been subsequently diverted to other purposes.”
Low admits that he occasionally "consulted" with 1MDB, and was involved in a number of transactions connecting his own interests with those of 1MDB, which he claimed were "arms-length and legally sound."
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