Settling the civil action would free up prosecutors to pursue the Goldman bond issued on behalf of 1MDB, which netted the bank suspiciously obsence commissions of up to 11% - Sarawak Report
Sarawak Report has learnt that Jho Low’s new legal team, headed by the well-connected former federal prosecutor and New Jersey governor Chris Christie, has already obtained a high-level meeting with officials of the DOJ and that at that meeting they offered to come to a settlement on behalf of the fugitive Malaysian advisor to 1MDB.
This would represent an effective acknowledgement by Low, who is currently believed to be holed up in China, that he is unlikely to be able to persuade the US courts to return some $1.2 billion in assets seized from him alone, which investigators have traced to money stolen from Malaysia’s development fund.
However, by cutting a deal the billionaire, who is facing criminal charges in Malaysia, Singapore, Switzerland and elsewhere, including the United States, will be hoping to retain some of the value of the assets.
Malaysia Kept On Sidelines?
Malaysian entities have expressed concern that the United States authorities may be tempted to negotiate with Jho Low’s new, high-powered legal team, in order to close a case that could otherwise carry on for years. Notably, the US recently refused to grant a Malaysian official request for a guarantee it would return all the money back from the assets seized.
“It doesn’t mean that the United States will not return the money to Malaysia, but it does mean the US is insisting on keeping control over the process and that might include settling the case for less than the entire amount”
one person who is well versed in the matter explained to Sarawak Report. It is further understood that the approach from Jho Low’s team has not yet been formally discussed with the Malaysian authorities, who may very well react with dismay at the prospect of any settlement of this nature.
Particularly galling to Malaysians is the likelihood that Low’s new and well-connected legal advisors are being generously paid by money that was itself stolen from 1MDB. US investigators have been reported as concluding that the origin of the cash received by Christie and one of President Donald Trump’s go-to law firms, Kasowitz Benson Torres, is indeed 1MDB.
Likewise, the money sent to pay the libel lawyers Schillings in the UK, which has been doing its best to disrupt the publising othe the book The Sarawak Report as well as the Wall Street Journal’s own book in Britain, is also thought to trace back to 1MDB.
Going For Goldman Sachs
The apparent willingness of US prosecutors to discuss such matters with Low’s new team and the news that they may indeed be tempted to reach a deal, may indicate that the DOJ sleuths are already focusing on other aspects of the case, informed observers have told Sarawak Report: namely the pursuit of the banking giant Goldman Sachs. Settling the civil action would free up prosecutors to pursue the Goldman bond issues on behalf of 1MDB, which netted the bank suspiciously obscene commissions of up to 11%.
The bank has earned the anger and ill-feeling of countless Americans as a result of its pivotal role in causing the crash of 2008 and yet none of its bankers have been brought to book so far. The apparent negligence and huge sums earned through 1MDB have provided US investigators their most compelling evidence yet against what many believe to be rogue behaviour by the major bank.
It was Sarawak Report that first exposed the huge commissions being earned by Goldman Sachs from 1MDB in 2013, by publishing the terms of two so-called power purchase bonds, which together with a later third offering netted commissions totalling just under $600 million for the bank. The market price for such services was a fraction of that amount.
The former South East Asia boss, Tim Leissner has already been picked up in the United States and is understood to be cooperating with the DOJ enquiries. A new case against the global bank is where 1MDB now seems headed as it gains even more international significance.
Settling the civil action would free up prosecutors to pursue the Goldman bond issued on behalf of 1MDB, which netted the bank suspiciously obsence commissions of up to 11% - Sarawak Report
Sarawak Report has learnt that Jho Low’s new legal team, headed by the well-connected former federal prosecutor and New Jersey governor Chris Christie, has already obtained a high-level meeting with officials of the DOJ and that at that meeting they offered to come to a settlement on behalf of the fugitive Malaysian advisor to 1MDB.
This would represent an effective acknowledgement by Low, who is currently believed to be holed up in China, that he is unlikely to be able to persuade the US courts to return some $1.2 billion in assets seized from him alone, which investigators have traced to money stolen from Malaysia’s development fund.
However, by cutting a deal the billionaire, who is facing criminal charges in Malaysia, Singapore, Switzerland and elsewhere, including the United States, will be hoping to retain some of the value of the assets. Malaysia Kept On Sidelines?
Malaysian entities have expressed concern that the United States authorities may be tempted to negotiate with Jho Low’s new, high-powered legal team, in order to close a case that could otherwise carry on for years. Notably, the US recently refused to grant a Malaysian official request for a guarantee it would return all the money back from the assets seized.
“It doesn’t mean that the United States will not return the money to Malaysia, but it does mean the US is insisting on keeping control over the process and that might include settling the case for less than the entire amount”
one person who is well versed in the matter explained to Sarawak Report. It is further understood that the approach from Jho Low’s team has not yet been formally discussed with the Malaysian authorities, who may very well react with dismay at the prospect of any settlement of this nature.
Particularly galling to Malaysians is the likelihood that Low’s new and well-connected legal advisors are being generously paid by money that was itself stolen from 1MDB. US investigators have been reported as concluding that the origin of the cash received by Christie and one of President Donald Trump’s go-to law firms, Kasowitz Benson Torres, is indeed 1MDB.
Likewise, the money sent to pay the libel lawyers Schillings in the UK, which has been doing its best to disrupt the publising othe the book The Sarawak Report as well as the Wall Street Journal’s own book in Britain, is also thought to trace back to 1MDB. Going For Goldman Sachs
The apparent willingness of US prosecutors to discuss such matters with Low’s new team and the news that they may indeed be tempted to reach a deal, may indicate that the DOJ sleuths are already focusing on other aspects of the case, informed observers have told Sarawak Report: namely the pursuit of the banking giant Goldman Sachs. Settling the civil action would free up prosecutors to pursue the Goldman bond issues on behalf of 1MDB, which netted the bank suspiciously obscene commissions of up to 11%.
The bank has earned the anger and ill-feeling of countless Americans as a result of its pivotal role in causing the crash of 2008 and yet none of its bankers have been brought to book so far. The apparent negligence and huge sums earned through 1MDB have provided US investigators their most compelling evidence yet against what many believe to be rogue behaviour by the major bank.
It was Sarawak Report that first exposed the huge commissions being earned by Goldman Sachs from 1MDB in 2013, by publishing the terms of two so-called power purchase bonds, which together with a later third offering netted commissions totalling just under $600 million for the bank. The market price for such services was a fraction of that amount.
The former South East Asia boss, Tim Leissner has already been picked up in the United States and is understood to be cooperating with the DOJ enquiries. A new case against the global bank is where 1MDB now seems headed as it gains even more international significance.
Having his say: A screengrap of www.jho-low.com website which contained the letter
Rogue businessman insists he is not guilty via letter on personal website
PETALING JAYA - Fugitive businessman Low Taek Jho has proclaimed his innocence over allegations related to 1Malaysia Development Bhd (1MDB) in a signed letter uploaded to his personal website.
Low, also known as Jho Low, admitted that in hindsight, he might have done things differently.
"But any mistakes I made do not amount to the sweepingly broad and destructive allegations being made against me.
"Let me be clear: I am innocent," Low wrote.
The website, www.jho-low.com, also contains legal documents related to the 1MDB case, news media articles on him and 1MDB as well as statements by Low’s lawyers.
A notice on the website said that jho-low.com was created on behalf of Low through his legal counsel to provide information to the public.
A search on the Internet archive shows that the website has been updated since 2015 but until recently only contained general information on Low.
According to the WHOIS database, jho-low.com was created on June 2, 2014.
Yesterday, the link to the website was shared extensively on social media, after the undated letter was posted.
“I only ask that everyone – courts, prosecutors, and the general public – keep an open mind until all of the evidence comes to light,” Low wrote in the letter.
The financier wrote that for the past several years, he had been subjected to a series of allegations around the globe in relation to the operations of 1MDB.
He said many of the allegations had originated from blog posts, “improper” leaks from governmental agencies around the world, or unproven allegations filed in court, where he had never been afforded an opportunity to set the record straight.
“I have been paraded in effigy through the streets of Kuala Lumpur, and photographs from my younger days plastered in tabloids across the globe.
“It has become clear that there is no platform where objective information can be presented regarding this issue – and no jurisdiction that hasn’t been poisoned by gossip, innuendo, and unproven allegations.
“This website is an effort to change that,” Low wrote.
The 36-year-old Penangite is described as a “global philanthropist, investor and entrepreneur” on the website.
A check with an official from a public affairs firm representing Low confirmed the veracity of the website.
Meanwhile, Swiss whistleblower Xavier Justo, in an immediate response, said: “The Jho Low website does not show any proof of his innocence.
“It is just a bunch of legal documents showing that he wants a few cases to be dismissed.
“It’s the way the justice system works, you can be as guilty as guilty is and ask for a case to be dismissed. It’s not proof of innocence,” he told The Star.
The former PetroSaudi International executive said he was appalled at Low’s attempts to defend himself through the website.
“Any decent person will face justice (in court) if he can prove that he is innocent,” he said.
He added that he was amazed at Low’s attempts to try to “stop the distribution of books, abuse the justice system and hire public relations officers to defend his reputation while also creating a website to tell fairy tales”.
Low’s current whereabouts are unknown; he has been speculated to be hiding in China or the Caribbean.
He and his father, Tan Sri Low Hock Peng, were charged in absentia in Malaysia last month over money allegedly stolen from 1MDB.
Last week, Low, through the London-based law firm Schillings, sought to ban the books, The Sarawak Report by Clare Rewcastle Brown and Billion Dollar Whale by The Wall Street Journal’s Tom Wright and Bradley Hope, from going on sale.
Having his say: A screengrap of www.jho-low.com website which contained the letter
Rogue businessman insists he is not guilty via letter on personal website
PETALING JAYA - Fugitive businessman Low Taek Jho has proclaimed his innocence over allegations related to 1Malaysia Development Bhd (1MDB) in a signed letter uploaded to his personal website.
Low, also known as Jho Low, admitted that in hindsight, he might have done things differently.
"But any mistakes I made do not amount to the sweepingly broad and destructive allegations being made against me.
"Let me be clear: I am innocent," Low wrote.
The website, www.jho-low.com, also contains legal documents related to the 1MDB case, news media articles on him and 1MDB as well as statements by Low’s lawyers.
A notice on the website said that jho-low.com was created on behalf of Low through his legal counsel to provide information to the public.
A search on the Internet archive shows that the website has been updated since 2015 but until recently only contained general information on Low.
According to the WHOIS database, jho-low.com was created on June 2, 2014.
Yesterday, the link to the website was shared extensively on social media, after the undated letter was posted.
“I only ask that everyone – courts, prosecutors, and the general public – keep an open mind until all of the evidence comes to light,” Low wrote in the letter.
The financier wrote that for the past several years, he had been subjected to a series of allegations around the globe in relation to the operations of 1MDB.
He said many of the allegations had originated from blog posts, “improper” leaks from governmental agencies around the world, or unproven allegations filed in court, where he had never been afforded an opportunity to set the record straight.
“I have been paraded in effigy through the streets of Kuala Lumpur, and photographs from my younger days plastered in tabloids across the globe.
“It has become clear that there is no platform where objective information can be presented regarding this issue – and no jurisdiction that hasn’t been poisoned by gossip, innuendo, and unproven allegations.
“This website is an effort to change that,” Low wrote.
The 36-year-old Penangite is described as a “global philanthropist, investor and entrepreneur” on the website.
A check with an official from a public affairs firm representing Low confirmed the veracity of the website.
Meanwhile, Swiss whistleblower Xavier Justo, in an immediate response, said: “The Jho Low website does not show any proof of his innocence.
“It is just a bunch of legal documents showing that he wants a few cases to be dismissed.
“It’s the way the justice system works, you can be as guilty as guilty is and ask for a case to be dismissed. It’s not proof of innocence,” he told The Star.
The former PetroSaudi International executive said he was appalled at Low’s attempts to defend himself through the website.
“Any decent person will face justice (in court) if he can prove that he is innocent,” he said.
He added that he was amazed at Low’s attempts to try to “stop the distribution of books, abuse the justice system and hire public relations officers to defend his reputation while also creating a website to tell fairy tales”.
Low’s current whereabouts are unknown; he has been speculated to be hiding in China or the Caribbean.
He and his father, Tan Sri Low Hock Peng, were charged in absentia in Malaysia last month over money allegedly stolen from 1MDB.
Last week, Low, through the London-based law firm Schillings, sought to ban the books, The Sarawak Report by Clare Rewcastle Brown and Billion Dollar Whale by The Wall Street Journal’s Tom Wright and Bradley Hope, from going on sale.
Former premier Najib Abdul Razak was arrested at his residence in Jalan Duta, Kuala Lumpur, this afternoon, according to MACC chief commissioner Mohd Shukri Abdull.
The arrest was carried out in relation to the commission's investigation into the SRC International issue.
Speculation is also rife that the former premier could be charged tomorrow.
Shukri Abdul told the media that the arrest took place at 3pm and the former premier has been taken to the commission's headquarters in Putrajaya for further questioning.
Previously, MACC had recorded Najib's statement twice with regard to the SRC International issue.
Last Friday, Malaysiakini had reported that there is a strong likelihood the former premier would be arrested this week.
Former premier Najib Abdul Razak was arrested at his residence in Jalan Duta, Kuala Lumpur, this afternoon, according to MACC chief commissioner Mohd Shukri Abdull.
The arrest was carried out in relation to the commission's investigation into the SRC International issue.
Speculation is also rife that the former premier could be charged tomorrow.
Shukri Abdul told the media that the arrest took place at 3pm and the former premier has been taken to the commission's headquarters in Putrajaya for further questioning.
Previously, MACC had recorded Najib's statement twice with regard to the SRC International issue.
Last Friday, Malaysiakini had reported that there is a strong likelihood the former premier would be arrested this week.
Low Taek Jho and an official from 1MDB had hired Goldman Sachs Group to underwrite the US$1.75 billion bond offering.
SINGAPORE: In a private dining room at Singapore's Taste Paradise restaurant, over a meal of abalone and suckling pig, two Goldman Sachs Group Inc bankers were explaining a US$1.75 billion bond offering to six executives of a Swiss bank.
It was early 2012, and joining Goldman bankers Roger Ng and Tim Leissner that day were a young Malaysian financier named Low Taek Jho and an official from state investment fund 1Malaysia Development Bhd, known as 1MDB, which had hired the New York bank to underwrite the bond sale.
Now, people familiar with the matter say, investigators from Singapore to the United States are looking more closely at the roles of Mr Ng and Mr Leissner, who have both left Goldman. And they're asking what happened in that private
dining room named after the first emperor of a unified China, Qin Shi Huang.
In particular, they're examining how US$577 million in proceeds from a bond sale that May ended up a day later in an account at BSI SA in Switzerland - the same bank whose executives were at the Taste Paradise.
The lunch, previously unreported, brought together the key parties in
what has become the biggest financial scandal in Malaysia's history,
involving the alleged misappropriation of US$4.5 billion of 1MDB funds.
It was the culmination of numerous conversations as BSI bankers and
compliance officials sought clarity on the deal.
The BSI account belonged to a British Virgin Islands entity known as
Aabar Investments PJS Ltd., which US court documents say was used to
siphon off about US$1.4 billion from two 2012 bond sales, including the
offering discussed at the lunch.
The man who led BSI bank into the abyss
Mr Leissner, Goldman's former chairman of South-east Asia and lead
banker for three 1MDB bond sales, is now barred from the world of
finance in Singapore and the US.
Prosecutors in Malaysia and Singapore are turning their attention to
Mr Ng, Mr Leissner's junior, who introduced several parties central to
the scandal, the people said. Malaysian authorities are said to be
preparing a warrant for Mr Ng's arrest, people familiar with the matter
said earlier this month.
Mr Ng couldn't be reached for comment. A lawyer for Mr Leissner, Mr
Marc Harris, declined to comment, as did Mr Edward Naylor, a Hong
Kong-based spokesman for Goldman Sachs, and an official at EFG
International AG, which acquired BSI in 2016. A representative for Mr
Low did not reply to emails.
Recouping fees
The 1MDB investigation has quickened since Malaysian Prime Minister
Mahathir Mohamad returned to power in May. Tun Dr Mahathir has called
former premier Najib Razak, who set up the fund in 2009, a thief and
made resolving the case one of his priorities. Several arrest warrants -
including one for Mr Low, described by prosecutors as a key figure in
the plot - have already been issued.
Dr Mahathir said in a June 22 Bloomberg Television interview that
Malaysia is also seeking to recoup some of the almost US$600 million in
fees Goldman made from the three deals, which were arranged by the
bank's London-based unit.
"What we earned from the debt transactions reflected the risks we
assumed at the time, specifically movement in credit spreads tied to the
specific bonds, hedging costs and underlying market conditions," Mr
Naylor, the Goldman spokesman, said last week in response to Dr
Mahathir's comments.
Datuk Seri Najib has repeatedly denied wrongdoing and called the probe "political revenge."
Genteel banker
Mr Ng, a well-connected Malaysian banker, joined Goldman in 2005 from
Deutsche Bank AG, where he won mandates for several bond deals. He
provided an introduction to lawmakers in the state of Terengganu, which
in 2009 hired Goldman to advise it on the creation of the Terengganu
Investment Authority (TIA), the people said.
Mr Ng was promoted to managing director that year. At TIA, which
eventually became 1MDB, Mr Ng crossed paths with Mr Low, a Malaysian
dealmaker and adviser to the fund.
As Goldman won deals from 1MDB, Mr Ng and Mr Leissner forged a
friendship, which extended to their wives, according to the people.
Investigators are now also looking at a transfer shortly after the May
2012 bond sale of US$17.5 million to Mr Ng's wife, Malaysian lawyer Lim
Hwee Bin, from Mr Leissner's former wife Judy Chan, who runs a vineyard
in China, the people said. Ms Lim and Ms Chan did not reply to emails
and phone calls.
Mr Ng is described by those who know him as the antithesis of a Wall
Street investment banker - genteel, valuing personal ties and averse to
asking hard questions. He was content letting his boss champion the 1MDB
deals. Mr Leissner, who arrived late at the 2012 lunch and left early
to catch a flight, made most of the presentation, leaving Mr Ng and Mr
Low to fill in the gaps, according to the people familiar with the
meeting.
While Mr Ng played an important role facilitating the US$1.75 billion
bond deal, dubbed Project Magnolia, he wasn't involved in the two other
bonds Goldman underwrote for 1MDB, the people said. Mr Ng left the bank
in 2014, a few months before the missing 1MDB funds became public.
Now managing director for Asia at energy-drinks company Celsius
Holdings Inc, where Mr Leissner and his current wife Kimora Lee are both
investors, Mr Ng has been barred from travelling by the Malaysian
Anti-Corruption Commission, the people said.
He and his wife live in a gated community in Damansara Heights in
Kuala Lumpur, where houses sell for RM5 million (S$1.7 million) to RM25
million.
Mr Ng joined Boca Raton, Florida-based Celsius in 2016, the same year
Mr Leissner became co-chairman of the board. Mr Leissner resigned in
May 2017, though he remains one of Celsius' largest shareholders. Hong
Kong billionaire Li Ka Shing and Mr Russell Simmons, the former husband
of Mr Leissner's current wife, are also investors.
Ms Megan Bell, a spokesman for Celsius, declined to comment.
Low Taek Jho and an official from 1MDB had hired Goldman Sachs Group to underwrite the US$1.75 billion bond offering.
SINGAPORE: In a private dining room at Singapore's Taste Paradise restaurant, over a meal of abalone and suckling pig, two Goldman Sachs Group Inc bankers were explaining a US$1.75 billion bond offering to six executives of a Swiss bank.
It was early 2012, and joining Goldman bankers Roger Ng and Tim Leissner that day were a young Malaysian financier named Low Taek Jho and an official from state investment fund 1Malaysia Development Bhd, known as 1MDB, which had hired the New York bank to underwrite the bond sale.
Now, people familiar with the matter say, investigators from Singapore to the United States are looking more closely at the roles of Mr Ng and Mr Leissner, who have both left Goldman. And they're asking what happened in that private dining room named after the first emperor of a unified China, Qin Shi Huang.
In particular, they're examining how US$577 million in proceeds from a bond sale that May ended up a day later in an account at BSI SA in Switzerland - the same bank whose executives were at the Taste Paradise.
The lunch, previously unreported, brought together the key parties in what has become the biggest financial scandal in Malaysia's history, involving the alleged misappropriation of US$4.5 billion of 1MDB funds. It was the culmination of numerous conversations as BSI bankers and compliance officials sought clarity on the deal.
The BSI account belonged to a British Virgin Islands entity known as Aabar Investments PJS Ltd., which US court documents say was used to siphon off about US$1.4 billion from two 2012 bond sales, including the offering discussed at the lunch.
The man who led BSI bank into the abyss
Mr Leissner, Goldman's former chairman of South-east Asia and lead banker for three 1MDB bond sales, is now barred from the world of finance in Singapore and the US.
Prosecutors in Malaysia and Singapore are turning their attention to Mr Ng, Mr Leissner's junior, who introduced several parties central to the scandal, the people said. Malaysian authorities are said to be preparing a warrant for Mr Ng's arrest, people familiar with the matter said earlier this month.
Mr Ng couldn't be reached for comment. A lawyer for Mr Leissner, Mr Marc Harris, declined to comment, as did Mr Edward Naylor, a Hong Kong-based spokesman for Goldman Sachs, and an official at EFG International AG, which acquired BSI in 2016. A representative for Mr Low did not reply to emails.
Recouping fees
The 1MDB investigation has quickened since Malaysian Prime Minister Mahathir Mohamad returned to power in May. Tun Dr Mahathir has called former premier Najib Razak, who set up the fund in 2009, a thief and made resolving the case one of his priorities. Several arrest warrants - including one for Mr Low, described by prosecutors as a key figure in the plot - have already been issued.
Dr Mahathir said in a June 22 Bloomberg Television interview that Malaysia is also seeking to recoup some of the almost US$600 million in fees Goldman made from the three deals, which were arranged by the bank's London-based unit.
"What we earned from the debt transactions reflected the risks we assumed at the time, specifically movement in credit spreads tied to the specific bonds, hedging costs and underlying market conditions," Mr Naylor, the Goldman spokesman, said last week in response to Dr Mahathir's comments.
Datuk Seri Najib has repeatedly denied wrongdoing and called the probe "political revenge."
Genteel banker
Mr Ng, a well-connected Malaysian banker, joined Goldman in 2005 from Deutsche Bank AG, where he won mandates for several bond deals. He provided an introduction to lawmakers in the state of Terengganu, which in 2009 hired Goldman to advise it on the creation of the Terengganu Investment Authority (TIA), the people said.
Mr Ng was promoted to managing director that year. At TIA, which eventually became 1MDB, Mr Ng crossed paths with Mr Low, a Malaysian dealmaker and adviser to the fund.
As Goldman won deals from 1MDB, Mr Ng and Mr Leissner forged a friendship, which extended to their wives, according to the people. Investigators are now also looking at a transfer shortly after the May 2012 bond sale of US$17.5 million to Mr Ng's wife, Malaysian lawyer Lim Hwee Bin, from Mr Leissner's former wife Judy Chan, who runs a vineyard in China, the people said. Ms Lim and Ms Chan did not reply to emails and phone calls.
Mr Ng is described by those who know him as the antithesis of a Wall Street investment banker - genteel, valuing personal ties and averse to asking hard questions. He was content letting his boss champion the 1MDB deals. Mr Leissner, who arrived late at the 2012 lunch and left early to catch a flight, made most of the presentation, leaving Mr Ng and Mr Low to fill in the gaps, according to the people familiar with the meeting.
While Mr Ng played an important role facilitating the US$1.75 billion bond deal, dubbed Project Magnolia, he wasn't involved in the two other bonds Goldman underwrote for 1MDB, the people said. Mr Ng left the bank in 2014, a few months before the missing 1MDB funds became public.
Now managing director for Asia at energy-drinks company Celsius Holdings Inc, where Mr Leissner and his current wife Kimora Lee are both investors, Mr Ng has been barred from travelling by the Malaysian Anti-Corruption Commission, the people said.
He and his wife live in a gated community in Damansara Heights in Kuala Lumpur, where houses sell for RM5 million (S$1.7 million) to RM25 million.
Mr Ng joined Boca Raton, Florida-based Celsius in 2016, the same year Mr Leissner became co-chairman of the board. Mr Leissner resigned in May 2017, though he remains one of Celsius' largest shareholders. Hong Kong billionaire Li Ka Shing and Mr Russell Simmons, the former husband of Mr Leissner's current wife, are also investors.
Ms Megan Bell, a spokesman for Celsius, declined to comment.
On the rise: A man walks past the Employees
Provident Fund headquarters in Kuala Lumpur. Remuneration of GLC chiefs,
senior management and directors have been on the uptrend following a
transformation initiative to make them more competitive commercially.
Overpaid CEOs and social duties of GLCs set for review
The new government has clearly said that there is a need to review the role of GLCs and the remuneration paid out to their top executives
A GLANCE at one of the annual reports of the country’s government-linked companies (GLCs) reveals that its chief human resource officer earned close to a million ringgit or about RM80,000 per month, last year.
Other senior personnel were also compensated with generous remuneration, with its chief executive taking home over one and the half million ringgit in financial year 2017.
More importantly, this was at a company that had courted much controversy in recent times over allegations of mismanagement and under-performance.
Such a scenario, however, is not uncommon at GLCs, where remuneration of key executives tend to run in the millions but performances sometimes leave much to be desired.
By definition, GLCs are companies where the government has a direct majority stake via their entities such as Khazanah Nasional, Employees Provident Fund, Permodalan Nasional Bhd (PNB), the Armed Forces Fund (Lembaga Tabung Angkatan Tentera) and the Pilgrims Fund (Lembaga Tabung Haji).
In recent years, remuneration of GLC chiefs, senior management and its directors have been on the uptrend following a transformation initiative to make them more competitive commercially.
The thinking behind this is that in order to attract talent – subjective as the definition of that may be – top dollar should be paid.
Some, however, argue that GLCs should in fact prioritise national service a little more.
Universiti Malaya’s Faculty of Economics and Administration professor of political economy Edmund Terence Gomez says GLCs have social obligations.
“What this essentially means is that GLCs cannot operate in a purely commercial manner as they also have to look at the social dimension,” he says. “The GLC professionals have many times articulated that they are doing national service. Going on that alone, one can argue that they shouldn’t be paid private sector salaries,” Terence adds.
And so it is now, there is a disquiet building up among GLCs following the change in government.
The new government has clearly said that there is a need to review the role of GLCs and the remuneration paid out to their top executives and senior management.
In this regard, the Pakatan Harapan government is understood to be mulling over making drastic changes in the appointment and remuneration of key directors at GLCs which include government agencies.
It was reported recently that the Council of Eminent Persons, headed by Tun Daim Zainuddin, who was Finance Minister in the 1980s, has requested details of the salaries of some of the top executives at GLCs as part of the review.
Already, there have been a couple of GLC chief executives who have left and more of this is expected to materialise over the coming weeks.
“It appears to be a purge of Tan Sri Nor Mohamed Yakcop’s boys,” quips an industry observer, referring to the veteran politician who was instrumental in the revamp and transformation of Khazanah which started in 2005 and subsequently, driving the GLC transformation initiative.
UM’s Terence says if the new government is to appoint new individuals, it must ensure that the process is transparent.
“If you are removing these people, who are you replacing them with? More importantly how are you selecting these people?
He adds there needs to be a transparent mechanism in the appointment of this new breed of professionals that will be brought in and what must also be looked into is the kind of check and balances being put in place to ensure governance.
“There should be a debate on these things,” he says.
Economist Yeah Kim Leng believes that a review is timely and appropriate as part of a deeper institutional and structural reform.
“The broad aims are firstly, to reduce excessive payoffs which don’t commensurate with performance and secondly, to address the widening wage and benefits gap between the top and bottom rungs of the organisation,” he says.
Such rationalisation will result in a more equitable salary structure as well as raise the generally depressed wages of middle management and support staff which form the largest number of most organisations, Yeah adds.
Unfair advantage
The role of a head honcho, be it at a GLC or non-GLC, is seldom a walk in the park.
CEOs make critical operational decisions that affect everything from future business directions to the health of a company’s balance sheet and employee morale.
The job generally entails long hours and tremendous pressure to meet expectations of shareholders and stakeholders.
But again, while local GLCs have been key drivers of the economy, one key feature is that they are ultimately owned by the government.
This, some argue, give GLCs unfair advantages such as access to cheap funding and political patronage over their private counterparts.
So, is running a GLC more of a stewardship role as opposed to an entrepreneurship role?
Therein lies the issue that in turn will have a bearing on the remuneration levels of GLC heads.
Minority Shareholders Watch Group (MSWG) chief executive office Devanesan Evanson puts it this way.
“Entrepreneurs have their skin in the game in that there are often the major or substantial shareholder in a company.
“It is in their direct interest to perform as this will be translated into share price appreciation which will impact the value of their shareholdings – this is motivation to grow the entrepreneurial spirit,” he says.
On the other hand, GLC heads do not have their skin in the game save for their limited shareholding through ESOS or share grant schemes.
“If a GLC loses money, the impact on them is limited. They may be prepared to take perverse risks as the eventual loser is the government-linked investment companies or GLICs (and the minority shareholders of the GLC), which eventually are the people who are the members or subscribers of the GLICs.
“In that way, we are not comparing apple to apple and yet, we need talent to run GLCs.
“So we can conclude that, we need to pay for talent at GLCs but it should not be as much compared to what one would pay the CEO of a firm which he started,” Devanesan says, noting that remuneration of some of the GLC heads have risen too fast in recent years.
Rising remuneration is a given, others say, as the government had recruited top talent from the private sector to helm these companies.
A case in point is Axiata Group Bhd, which has done relatively well with the infusion of the “entrepreneurial spirit” under the helm of president and group CEO Tan Sri Jamaludin Ibrahim, who has helmed the Khazanah-owned telco since 2008, they point out.
Prior to that, Jamaludin was with rival Maxis Communications Bhd, a private company controlled by tycoon Ananda Krishnan.
Other GLCs which have performed consistently over recent years include banks like Malayan Banking Bhd
and CIMB Group Holdings Bhd which have expanded their operations out of Malaysia, carving a brand name for themselves regionally.
Under a 10-year transformation programme for GLCs initiated in 2005, companies were given quantitative and qualitative targets to meet as measured by key performance indicators.
Now, the 20 biggest GLCs currently make up about 40% of the local stock market’s market capitalisation.
One of the principles under the programme was also the national development agenda, which emphasised the principle of equal growth and development of the bumiputra community with the non-bumiputras.
Asian Strategy and Leadership Institute (ASLI) Centre of Public Policy Studies chairperson Tan Sri Ramon Navaratnam says the purpose of establishing GLCs to encourage bumiputras to participate in business has largely been fulfilled.
“Now that the bumiputras are on a strong footing in the corporate sector with able leaders who have wide experience, it (GLCs) could be seen as an erosion to the welfare and progress of the smaller and medium-sized industries, particularly those where other bumiputras are involved,” Ramon says.
Having said that, he says although many GLCs are doing well, they have performed well “mainly because of protective policies and monopolistic practices”.
“The time has come in this new Malaysian era for more competition and less protection.”
Benchmarking
Still, if simplistic comparisons are to be made, the CEOs of the country’s two largest GLC banks, Maybank and CIMB for instance, took home less than the CEO of the country’s third largest bank, the non-GLC Public Bank Bhd
last year.
In 2017, Public Bank’s managing director Tan Sri Tay Ah Lek took home some RM27.8mil in total remuneration while Maybank’s Datuk Abdul Farid Alias earned RM10.11mil and CIMB’s Tengku Zafrul Abdul Aziz made RM9.86mil.
Across the causeway, a survey of CEO remuneration of Singapore-listed companies by one financial portal shows that Singaporean GLC CEOs earned 31% more than their non-GLC counterparts in 2017.
Singapore’s Temasek Holdings-owned DBS Bank, which is Singapore’s largest bank, paid out S$10.3mil (RM30.36mil) to its head honcho, while in the telecommunication sector, SingTel’s remuneration to its top executive was some S$6.56mil (RM19.34mil) for the most recently concluded financial year.
By definition, Singapore GLCs are those which are 15% or more owned by the city-state’s investment arm Temasek Holdings.
UM’s Terence does not think Singapore should be a benchmark for Malaysian companies.
“Singapore is a much smaller country and the manner in which they operate in is also different ... their GLCs are deeply conditioned by their holding company, which is the Minister of Finance Incorporated,” he says.
MSWG’s Devanesan notes that determining remuneration is “not exactly science” as there are many parameters to be considered.
Some of the factors to note include whether the companies are in a monopolistic or near monopolistic position and the performance of the GLC heads over the years.
“Based on these parameters, we can instinctively know if a GLC head is over-remunerated,” he says. Over in China, state-owned Industrial and Commercial Bank of China (ICBC), the country’s largest lender by assets, paid out about 63.43 yuan or about RM39mil in total remuneration before tax for the year 2017 to its top executive.
Notably, the Beijing-based ICBC’s net profit’s was at a whopping US$45.6bil (RM182bil) in 2017.
Sources: Gurmeet Kaur and Yvonne Tan The Star
GLC singers sing a different tune
Some officials singing 'Hebat Negaraku'.
Swan song for some after 'Hebat Negaraku' post-GE14 - CEO think video to showcase musical talents
Several heads of government-linked companies (GLCs) have come together
in a heartwarming music video titled "Hebat Negaraku" (my country is
great).
The heads of government linked companies (GLC) who sang a song that later became the theme song for the Barisan Nasional’s election campaign have distanced themselves from the controversial music video.
Those who sang and played musical instruments in the music video titled “Hebat Negaraku” (my country is great) said they did not know the video or the song was going to be a political theme song.
There have been repercussions on the CEOs who appeared in the music video. They have come under scrutiny for making a song that was used as propaganda by Barisan in the last general election.
Three of the GLC bosses in the video have either retired or resigned since the new government took over.
Several more have been speculated to leave in the coming weeks or months but nothing is cast in stone. Sources said this is because most of the CEOs are not known to have campaigned openly for either Barisan or Pakatan Harapan.
“None of the CEOs had a clue it would become a political song. Do you really think the CEOs would have done it if they knew it would become political?” asked one of the CEOs who appeared in the video but declined to be named.
“We have said no to so many things, and we could have easily have said no to this if it was political.’’
Another CEO said he was approached and felt it was “more of a patriotic song and nothing more.”
“At that point in time, we did not think much (of the repercussions). Hebat Negaraku was announced as Barisan’s campaign theme long after the recording was made. We did not know that.’’
Another CEO added: “We thought it was a casual thing when we were approached as some of the CEOs have their own band.’’
It all started when several CEOs were called to be part of a music video and they thought it was to showcase the musical talents of 14 GLCs heads, plus staff members of the 20 key GLCs.
The song is about the greatness, advancement and inspiration of Malaysia. It was released on YouTube on March 22 but has since been taken down.
But fingers have been pointed at the GLCs bosses who made the music video because it became a political video.
Datuk Seri Shazalli Ramly has been said to be the main orchestrator for the group in terms of making the music video. He was also said to be the branding chief for Barisan’s elections campaign.
Barisan lost the elections held on May 9 to Pakatan, which has since formed a new government and is scrutinising all the performance, processes, remuneration and procurement of the government and GLCs.
Shazalli quit his job as group CEO of Telekom Malaysia Bhd (TM) on June 6. Malaysian Resources Corp
Bhd (MRCB) group managing director Tan Sri Mohamad Salim Fateh Din has retired as group MD last week and it was something he had planned to do. Malaysia Airports Holdings Bhd
Datuk Badlisham Ghazali did not get his contract renewed. All three were in the music video.
There is a GLC secretariat that now comes under the purview of TM, which was earlier parked under Khazanah Nasional Bhd. The secretariat organised the making of the music video, according to sources. The CEOs were called to attend a session and within a few hours it was all done with no prior rehearsals.
“When you are called, it could be difficult not to comply since it is the secretariat that called you. We have to oblige but we really did not know it was going to be a campaign slogan. This is really unfortunate that it has turned out like this.
“We were surprised when we found out it was a party slogan but it had already been done and what can we do, we are in the picture,’’ said another CEO.
Not all CEOs who were invited took part in the video. Prior engagements were the reason used for declining to appear. - By b.k. Sidhu The Star
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