Belmont Club

The Global City

AP Photo/Richard Drew, File

Unnoticed in the blizzard of “Russian collusion” news coverage are the dramatic events in Malaysia where the ruling party lost its 60 year old grip on power over voter anger at what has been dubbed the largest financial scandal in history.  It was “a stunning, sudden fall for Najib Razak, Malaysia’s ‘Man of Steal'”, wrote the New York Times. The fall was from the great height of nearly $5 billion abstracted from the 1Malaysia Development Berhad, the country’s state investment fund, known as 1MDB. “1MDB was a key factor in the election result,” said one NYT source. “The long-running scandal became indelibly associated with the endemic high-level corruption in the country.”  It is also a case study in global money laundering.

Much of the stolen money wound up in the US. The American part of the Malaysian story deserves examination.  According to Wikipedia:

In June 2017, the U.S. Department of Justice began moves to recover more than US$1 billion from people close to Najib and 1MDB.  Assets include high-end properties in Beverly Hills, Los Angeles, Manhattan, New York City and London.  Also included in the assets seizure was fine artwork, a private jet, a luxury yacht and royalties from the film Wolf of Wall Street and its production company Red Granite Pictures.  On 28 February 2018 Indonesian authorities seized the luxury yacht linked to the 1MDB investigations in waters off Bali on behalf of the FBI. And on 7th March 2018 in Californian courts, the producers of the ‘Wolf of Wall Street’ agreed to pay $60m to settle Justice Department claims it financed the movie with money siphoned from 1MDB.

One of Razak’s alleged henchmen was Malaysian businessman Jho Low, an aspiring player on the globalized business scene.  He was the very model of the global man.  A graduate of Harrow and Wharton business school,  Low had connections with China,  Singapore and the Middle East.  He was reputedly close to Riza Aziz, the stepson of now deposed Najib Razak.  Aziz himself was cut from the same cloth. “Riza holds a BS degree in Government & Economics and an MS in Politics from the London School of Economics. … In 2010, with producing partner Joey McFarland, Aziz co-founded Red Granite Pictures, an American film finance, development, production and distribution company.”

Both these worthies were eventually named in a massive DOJ forfeiture action seeking the recover of assets purchased by money stolen from 1MDB .  The methods used to loot the Malaysian sovereign fund are instructive. Some money was moved under cover of a private Saudi oil extraction company into a Swiss bank account named Good Star Limited. Others funds were obtained by diverting 1MDB proceeds raised “through two separate bond offerings arranged and underwritten by Goldman Sachs” and guaranteed by an investment fund wholly owned by the Government of the UAE. Yet a third bunch of money was abstracted through a third bond offering arranged by Goldman in March 2013 — this time to Singapore.  In 2014 another $850 m was siphoned away under the guise of buying back options from a shell company they themselves created. No masks or firearms were involved.  During all this time the alleged malefactors were not hiding in some safe house but were out in the open hobnobbing with the rich and famous. Picture this scene:

On the evening of July 20, under a tent at a vineyard in St. Tropez brimming to his specifications with booze, billionaires and babes, Leonardo DiCaprio was preparing to host one of the glitziest charitable events of the year: the third annual fundraiser for his Leonardo DiCaprio Foundation. Earlier that same day, under far less glamorous auspices half a world away, the U.S. Department of Justice was filing a complaint with the U.S. District Court in downtown Los Angeles that suggested the recent Oscar winner is a bit player in the planet’s largest embezzlement case, totaling more than $3 billion siphoned from a Malaysian sovereign wealth fund called 1MDB.

While the complaint does not target DiCaprio — he’s referred to twice in the 136-page document and only as “Hollywood Actor 1” — the scandal shines an unfamiliar light on the charitable foundation of the most powerful actor in Hollywood thanks to the way the LDF has benefited directly from DiCaprio’s relationship with key figures in the saga. And much like the gala in St. Tropez, with its expressions of one-percenter excess ostensibly in support of saving the environment (guests helicoptering in to dine on whole sea bass after watching a short film about the dangers of overfishing), a closer look at the LDF itself raises questions about its ties to the 1MDB players as well as the lack of transparency often required (or offered in this case) for the specific structure the actor has chosen for his endeavor.

The 1MDB scandal actually came close to touching the Clintons via their links to Hollywood. “Actor and collector Leonardo DiCaprio has bailed on a fundraiser for Democratic presidential candidate Hillary Clinton … It may be no coincidence that DiCaprio’s withdrawal from the $33,400-a-plate fundraiser comes just after the Hollywood Reporter (THR) published a deep dive into a complaint by the Department of Justice (DOJ) that details DiCaprio’s links to Malaysian financier Jho Low, who is part of a giant scandal involving money misappropriated from a Malaysian government fund.”

The scandal even beat upon Trump’s outer circle. “Elliot Broidy, a republican donor, and his wife Robin Rosenzweig, discussed setting up a consulting contract with Jho Low, who is at the center of the 1MDB scandal. The contract proposed a $75 million fee for Broidy and his wife if they could get the Justice Department to drop its probe into 1MDB.” No one was safe.

But then Jho Low was educated at the best schools in the West and moved in the most exalted circles.  He knew how the power networks operated. The sheer scale of 1MDB dwarfs anything alleged in connection with the “Russian collusion”. The few hundred K spent by the Kremlin on Facebook ads are absolutely dwarfed by the kind of money being thrown around by one small third world country.

1MDB illustrates just how vulnerable American politics has become to “globalization” with its attendant tangle of foundations, celebrities, bankers, lobbyists and fixers.  The Iranian nuclear deal cannot be understood except in connection with the huge business transactions with which it is associated. “The USA is withdrawing from the Iran nuclear deal framework. With that withdrawal and reimposition of sanctions, plane deals worth $38BN from Airbus and Boeing to Iran Air are effectively cancelled. The Iranian flag carrier ordered 100 planes from Airbus, 80 from Boeing, and 20 from ATR, an Italian-Franco turboprop manufacturer.” One wonders: how much of the Deal was based principle and how much on the money?

Perhaps the saddest fact of modern life is that, despite the inspiring speeches about human rights, the environment and values, politics is nearly always about dollars. Anyone who thinks Washington’s biggest problem involves Facebook, Cambridge Analytica and Russian trolls is probably wrong.  The most profound cinematic political observation of the 20th century was in the movie Die Hard.  It’s all about money.  Money is what holds both the good and bad parts of Global World together.  Country? Not so much.

Joseph Takagi: You want money? What kind of terrorists are you?

Hans Gruber: Who said we were terrorists?

‘Hans Gruber’ was a global kind of guy.

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Books:

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies, by Erik Brynjolfsson and Andrew McAfee. This book reveals the forces driving the reinvention of our lives and our economy. As the full impact of digital technologies is felt, we will realize immense bounty but also experience wrenching change. Professions of all kinds – from lawyers to truck drivers – will be forever upended. Companies will be forced to transform or die. Recent economic indicators reflect this shift: fewer people are working, and wages are falling even as productivity and profits soar. Drawing on years of research and up-to-the-minute trends, MIT’s Brynjolfsson and McAfee identify the best strategies for survival and a new path to prosperity.

Open Curtains: What if Privacy were Property not only a Right, by George Spix and Richard Fernandez. This book is a proposal for bringing privacy to the internet by assigning monetary value to data. The image of “open curtains” is meant to suggest a system that allows different degrees of privacy, controlled by the owner. The “curtains” may be open, shut, or open to various degrees depending on which piece of data is being dealt with. Ultimately, what is at stake is governance. We are en route to control of society by and for the few rather than by and for the many, because currently the handful of mega tech companies are siphoning up everyone’s data, for nothing, and selling it. Under the open curtains proposal, government would also pay for its surveillance in the form of tax rebates, providing at least some incentive for government to minimize its intrusions … (from a review by E. Greenwood).

Skin in the Game, by Nassim Nicholas Taleb. In his new work, Taleb uses the phrase “skin in the game” to introduce a complex worldview that applies to literally all aspects of our lives. “Never trust anyone who doesn’t have skin in the game. Without it, fools and crooks will profit and their mistakes will never come back to haunt them,” he says. In his inimitable style, he pulls on everything from Antaeus the Giant to Hammurabi to Donald Trump to Seneca to the ethics of disagreement to create a jaw-dropping tapestry for understanding our world in a brand new way.

For a list of books most frequently purchased by readers, visit my homepage.


Did you know that you can purchase some of these books and pamphlets by Richard Fernandez and share them with your friends? They will receive a link in their email and it will automatically give them access to a Kindle reader on their smartphone, computer or even as a web-readable document.
The War of the Words, Understanding the crisis of the early 21st century in terms of information corruption in the financial, security and political spheres
Rebranding Christianity, or why the truth shall make you free
The Three Conjectures, reflections on terrorism and the nuclear age
Storming the Castle, why government should get small
No Way In at Amazon Kindle. Fiction. A flight into peril, flashbacks to underground action.
Storm Over the South China Sea, how China is restarting history in the Pacific
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