Two men with links to the alleged mastermind of a multibillion-dollar Malaysian financial scandal launched a bid last year to buy a controlling stake in a bank in Mauritius.
The deal took shape in the months after the U.S. Justice Department alleged in a July 2016 civil asset-forfeiture lawsuit that Jho Low, a Malaysian financier, helped divert billions of dollars from state investment fund 1Malaysia Development Bhd. -- and at times used small banks to help launder the money. Mr. Low has denied wrongdoing.
In late 2016, former Goldman Sachs Group Inc. partner Tim Leissner, who had been the primary Goldman executive to handle the bank's 1MDB account, and Thai businessman Phengphian Laogumnerd, a friend of Mr. Low's, worked together in an effort to buy Qatari-owned Century Banking Corp. of Mauritius.
The central bank of the Indian Ocean island nation blocked the transaction and, concerned about a possible connection between Mr. Leissner and the global 1MDB scandal, notified the U.S. Federal Bureau of Investigation about the bid, according to people briefed on the central bank's actions. Mr. Leissner, who is German, had been Goldman's Southeast Asia chairman before it suspended him for writing an unauthorized letter of recommendation for Mr. Low.
Mr. Leissner handled 1MDB for the Wall Street bank from the fund's creation in 2009, helping raise billions of dollars of bonds for the fund, and he worked with Mr. Low from the time that Mr. Low was an adviser to a fund that eventually became 1MDB, according to people familiar with their relationship.
The Justice Department is investigating the nature of Mr. Leissner's relationship with Mr. Low, according to people familiar with the probe. Mr. Leissner has said he had only a passing acquaintance with Mr. Low and that work he did while at Goldman on the 1MDB account was above board.
Goldman has consistently said it did nothing wrong and had no way of knowing there might be fraud connected to 1MDB. Neither Goldman nor Mr. Leissner have been accused of wrongdoing in relationship to 1MDB.
Mr. Phengphian also has a business connection with Mr. Low: In July 2017, he acquired from a Low family trust a controlling stake in a lingerie business in London.
Mr. Low has said he would fight civil cases filed by the Justice Department against assets it says were purchased with stolen 1MDB funds. Those cases were recently put on hold by a judge after the Justice Department requested more time to finish criminal investigations into the alleged 1MDB fraud and related asset purchases.
Lawyers for Mr. Low declined to comment on the Century Banking deal. A lawyer for Mr. Leissner said his client did nothing illegal in the deal.
1MDB has denied any funds were misappropriated or any wrongdoing on its part, and pledged to cooperate with any "lawful" investigation. Malaysian authorities cleared the fund of wrongdoing, though it remains under investigation in the U.S. and several other countries.
Mr. Low has said he was only an informal adviser to 1MDB. U.S. investigators say he was pulling strings from behind the scenes, arranging deals to divert funds.
The Justice Department said in its asset-forfeiture cases that Mr. Low and alleged co-conspirators at times laundered money through small financial institutions that they thought would attract little attention.
The Department alleges that one such institution, Falcon Private Bank Ltd. of Switzerland, was controlled by an associate of Mr. Low's from the Middle East and used to move laundered 1MDB funds. Falcon was fined by regulators in Switzerland and Singapore for lack of proper money-laundering controls and remains the subject of a Swiss criminal investigation, according to Swiss authorities. Falcon has said it is initiating new control measures and that it has been cooperating with authorities.
The Mauritius bank, Century Banking, is owned by Ghanim Bin Saad Al Saad Group of Qatar. It opened in 2011 and is located along the waterfront in the capital, Port Louis. Mr. Low's family trust previously bought a high-end building in London from the group in 2014. The Justice Department is trying to seize it, according to an asset-forfeiture lawsuit.
Months after Mr. Leissner quit Goldman Sachs, following his suspension, in March 2016, Mr. Phengphian worked with him to help complete a purchase of Century Banking, according to people familiar with the matter.
Mr. Phengphian, a manager of Songkhla Finishing Co., a technology contracting company in Thailand, would fund the deal, the people said. Lawyers for Mr. Phengphian declined to comment.
The corporate registry in Mauritius shows Mr. Leissner set up a company called Blackfish International (Mauritius) Ltd. on Sept. 29, 2016.
On Nov. 11, Mr. Phengphian became a member of the Century board, and on Dec. 29 he transferred about EUR10 million ($11.6 million) from an account in Hong Kong to his Century Banking account, according to people with direct knowledge of the transfers.
The money was converted into Mauritian rupees and passed through two companies before ending up in the Century Banking account of Blackfish, which converted it to dollars and transferred about $7.7 million to a Mauritius law firm hired by Mr. Phengphian to help purchase the bank, these people said. A lawyer at the firm is a director of Blackfish along with Mr. Leissner, records show.
After that transaction -- in late December 2016 or early this year -- Mr. Leissner applied to Mauritius authorities to acquire a controlling stake in Century Banking and become an executive and board member, according to Mr. Leissner's lawyer, Marc Harris, and Century Banking chief executive Muniruddeen Lallmahamood.
The Bank of Mauritius, the nation's central bank, soon launched an investigation into the transaction after it learned that Mr. Leissner was associated with 1MDB and Mr. Low, according to people familiar with the matter.
The central bank later rejected Mr. Leissner's application for "compliance concerns," said Mr. Harris, the lawyer. Mr. Harris didn't identify those concerns.
Mr. Lallmahamood declined to comment on Mr. Leissner's application, except to say it wasn't approved by the central bank.
In response to questions to the Bank of Mauritius about the Century Banking bid, Yandraduth Googoolye, first deputy governor of the central bank, said: "You may rest assured that the Bank is exercising its regulatory duties in terms of its statutory powers."
Mr. Leissner did become a director of a fully owned subsidiary of the bank for several months, ending in April, corporate registry records show -- a move that was approved by a different regulator. In September, the German banker was barred from the U.S. securities industry for failing to cooperate with a regulator's investigation related to his departure from Goldman.
Mr. Phengphian is now chairman of Century Banking's board, appointed to the position in January after what the bank's CEO, Mr. Lallmahamood, described as thorough due diligence in line with global best practices.
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(END) Dow Jones Newswires
November 07, 2017 05:44 ET (10:44 GMT)