By: Our Correspondent

Among all the questions triggered by a long-expected default this week by 1Malaysia Development Bhd on a US$50.3 million payment on bonds guaranteed by an Abu Dhabi sovereign wealth fund, the biggest one is perhaps this: How on earth did they think they could get away with it?

Did the Prime Minister of Malaysia and his enablers simply believe nobody would notice that billions – not millions – billions of US dollars would disappear irretrievably, to the point where it could imperil the entire Malaysian financial system? Did they think authorities in Abu Dhabi wouldn’t notice they weren’t getting paid US$3.5 billion?

Both Najib and 1MDB have defended themselves vehemently, blaming dark forces for their troubles.

It isn’t just that the money has disappeared, that there might be a Bernie Madoff or a Robert Vesco in the works, quietly squirreling away the scratch. It is the utter flamboyance. For months – years – there have been reports of partying on a vast scale by Low Taek Jho, the Penang-born Wharton grad who convinced Najib Razak to establish 1MDB back in 2009 and who has made the pages of the New York Post for pouring Cristal champagne for an assortment of pricey blondes and who has escorted the Prime Minister’s wife, Rosmah Mansor, in New York.

As Sarawak Report has discovered, hundreds of millions of dollars allegedly went from 1MDB into companies controlled by Jho Low, who now is said to have made himself scarce aboard a 300-foot yacht named Equanimity (equanimityˌɛkwəˈnɪmɪti,iː-/(noun, “calmness and composure, especially in a difficult situation” – Merriam Webster). What other country or individuals would steer millions of state-owned sovereign money into the making of the Wolf of Wall Street, produced by Najib’s stepson but banned in Malaysia as lurid? Who else would use a state guarantee to attempt to buy three of London’s finest hotels, the Connaught, the Berkeley and Claridge’s?

As has been reported everywhere, there have been credible reports that nearly US$1 billion – US$681 million in one dose – made it into Najib’s personal bank account in 2013 and that US$620 million went back out a few months later to an unknown donation. Another U$42 million was transferred from SRC International to his personal bank accounts, much of which seems to have been spent in shopping trips in Milan and Monaco, among other enclaves for the moneyed. Rosmah has been photographed wearing enough jewelry to glitter like an iceberg in the sun.

Unfortunately, financiers in Abu Dhabi have noticed, along with the gumshoes of at least five governments who are involved in the grim chase for the money and the perps. 1MDB is believed to face debt obligations of more than US$6.481 billion to units of the Gulf emirate including US$1.75 billion on bonds guaranteed by International Petroleum Investment Corporation (IPIC) of Abu Dhabi. IPIC, believing the money was stolen, is refusing to cover the US$50 million payment. A cross default triggered by the affair is said to potentially pose a serious threat to Malaysia’s investment grade ratings, with traders and lawyers scrambling to work out the implications. The lawyers, as they do, are said to be lining up.

In fact, a lot more than the US$1.75 billion apparently has been stolen. Swiss authorities are demanding that 1MDB and the Malaysian government account for US$4 billion believed to have been laundered illegally into Swiss banks. The amount of missing money could be well over US$5 billion. If 1MDB refuses to pay, IPIC is likely to call on Malaysian government guarantees.

At least US$3.5 billion of the missing funds were in payments by 1MDB to what it thought was Aabar Investments PJS in Abu Dhabi. Instead, the money went to Aabar BVI, an evil twin established in the British Virgin Islands. The money apparently has disappeared.

It wasn’t just Najib

In Malaysia’s case, the seeds for this kind of behavior appear to have been sown a couple of decades ago. Najib became defense minister in 1999 and kept the portfolio when he became deputy prime minister. He appears to have mastered the game of doing well by doing good, particularly through three contracts that appear to have produced at least US$300 million and probably more, either for him or for his friends in UMNO. Opposition figures told Asia Sentinel previously that the three contracts were one for Russian Sukhoi jet fighters, a second for French submarines and a third for navy patrol boats.

That wasn’t all. According to a think tank at the time, the shopping list “included battle tanks from Poland, Russian and British surface-to-air missiles and mobile military bridges, Austrian Steyr assault rifles and Pakistani anti-tank missiles.” Given military contract overruns, it can easily be assumed that there was a sweetener involved with every one of them.

The vast overspending attached to the contracts has been catalogued again and again, often on the floor of the Malaysian Parliament, by opposition figures, to no avail. But even before there was a Najib, there was a Mahathir. The former prime minister, at the start of his 22-year reign, set out to create a cadre of 100 super-rich bumiputeras who in turn would help rural Malays into prosperity under a konsep payung, or umbrella concept routed through the United Malays National Organization, much the way he envisioned driving the country into industrialization through massive projects. But greed intervened. Once the privileged got rich, there was little incentive to share it with the kampungs, the Malay rural villages. The umbrella concept morphed into a kleptocracy concept.

Many of the companies eventually collapsed and even today are being supported by government institutions such as Kazanah Nasional, the country’s sovereign investment fund, or the Employee Provident Fund. According to the late Asian Wall Street Managing Editor Barry Wain, in his book, Malaysian Maverick, as much as RM 100 billion went up in smoke from mismanagement and graft. A misguided attempt to build a steel industry with a company called Perwaja Steel lost an estimated US$800 million. Eric Chia, one of Mahathir’s cronies, was arrested and tried but was acquitted of wrongdoing.

 Perhaps the most spectacular was the disappearance of US$1 billion in the early 1980s when Bumiputra Malaysia Finance, a Hong Kong-based offshoot of the state-owned Bank Bumiputra. Despite an exhaustive report by the then-auditor general, Ahmad Noordin Zakaria, nobody was ever prosecuted in Malaysia, although officers were in Hong Kong. In none of these cases has anybody ever been punished. Perhaps that gives Najib and his associates the confidence that, despite the reports of investigations stretching almost all the way around the planet, they won’t again.