I’ve noticed a spike in the page view statistics for this blog over the last couple of days. They are still modest, but yesterday was a new record, and mostly because of visitors within New Zealand. This is the first post for 2017, so it isn’t because of something new. I’m figuring it’s because of some journalism by Matt Nippert in the New Zealand Herald, which has revived interest in the foreign trust issue. It concerns a court case heard today in Auckland where Low Taek Jho (Jho Low) – part of the infamous 1MDB scandal – has been trying to regain control of a series of trusts that control assets which the U.S. authorities effectively want to get as forfeiture, given the allegations of money laundering at 1MDB.
Of course, the 1MDB scandal has been hitting the headlines overseas, as it includes Swiss banks and trust firms, the PetroSaudi firm and U.A.E.-based investment bankers, and the Prime Minister of Malaysia. The 1MDB saga has been written about extensively by the Sarawak Report, and the Ethical Alliance collates the many related stories about it. But it hasn’t really been covered at all in the New Zealand media, at least, until Mr Nippert found the New Zealand connection in the litigation currently taking place in California. It seems that the ownership by the Low family of various assets in the USA, mainly in property in New York and Los Angeles, was buried in a structure of companies with shares owned by various trusts. The trusts were controlled by two Swiss firms, Virtue Trustees (AG) and Rothschild Trust (Schweiz) AG, and the latter also used some of its New Zealand companies.
Now, the Swiss companies appear to have been reluctant to take part in any legal action concerning the Low family assets, apparently because of fear of the consequences from the U.S. authorities in regard to money laundering. So to prevent the forfeiture of these property assets worth over $US250 million, Jho Low got legal advice about changing the trustees in the structures, and asking the courts in the Cayman Islands and New Zealand to allow this change, so that the new trustees could contest the U.S. litigation. It seems that the two Swiss companies would only contest the legal action to remove them as trustees on the basis of being adequately compensated, given the tangled web they were part of. So the Cayman Islands authorities had already approved of the change, as far as Virtue Trustees (AG) are concerned; and the New Zealand case was in the Auckland High Court this week. Mr Nippert has also provided the legal papers on the Herald website.
Rather than get into the detail of the case I just want to touch on a few anomalies, and point to some facts that emerge from the company register in New Zealand. Firstly, I have referred to Virtue Trustees in an earlier post [Anchor and some Swiss Virtues], which had a New Zealand company being run by the Anchor Trustees firm. But it is Rothschild Trustees that have involved their New Zealand companies, these are administered by the Cone Marshall law firm, and one of their vehicles, Arrow Master Holdings Ltd. Now what Jho Low has done is to ask a trust firm based in the Cayman Islands, called FFP Trustees (Cayman) Ltd, to take over the trustee role from the Rothschild Trustees AG in the Caymans, and in New Zealand. The Rothschild companies in New Zealand included Elephant Sun Ltd, Star Towers Ltd, and, as it appears in the actual litigation, a company called Indigo Management Ltd. The former names also appear in overseas companies linked to Jho Low; while Indigo Management was set up by Cone Marshall in 2010. The original shareholder was a company called Great Wairua Ltd, before Arrow Master Holdings eventually took over the 100 shares. Great Wairua had a Swiss national, Peter Henggeler as an original director, and he was also involved in another company, Kaumatua Trustees Ltd. Henggeler had worked for the Rothschild Trustees until recently.
The legal brief for the litigation in the Auckland High Court was prepared by an American, Daniel A Zaheer, in San Francisco, California. In the affidavit by Zaheer, dated 5 December 2016, he states that Alix Partners LLP, and FFP Caymans, will take over the trustee roles; and FFP provide a detailed covering letter to the American court in support of the action. The FFP letter is signed by Michael Pearson, as a director; but Pearson also appears on the New Zealand register for companies that have been removed, and seems to have been a resident in Wellington (NZ), and later in Brisbane, Australia. In the letter Pearson talks about the experience of FFP as a replacement trustee, and its involvement in forfeiture actions related to the FIFA scandals. But the really interesting thing is the schedule of 17 trusts that FFP are to be the replacement for. In the actual litigation in Auckland there is a list of over 20 trusts that the plaintiff’s brief refer to, 23 of which involved the Rothschild Trust; and there was one controlled by Indigo Management Ltd called Avenue Raphael (Paris) Trust. So the interesting thing is that these schedules involve completely different sets of names: the only similar one is Global One Aviation (Global 5000) Trust in the FFP schedule, which in the second version is the Global One Aviation (Global G650) Trust.
The case in the New Zealand High Court (CIV-2016-404-3115  NZHC0025) is Low Hock Peng & ORS v Rothschild Trust (Schweiz) AG as first defendant. Low Hock Peng is Jho Low’s father. The other defendants include Rothschild’s three New Zealand companies, and two companies registered in the British Virgin Islands, Global One Real Estate Ltd and Boluo Investments (US) Ltd. To briefly summarise the judgement of Toogood J in the case: while he recognised that the US litigation involved a serious case of money laundering, as alleged in the 1 MDB scandal, he still had to allow for the defendants to use the legal process to prevent their assets from being forfeited without a fight. He also refers to a “waterfall effect” where, by allowing FFP to take over all the functions as replacement trustees, all of the official roles of each company are passed over to ‘professionals’ in the Cayman Islands. Of course, FFP did create a subsidiary company in New Zealand, and it was registered as FFP Trustee (NZ) Ltd on 12 January 2017. Its directors include Michael Pearson, Stephen Briscoe, Christopher Rowland, and Andrew Childe, all resident in the Caymans; along with Douglas Mark Andrew Burgess acting as the token local director.
Justice Toogood may have been only concerned with facilitating proper legal processes for the Low family in the USA. But, by effectively being a legal adjunct to the activity of the tax haven in the Cayman Islands, he also highlighted how New Zealand trusts and companies are used as part of money laundering structures; and he has ensured that the legal action proceeding in the USA will be far more complicated and expensive than it needed to be.
Addendum 20/6/17: On 15 June 2017 the US Justice Department filed the latest stage in their case against Jho Low for the money laundering involving 1MDB. The case is called U.S.A v. Certain rights to and interest in the Viceroy Hotel Group. On page 185, under section R, there are allegations that Jho Low used 1MDB proceeds to purchase the Stratton Penthouse and Stratton Flat in London, using the Good Star Account. In paragraph 689, sub-section c, there are the details about how Rothschilds indicated the use of Stratton Street (London) Trust and Seven Stratton Street (London) Trust, being New Zealand foreign trusts, to administer two of the three London properties held in trust for the Low family. The money was transferred from a company Low owned called Selune Ltd. The document then goes on to Section S, on page 187. This section details how Low purchased the Stratton Office using diverted 2013 bond purchases. This involved the former Rothschild administered trust, Eight Nine Stratton Street (London) Trust, being another New Zealand foreign trust. It was the third London property, linked with Park Lane Partnership, and Condor Acquisition (Cayman) Ltd, and an oil investment in the U.S.A. called Coastal Energy. The purchase was made from the One Universe Account.