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Tuesday, May 30, 2023

1MDB, P&ID, and the State of International Justice

It was the story that rocked Malaysia, ended the career of the country’s then Prime Minister, and featured a cast of characters that included international bankers, film producers, and some of the leading lights of Hollywood. ‘The 1MDB Scandal’ is perhaps the 21st century’s best-known financial crime, and one which is still the subject of legal action in multiple international jurisdictions.

All told, the US Justice Department has estimated more than USD4.5 billion was embezzled by a coterie of bankers, advisers, and politicians between 2009 and 2012. There was even a Saudi Prince involved.

After a trial that lasted nearly two months, former Goldman Sachs banker, Roger Ng, is the most recent character to face justice. He was convicted on multiple counts, including conspiring to violate US anti-bribery laws and conspiring to launder money. Ng faces up to 30 years in prison.

The 1MDB Scandal’s notoriety is, at least in part, a product of the colorful characters who were involved. Jho Low, the former 1MDB ‘advisor’ and alleged ringleader (who is rumored to be living in China), lived the life of a jet-setting billionaire; he dated Miranda Kerr, racked up USD85 million in gambling debts in Las Vegas, and threw a birthday party for himself that featured Britney Spears bursting out of a cake.

The fact that Low partly funded the Wolf of Wall Street, a film that charts the rise, cartoonish excesses, and fall of the convicted fraudster Jordan Belfort, only further fuelled media interest in the story – the irony lost on no one.

Even so, the 1MDB saga is not the only colossal fraud deserving attention. The Nigerian Government’s case against Process & Industrial Developments (P&ID) also involves a plethora of jurisdictions, allegations of bribery, and even a former show-band manager-turned arms dealer as its ringleader.

The P&ID story begins with two Irishmen, Michael Quinn (the aforementioned arms merchant) and Brendan Cahill. In 2010, the pair secured a gas supply and processing agreement (GSPA) to develop a sophisticated processing plant for the Nigerian government – the primary output of which would help to power the national grid.

The agreement committed P&ID to supply treated gas to the Nigerians at no cost. The company’s profit would instead be derived from the sale of by-products of the refinement process – propane and butane.

In theory, the plan would have benefitted all parties. The government would get its gas, providing energy to millions of Nigerians, and P&ID would profit from the sales of the by-products. But the plant, and its promised natural gas, were never delivered. Two years after the contract had been signed, P&ID had yet to buy any land or submit the extensive plans necessary for such a complex project.

The Nigerian government canceled the contract, at which point P&ID launched private and confidential arbitration proceedings in London. The court ruled in P&ID’s favor, awarding the company just under USD6.6 billion with interest accruing from 20 March 2013 at a rate of seven percent. The award is worth approximately USD10 billion at the time of writing. Not bad, considering P&ID hadn’t actually built a thing.

It has since been alleged that Quinn and Cahill never intended to build the promised plant. Instead, the ruse had always been to secure a contract and, though bribes, affect the contract’s cancellation – activating the agreement’s arbitration provisions.

Unfortunately for Quinn, he would never get to see his scam payout. He died in 2014. Cahill was arrested by Gardai in his native Ireland in December 2021.

It would appear justice might finally be catching up on the P&ID crew, although not soon enough for VR Capital, the vulture fund and distressed debt specialist they convinced to get in on the action in 2018. The firm owns 25 percent of P&ID, and therefore 25 percent of the arbitral award.

However, the enforcement of the award has not been smooth sailing. The Nigerian government has fielded a strong defense, gaining momentum in the British Virgin Islands (BVI) and US courts in recent months. The main showdown will be in London in January 2023, when Abuja’s appeal is heard before the High Court.

The conclusions to the 1MDB and P&ID scandals have yet to be written. Jho Low remains on the run in China, and the owners of P&ID are yet to be brought to justice. So far, it’s been the developing world that has been forced to pick up the cheque. Perhaps January 2023 will mark the moment when that trend ends?

Author: Saeed Khan is a British-American Professor at Wayne State University in Detroit, Michigan where he is the director of global studies(IR). He specializes in the Middle East and Islamic world and has previously contributed to C-Span, NPR, Voice of America, and the National Press Club.



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