These stories as I would like to call it are real and non-fictional, even though not much had been written about it. It is another sad story from the Dark World of Finance that took place from the late 1990s and continues on till today. The after effects of the saga affected Bruneians till this day. I have to mentioned some names, of which you could verify their their identities; and I kept many other names not mentioned for the sake of protecting their identities. But for one they are real people (non-fictional), and my accounts here are from first hand source. How I did get involved deeply on the subject is something that I will not reveal. The purpose of me writing here is for the benefit of taking the lessons for future generations (hopefully, if we ever learn).
Brunei Investment Agency is one of the uprising Sovereign Wealth agency of 1990s. The wealth of BIA, as they are called, during those time should be in the region of US50 billion (on a conservative estimate). The one running BIA as its Chairman, at the time is H.H. Pengiran Jefri Bolkiah (later on I will use Pengiran Jefri for the sake of brevity), the youngest brother of H.H. Sultan Hasanal Bolkiah, who was then the Finance Minister of Brunei (1986 to 1998). The main source of wealth for the BIA is the Brunei oil revenue, where 1/3 of it goes to Shell (the operator), 1/3 to BIA and 1/3 to the Royal family; under the terms set by Al-Marhum Sultan Haji Omar Ali Saifuddien. Pengiran Jefri is considered among the smartest and ambitious of between the four brothers.
Under him, Brunei undertook massive development projects in late 80s and early 90s, which saw the development of Jerudong Park (the first major theme park in Asia), which opened in 1994 at a cost of US1 billion. Built upon this success, then Pengiran Jefri setup Amedeo Corporation Sdn. Bhd., named after the famed Amedeo Modigliani, the Italian painter of nude girls, of which about 300 of the paintings were bought by Pengiran Jefri.
The creation of Amedeo, is to bypass the extremely bureaucratic BIA, which hinders many projects and the speed of execution as demanded. Pengiran Hakim, who is Pengiran Jefri’s eldest son was the co-director of Amedeo, and the de-facto chief operating person is Mr. Danny Wong, from Malaysia. The question is how did Amedeo operates?
First, monies were passed from BIA to Amedeo, and from there it went to finance all the projects and operations of Amedeo. All in total, about US40 billion went through this route over a period of about 5 years. Amedeo went first on spending spree, acquiring assets all over the world, namely super luxury hotels: New York Palace Hotel (from the Helmsley), Plaza Athnee (Paris), Hotel Bel Air (California), and a string of other hotels. It also bought the Hilton in central Jakarta, Four Seasons in Singapore, and at least 11 more hotels in various locations in Indonesia and the Philippines. During the rescue of Amedeo, a calculation that was made, all these hotels could be packaged into a Hotel/Real Estate Trust, which could be easily valued somewhere around US4 billion (in early 2000 terms), at a PE of 6. This was an estimated provided by Goldman Sachs and few other financial team at the time. This is the first class of assets – namely prestigious real estates.
The second class of assets were collectibles – these were paintings (Modigliani, Picasso, and others), and then luxury cars as special collection, numbering between 2000 to 3000 cars, the most notable one is Bentley Convertible (which the patent is somewhat owned/developed under Amedeo), thoroughbred horses of around 5,000 heads, two super luxury yachts named Tits1 and Tits2 (under construction in Papenburg, Germany at the time), seven airplanes (which includes at least one Boeing 747), and numerous jewelry, watches, and others. Notable also is the acquisition of the British jeweler, Asprey Ltd. The third class of assets were projects undertaken – Brunei Imperial Hotel, Berakas Power Plant, Brunei mobile phone, various palaces in Brunei, Jalan Bukit Tengku in KL, to name a few.
All assets were purchased using cash by Amedeo, and in fact Amedeo do not have any bonds or debts raised from the market, and neither any bank borrowings. So what went wrong? What happened was like someone spending water below a dam, thinking that the dam will always be filled; but suddenly one day, the dam went dry. The dam was BIA and the spender was Amedeo. BIA’s cash were depleted. At that time then everything went haywire. H.H. the Sultan sacked Pengiran Jefri as Finance Minister and BIA Chairman, and Amedeo left in the lurch with no more cash to spend. BIA then claimed that all monies paid to Amedeo are debts owing to BIA. So the question is what’s left in Amedeo? All that were left are some the assets in Brunei (namely the Imperial Palace Hotel, palaces, luxury cars, horses, some of the paintings, etc), and Amedeo owed its contractors and suppliers to the tune of Brunei Dollar (BD) 1 billion or so. All in, the assets in Brunei is less than few billion dollars. The total amount spent by BIA through Amedeo exceeds US40 billion. Where were all the monies gone?
Amedeo and Pengiran Jefri is nothing but the same entity. In fact, all the monies that were spent or “invested” outside Brunei were not in Amedeo’s name – they all went through hundreds of offshore trusts created in Jersey or some other jurisdictions in Switzerland and Europe. All the trusts were named after various flowers, such as Lily Trust, Rose Trust, etc. While all other assets in Asia went under personal names, or held by various individuals (Bruneian, Malaysian, lawyers, etc.).
BIA then launch a lawsuit against Amedeo and Pengiran Jefri in 2000 – in its efforts to recover the investments. A deal were reached within the same year, as Pengiran Jefri agreed to return the assets, and Amedeo, under the pile of local debts went to the receivers. Arthur Andersen was appointed as the Receiver & Manager of Amedeo. However, after sometime, the deal went sour for unknown reasons, and only part of the transfers or returning of the assets went through.
During the period, before its demise, Arthur Andersen were auctioning items under Amedeo, to raise monies to pay off its creditors. For that AA went overdrive, and the total sale were about US300 million, and the bulk of the monies went instead to pay AA’s fees which were in the same region of US300 million. So almost nothing went to pay the creditors of Amedeo. This is another rip-off of grand scale by Arthur Andersen. What went off in the sale were the Modigliani paintings, some jewelries, some cars and so on. Nothing too significant.
The question is why Amedeo went to receivers? Simply because the unwillingness by anyone to deal with its creditors of a meager BD1 billion (compared to the assets of Amedeo). This allows AA to take advantage of, and nobody was a real winner, except Arthur Andersen, who walked away after that with the fees. Shortly thereafter, AA went bust with the Enron scandal of the US.
What were then proposed (yours truly is part of the team), is to form another vehicle to buy Amedeo’s creditors, through a new company called Global Evergreen S/B. The offer was to pay buy dollar for dollar for all small creditors (below some threshold figure), to get among the biggest creditor to totally waived off the claims (among them major contractor and suppliers), and make payments with cash as full and final settlement. The scheme were executed and completed in less than three months, with little cost incurred (mainly legal fees involved). And it was done with almost $600 million in savings to BIA/Amedeo. This is a far cry compared to US300 million ripped by Arthur Andersen, and yet they had done nothing significant, except paper works (which resulted in nothing), and finally they also shred most of the papers when they were terminated (similar to what happened in Enron’s case, well before Enron occurred). Anyway, most of the small creditors are Bruneian companies or entities.
Then what’s left is how to make recovery on the balance of the assets? First, I must mentioned the name “Manoukian brothers”, who were major players in “selling or supplying” the assets to Amedeo. These were unscrupulous people, who arranged for the paintings to be bought, to broker the sale of Asprey at inflated prices, and so on. We can’t tell how much really they walked away with, and yet afterwards are suing Amedeo and Pengiran Jefri for more.
The hard part is to unravel the ownership of these assets, since most were either under offshore trusts or personal names of other individuals. The papers for the Trusts were mostly lost or gone, and there were no clear papers to link the individuals holding the assets with Amedeo. The task is really an uphill battle. Pengiran Jefri was sincere in his efforts to return back the assets. In fact, it could be accounted that large sums of the monies were spent for the benefit of the Brunei royal families.
But what had happened was, there were so many people taking advantage of the situation – some running away with the assets, some trying to hive of the assets cheaply, and the lawyers (from London to Switzerland, Singapore, Malaysia, United States, Indonesia, Hong Kong etc.) were the largest gainers, as there were at one stage not less than 100 lawsuits and interlocutory suits filed in all of these jurisdictions. Lawyers were advising against settlements (which could be achieved simply by having the brothers to sit down and agreed on a settlement, since the matters could be classified as “private matters” between Pengiran Jefri and HH the Sultan). But that was not the case to be. Some of the lawsuits are still alive until today (well beyond 15 years on).
Some of the assets such as the Brunei Imperial Palace Hotel were returned, the Hilton in Jakarta today is named as The Sultan, the land next to KLCC today is the Grand Hyatt, the land in Bukit Tunku had been levelled (the ghostly remains of uncompleted building demolished, the land was under Pengiran Jefri’s personal name), bulk of the luxury cars were sold, the 5,000 horses were sold, Tits1 and Tits2 were sold, and so on. What’s still left under Pengiran Jefri is the New York Palace Hotel, Plaza Athenee in Paris and few other notable ones in Las Vegas and Bel Air in California.
All in all, the total tally of what’s “lost” is around US18 billion. This is the sad and tragic story of Amedeo Saga of Brunei. By the total count, per capita loss was at least US45,000 per Bruneian (counting the whole population of Brunei of 400,000 people). That’s what happen when this so-called sovereign wealth management went unchecked. This one won’t definitely be the last. Many more could come – since we refused to learn from the past.
What’s unique about this saga is the amount of debt to external parties was small (BD1 billion), but what cost so much is the fact that the issue was dragged for too long and too far. Much could be saved and recovered if fast and decisive actions were taken. So on the same score, 1MDB could be saved and possibly lesser losses or no losses could be achieved – only if timely, decisive, correct actions are taken. Whether that would be the case or not is something that we have to wait and see.