SINGAPORE (July 14): Malaysian businessman Low Taek Jho, better known as Jho Low, was “closely involved” in a scheme to skim millions of dollars in secret profits through a restructuring of 1Malaysia Development Bhd’s (1MDB) interest in PetroSaudi Oil Services Limited (PSOSL), according to state prosecutors.

Prosecutors this week revealed that BSI bank in Singapore had received instructions in mid-2012 to assist 1MDB to “restructure” its interest in PSOSL under a fiduciary fund structure. Post-restructuring, the value of 1MDB’s interest was to be marked as US$2.32 billion ($3.19 billion).

Investigations revealed that the principal assets of PSOSL were two aging drill ships: the PetroSaudi Saturn and PetroSaudi Discoverer. The vessels were each more than three decades old, and only one of the two was generating revenue.

See: PetroSaudi Oil Services valuation comes to light following 1MDB-linked conviction

The fund manager was Hong Kong-based firm Bridge Partners Investment Management (BPIML).

“The effect of the ‘restructuring’ was that 1MDB, through Brazen Sky, continued to hold the same interest in PSOSL, albeit in the form of an ‘investment’ in Bridge Fund units, with various Bridge Partners-affiliated entities interposed between Brazen Sky and PSOSL,” state prosecutors say in an address on sentence at the trial of former BSI bank wealth planner Yeo Jiawei on Wednesday.

Prosecutors say Yeo had “significant involvement” in BSI’s restructuring of PSOSL, which was codenamed “Project No Retail”.

Yeo had prepared the initial proposals for Low’s consideration. These proposed plans would only be formally presented to 1MDB after discussion and review with Low, according to emails unveiled in court documents.

However, unbeknownst to BSI Singapore, Yeo and his former boss at BSI, Kevin Swampillai, had devised a plan to secretly obtain a cut of the fees earned from transactions involving the fiduciary funds.

By negotiating with the fund to receive a smaller share of the fees, Yeo and Swampillai created a margin of “secret profit” that they could pocket on the sly.

This was done with the assistance of an associate, Samuel Goh Sze Wei, through the use of corporate intermediaries and referral fee arrangements.

This included negotiating with Bridge Partners for BPIML’s share of the management fees to be capped at US$500,000 per annum, and for the balance amount per annum to be paid as a form of referral fees to connected persons in return for recommending Bridge Partners for the deal.

In reality, most of these referral fees would eventually be paid to the Yeo and Swampillai.

To conceal the receipt of these secret profits, the referral fees for the connected persons would be paid first to Bridge Global Managers Inc., of which Goh was a director, shareholder, and bank account signatory.

The fees would then flow to two entities – Bridgerock Investment Inc. and GTB Investment Ltd – which were beneficially owned by Yeo and Swampillai, respectively.

Through Bridgerock, Yeo would receive a sum of US$1.65 million per annum that would be traceable to the annual management fees paid by Brazen Sky.

Shortly after the first payment was received in Bridgerock’s account on Nov 14, 2012, Yeo transferred a sum of US$500,000 to a bank account in the name of Yishun Aquarium – a Singapore partnership beneficially owned by his parents.

After he left the now-defunct bank in 2014 to work for alleged 1MDB mastermind Jho Low, Yeo is said to have accumulated a net worth of $23.9 million in just 15 months through “secret profits”.

Yeo in court on Wednesday pleaded guilty to money laundering and cheating charges in relation to the 1MDB sovereign wealth fund.

He was sentenced to imprisonment of 24 months of cheating BSI of profits and 30 months for money laundering. Both sentences will run consecutively.

Yeo is currently mid-way through a jail term of 30 months after he was last year convicted on four counts of witness tampering in relation to the 1MDB-linked scandal.

This brings his total sentence to 69 months – the longest meted out so far in Singapore’s probe into 1MDB.

In addition, Yeo has volunteered to assist the Commercial affairs Department (CAD) in its investigations into 1MDB and Jho Low.

“The assistance that the accused (Yeo) will be providing would not be unexceptional,” says deputy public prosecutor Nathaniel Khng. “As a member of Jho Low’s circle of associates, the accused is in a unique position to assist CAD in its investigation.”

See: Yeo Jiawei to assist CAD investigations on 1MDB, disgorge profits from money laundering and cheating charges

Is the noose tightening around alleged 1MDB mastermind Jho Low?

Find out more in our cover story, “Is Jho Low the next target?”, on pages 12 – 14 of The Edge Singapore (week of July 17), available at newsstands now.