PetroSaudi diverted 1MDB money in Venezuela deal

Wall Street Journal or the Journal strikes again with another accusation that PetroSaudi International Ltd – which is deeply involved in the 1MDB scandal – used part of the embattled Malaysian sovereign arm cash for a project in Venezuela.

This is part of the tracing of the 1MDB money by the Journal, which together with the Sarawak Report, broke most of the stories on the 1MDB scandal.

The Journal said Venezuela’s investigation into executives of its state oil company over a contract that the firm entered into with PetroSaudi International Ltd. marks the second time that investigators are known to have scrutinized a business partner of the Riyadh-based energy-investment startup.

It said while the Venezuela investigations are unrelated to continuing probes in six countries over 1MDB’s missing fortune, they focus on the decision by Petróleos de Venezuela SA, or PdVSA, to lease a ship that PetroSaudi financed with a portion of the funds in the joint venture with 1MDB.

The U.S. Justice Department had said $700 million meant for the joint venture was instead diverted to a company called Good Star Ltd. in the Seychelles, which distributed money to several beneficiaries of the alleged fraud.

Part of the remaining $300 million was used by PetroSaudi to finance the purchase of the Neptune Discoverer drillship working in Venezuela in 2009, according to financial records and people familiar with the transaction. The rig was then rented to PdVSA.

PetroSaudi – in a tangle with 1MDB – now claims it never received the $700 million, believing it went to another bogus company with a similar name but registered under its former employees.

The U.S. Justice Department last summer alleged in civil lawsuits that more than $1 billion (RM4.5 billion) was diverted from the joint venture between PetroSaudi and embattled Malaysian state fund 1Malaysia Development Bhd., over several years.

The Justice Department lawsuit doesn’t target either PetroSaudi or 1MDB and the Malaysian fund has denied wrongdoing in the scandal.

But many of those involved in the 1MDB money trail from Singapore to Switzerland and now the US, has paid a heavy price either losing their jobs or being banned in Singapore’s financial sector.

Some of PetroSaudi’s Swiss assets have been frozen by Swiss authorities.

Malaysia has closed all but one investigation into 1MDB, with no wrongdoing found.