Question: What does Malaysian politics, Middle Eastern oil money, Western banking giants like Goldman Sachs, Paris Hilton, Victoria Secret model Amanda Kerr, actor Leonardo DiCaprio, a $75 million bribe to American politicians, a US law firm’s IOLTA accounts, and one murder all have in common?
Answer: A “Billion Dollar Whale.” This book, penned by “Wall Street Journal” reporters Tom Wright and Bradley Hope, is NOT a novel. As I read it, I had to keep reminding myself that every single word in this book is true!
The “whale,” which is a very high roller in gambling casinos, in this case is Jho Low, an associate of former Malaysian Prime Minister Najib Razak. Low helped Razak establish a Malaysian sovereign wealth fund called 1Malaysia Development Berhad. It was a “green” initiative that was supposed to help Malaysia become a first-world financial contender, do the right thing for the Malaysian people, and save the environment. Instead, Low siphoned off most of the money from the fund and used it as collateral to then swindle more billions from other sources – all to fund his international lifestyle and eventually pay over $781 million over to Razak. In fact, this was the biggest heist ever perpetrated by any crook. Low makes Bernie Madoff look like chump change in comparison.
What else was happening? Get ready and fasten your seatbelt. Low was a serious fan of Leonardo DiCaprio and the actor received $13 million in artworks as gifts from Low, as well as funding for the production of DiCaprio’s movie “The Wolf of Wall Street”. At the same time, Low bought $8 million in jewels for then-girlfriend Amanda Kerr; commissioned a $250 million super-yacht, the Equanimity, featuring a helicopter pad, room for 22 guests, a spa, and beauty salon; paid Paris Hilton $100,000 every time she was his “date” for an event; and made sure that Goldman Sachs made a $600 million profit in one year acting as agent for his various deals by underwriting and arranged bond sales for the wealth fund. The Goldman Sachs swindle alone eventually totaled $6.5 billion. Then a Malaysian prosecutor who tried to bring this charlatan to justice was found murdered and stuffed in an oil drum. The drama is staggering.
The unbelievable amounts of money involved, the oil-rich Arab families looking to invest in other parts of the world, the birthday parties costing over $2 million for one night, the $1 million dropped at the Las Vegas gambling tables in one throw of the dice, and the $5,000 bottles of champagne made this all seem so astonishing.
Yes, this book reads like a novel, but Wright and Hope have documented every statement in this book, and their reporting is flawless. I just had to keep reminding myself that this is all true.
Where is Jho Low at this time? As of this writing, news sources state that he struck a $700 million deal with the US government to end the legal case against him. Yet, this was done through his lawyers and he never appeared. Some sources say he is in hiding and cannot be found. Malaysia news sources state that he is not hiding, but jetting around the world, still brokering deals, partying, and living a high life. Sadly, his super-yacht was impounded by the US government, so Low probably has to resort to using his private jet, tapping into bamboozled monies hidden in various banks around the world, and living in secret mansions purchased under other names.
As an addendum, Goldman Sachs has recently reached a billion-dollar settlement with the Malaysian government over this corruption scandal. But, as of this writing, Goldman Sachs still faces an investigation by the US Department of Justice. Have they learned their lesson? Probably not.
How do we know this? Sadly, the ultra-rich are really the new royalty and they command a tremendous amount of power. International banking organizations move billions every day. Billions of dollars represent power. Power and money are a seductive combination, and according to most economists this has created a serious imbalance in wealth world-wide. Banking institutions, however, thrive on making money – not on ensuring equality among the non-ultra-rich.
Why do we care? Executive Director and Chief Economist at the Washington Center for Equitable Grown, Heather Boushey, tells us in her wonderful book, “Unbound: How Inequality Constricts Our Economy and What We Can Do About It”.
Basically, Boushey explains that economic inequality really undermines financial growth for both individuals and countries in three ways. When wealthy families exercise a monopoly on the best social, educational, and economic opportunities, it obstructs the talent, initiatives, and prospects for capital growth for everyone else.
As if that was not enough, inequality also subverts private competition and public investment. Small businesses cannot grow if large corporations stifle the little businesses, and this costs us the consumers because we have less money to spend, because us the workers have suppressed wages, and because us the innovators have no outlet for our inventions.
In turn, schools become under-funded, our infrastructure is ignored, and technology stagnates. Lastly, as our buying power decreases, the economy drifts toward even greater instability.
This book is not going to be easy to get through for some of my readers, because Boushey makes an argument for increasing taxes for the wealthy, explains that we get what we pay for (there is no such thing as a free lunch – example: you want good roads you have to pay for them), and the actual cost of lower taxes means less tangible money and fewer advantages for everyone. Top-down tax breaks don’t seem to work. But, believe me, she is not a Socialist. She is an economist with some serious chops, and her analysis is excellent.
As I read, I was really surprised to find that research shows one of the best ways to support equality is to espouse early childhood intervention! Yes, giving all children good nutrition, appropriate medical attention, access to well-designed developmental pre-school and kindergarten, will eventually contribute to helping balance the economy for everyone.
This was certainly an eye-opening book and one that all politicians and voters should read and take to heart while decisions are made regarding economic policy.
Speaking of economic policy, “Crashed: How a Decade of Financial Crises Changed the World” by Adam Tooze, will most likely blow your socks off! This is Really Not an easy read. Rather, it is a blockbuster review of recent economic history that will make you angry, frustrated, and hopefully energized enough to do what ever you can to Never Let This Happen Again.
This book really starts in 2008. We all remember that debacle. The world was brought to its economic knees by what happened on Wall Street, and many are still struggling to survive in the aftermath. What else? For one, US banking regulations were rolled back. This let in the likes of Jho Low and his ilk (see above) manipulate the greedy in the banking industry, and pretty much manage to destroy stability in Malaysia.
Some financial institutions collapsed in 2008, debt in certain countries rose to unbearable levels, and many individuals lost their homes. Interestingly, some banking institutions (see Goldman Sachs above) may have realized this was an impending disaster, hedged their bets beforehand, and knowing that many mortgages may not have been stable, made sure to be ready to sell mortgages to another institution before everything hit the fan, and then judiciously grab up the equity from the collapsed institutions after it did. Slick.
Writing a conclusion for this column is a struggle for me. Most frequently, I like to review books that are fun, entertaining, and diverting. While the “Billion Dollar Whale” is certainly all that, the last two books are right in your face. Economists are worried. They have pretty much come to a consensus with respect to the inequality in our economy, and their predictions for everyone’s survival hinge on making significant changes in how we as a country approach our financial wellbeing. Read, get informed, promote equality of women, minorities, and the economically disadvantaged – because for better or worse, we are all in this together.