May 24, 2018

Breakingviews: EMI Deal Calls Out to 1MDB Bounty Hunters

by Breakingviews.

The sale of EMI Music Publishing could be music to bounty hunters’ ears. Sony’s move to take control of the venerable song publisher could mean a big payout for a key figure in the furor over the scandal at Malaysian fund 1MDB.

When Sony first invested in 2012, it was financially weak. So it had some odd allies, including Abu Dhabi state investor Mubadala, the estate of Michael Jackson, and private equity group Blackstone. Malaysian dealmaker Jho Low’s Jynwel Capital was also involved.

The financier has since achieved far greater notoriety, with U.S. authorities saying he was central to the looting of $4.5 billion from 1MDB – a saga that has just helped bring down Malaysian Prime Minister Najib Razak. Low has previously said the claims are “deeply flawed and politically motivated”. Both he and Najib deny any wrongdoing.

Indeed, last year the U.S. Department of Justice laid out how a Jynwel unit, JCL Media, ploughed $107 million into the EMI deal using funds diverted from 1MDB and shuffled through at least six different bank accounts in just a day or so. This is just part of the $1.7 billion of 1MDB-linked assets the DOJ is chasing.

Sony’s filing does not name Low, but does say JCL Media owns 22.1 percent of the seller. With selling investors set to receive $1.9 billion, Low could get $420 million, assuming he still owns JCL Media. The near-quadrupling of the investment reflects a comeback for the music industry.

That will intrigue investigators in Malaysia. Same goes for their U.S. counterparts, who in March agreed a $60 million settlement with a producer of “The Wolf of Wall Street”. The DOJ had alleged that 1MDB funds were used to finance the film.

It is not clear how or when the EMI stake sale money could potentially be intercepted. But the transaction will not come as a surprise: the DOJ knew about the latest Sony deal before it happened, a person familiar with the matter told Breakingviews.

In any case, Malaysia’s new government, led by Mahathir Mohamad, is desperate to clear up after 1MDB and recoup missing funds. An investment windfall of hundreds of millions of dollars would strike a welcome note.

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