Venezuela’s investigation into state oil company executives over a contract the firm entered into with PetroSaudi International marks the second time investigators are known to have scrutinised a business partner of the Riyadh-based energy-investment start-up.
The US Justice Department last northern summer alleged in civil lawsuits that more than $US1 billion was diverted from the joint venture between PetroSaudi and Malaysian state fund 1Malaysia Development Berhad over several years.
The Justice Department lawsuits don’t target either PetroSaudi or 1MDB.
FBI investigators are also conducting a criminal investigation into the alleged 1MDB frauds, according to people familiar with the matter.
The Malaysian fund has denied wrongdoing and pledged to co-operate with the investigation.
US authorities last year gave a senior PetroSaudi executive involved in the 1MDB deal, Patrick Mahony, a subpoena ordering him to testify about the alleged 1MDB fraud, and some of PetroSaudi’s Swiss assets have been frozen by Swiss authorities, according to people familiar with the matter. Mr Mahony hasn’t yet testified.
PetroSaudi’s lawyers, responding to questions on behalf of the company and Mr Mahony, said the firm denied any wrongdoing and “no one from PetroSaudi has had to appear before a grand jury”.
While the Venezuela investigations are unrelated to continuing probes in six countries over 1MDB’s missing fortune, they focus on the decision by Petroleos de Venezuela, or PdVSA, to lease a ship PetroSaudi financed with a portion of the funds in the joint venture with 1MDB.
The Justice Department says $US700 million meant for the joint venture was instead diverted to a company called Good Star in the Seychelles, which distributed money to several beneficiaries of the alleged fraud.
Part of the remaining $US300m 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 was founded in 2005 by a Saudi citizen, Tarek Obaid, and a member of the Saudi royal family, Turki Bin Abdullah al-Saud.
The Discoverer and the subsequent purchase of the Songa Saturn drillship in 2010 were among the biggest investments PetroSaudi made and constituted a major part of the company’s operations.
