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Friday, February 3, 2017

Report: DOJ seeks to remove Jho Low's stake in NY hotel



The US Department of Justice (DOJ) has requested a US federal court to approve a plan to remove controversial businessman Jho Low's stake in Park Lane Hotel in Manhattan, New York.
This is part of the DOJ's efforts to seize Jho Low's assets, who was directly named in their 1MDB-related civil forfeiture suit filed last year, reported The Wall Street Journal (WSJ).
The motion, filed jointly in Los Angeles federal court with New York property developer Steven Witkoff, aims to stabilise the ailing Park Lane Hotel and set up a process for selling Low's stake in the property.
Low bought 55 percent stake in the hotel, which the DOJ believes is one of the many assets purchased with misappropriated money from 1MDB.
WSJ said that the hotel was Low's splashiest investment in the US and the largest asset being sought by the DOJ in its case against him.
Low's spokesperson did not respond to a request for comment on this matter, WSJ added.
Low had previously denied wrongdoing in this matter and he has yet to be charged with a crime in connection with the 1MDB issue.
If the motion by the DOJ and Witkoff is approved, the plan would enable Witkoff and a group of investors to shore up the hotel's finances and move forward with its development plans, the daily said.
The court papers said the process of selling Low's "complex and valuable" stake would take many months.
"Unless the parties are able to commence that process, now the [hotel] faces default, loss of financing arrangements, and foreclosure, all at significant detriment to the value of the asset [and] the people harmed by the alleged crimes," the papers stated.
Witkoff and an investor group, along with Low, purchased the Park Lane Hotel in 2013, at a value of US$654 million.
The court papers said that Low and his family provided the larger share of the equity, with "proceeds derived from or involved in fraud, misappropriation and other violations of United States and foreign law".
Witkoff and the investor group had purchased the property with the intention of converting it to a luxury condominium but these plans were stalled when the DOJ initiated its suit to seize Low's assets.
Since the action suit, financial problems began to arise as the hotel's cash flow was not sufficient for the group to stay current on some US$480 million in debt and pay expenses related to planned development and operations.
"The group issued a so-called capital call to its participants to plug the gap, but Low didn’t contribute, which put him in default on his stake, the court papers state," WSJ said.
Witkoff and the other investors have now come up with sufficient money to stay current on the hotel's interest payments and other obligations, WSJ said, and as part of the agreement with the DOJ, they would be reimbursed for that amount along with 12 percent interest if Low's stake is sold.
The chief of the programme operations unit of the DOJ's money-laundering and asset-recovery section Gene Patton said in an affidavit that Witkoff is "uniquely positioned to market the asset to potential investors around the world".
However, people familiar with the matter had said that more problems are approaching as the debt is due later this year, WSJ reported.
"The court papers say the DOJ cut its deal with Witkoff’s group in September.
"It isn’t clear why the two sides waited months to ask for court approval, which would be necessary for a sale of Low’s stake to proceed," WSJ said.
It added that the court papers also raised questioned about Low's relationship with Abu Dhabi sovereign wealth fund Mubadala Development Co.
Witkoff told the DOJ that Low sold Mubadala about 45 percent interest in his 55 percent stake in the Park Lane Hotel.
This was shortly after he, Witkoff and the other investors purchased the hotel, according to the court papers.

Mubadala has recently "begun to discuss the purchase" of Low's stake subject to court approval, the court papers read.
"According, at this time, at least the Jho Low related potentially interested parties do not consent (to the motion)," the papers stated.
The WSJ said a spokesperson for Mubadala told them in an email that the fund's legal team "is looking into recent paper submitted in the proceedings and will determine our position and take the necessary action".
The spokesperson declined further comment.- Mkini

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