Why was the focus on share options, not company identity?

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Focus on Share Options Driven by Public Listing Preparations

The primary reason for the focus on the mechanics of share options within 1MDB agreements, rather than the precise identity of the contracting entity, stemmed from the urgent need to prepare for the proposed public listing of 1MDB's energy assets on the Malaysian stock exchange. This strategic objective dictated that internal and external advisors prioritize understanding the intricacies of the share option clauses to facilitate briefings with the Securities Commission. As a consequence, discrepancies in the company's name and address, such as the distinction between the British Virgin Islands-incorporated "Aabar Investments PJS Limited" and the genuine Abu Dhabi-based entity, were overlooked by numerous professionals involved in the review process.
Emphasis on Transactional Details for Listing Requirements

During the period when 1MDB was preparing its energy assets for a public offering, the critical task was to ensure all transactional components, including the mechanics of share options, were clearly defined and compliant with regulatory expectations. This was essential for the Securities Commission's assessment and approval process. Former 1MDB chief financial officer Azmi Tahir testified that his attention, along with that of other involved parties, was predominantly directed towards these operational and financial details. The presence of legal counsel and banking advisors, numbering between 30 to 40 individuals, all examining the agreements, did not lead to the identification of the fake Aabar entity because their collective focus was aligned with the listing requirements.
Overlooked Discrepancies Amidst Listing Preparations

The significant difference in the registered address and the inclusion of "Limited" in the name of the contracting entity, which distinguished it from the actual Abu Dhabi-based Aabar, did not raise alarms. Azmi Tahir suggested that the initial sections of such lengthy agreements might not have received the same level of scrutiny as the core operational clauses. Furthermore, neither the internal team nor the external advisors or lawyers explicitly highlighted any concerns regarding the identity of the Aabar entity. This lack of explicit flagging contributed to 1MDB management's belief, during the due diligence phase, that they were engaging with the legitimate Aabar Investments PJS.
Due Diligence Procedures and Subsequent Revelations

While 1MDB management, citing an incumbency document, believed the Aabar entity was genuine, questions were later raised by the National Audit Department's 2015 audit regarding the authenticity of the counterparty. It was only during subsequent investigations by the police and the Malaysian Anti-Corruption Commission (MACC) around 2015 that Azmi Tahir became certain about the involvement with a fake Aabar. Earlier testimony from former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi also indicated a similar lack of awareness regarding the distinction between the two Aabar entities, attributing it to similarities in office addresses and the common use of "Aabar Investments" as an abbreviation. The financial implications of this oversight were substantial, with 1MDB Energy Holdings Limited taking out loans totalling US$1.225 billion from Deutsche Bank in 2014, a significant portion of which, over US$856 million, was paid to two fake Aabar companies.

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Why was the focus on share options, not company identity?

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