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A Beverly Hills Hotel, Bought With Looted Money, Goes on Sale

For sale: Boutique hotel, convenient to Hollywood. 116 rooms, rooftop pool, jet-setting clientele. Previous owner spent $40 million on renovations before becoming an international fugitive. Asking price: $100+ million.

If that sounds like a steal — even in the middle of a global pandemic that has nearly ground travel to a halt — the Viceroy L’Ermitage Beverly Hills could be yours. Just contact the U.S. government.

Prosecutors moved to seize the hotel, about a mile from Rodeo Drive, in 2016 as part of a long-running investigation into one of the biggest foreign bribery and kleptocracy cases in history: the looting of more than $2.5 billion from a Malaysian sovereign wealth fund, 1Malaysia Development Berhad, known as 1MDB.

The property was commandeered from Jho Low, a financier turned fugitive whom authorities in the United States and Malaysia described as the architect of a brazen scheme that also ensnared a prime minister and one of Wall Street’s most powerful banks, Goldman Sachs. The stolen money was used to buy everything from paintings by Van Gogh and Monet to a custom-built yacht to a see-through grand piano. Some of the cash helped finance “The Wolf of Wall Street,” which earned Leonardo DiCaprio a Golden Globe for his performance as the stock-market scammer Jordan Belfort.

Now the hotel — the last of Mr. Low’s marquee properties to be sold by federal authorities — is being auctioned off, with proceeds to be split between the governments of Malaysia and the United States.

Viceroy, which operates the hotel, charges about $600 a night on average for rooms it markets as a “home-away-from-home for Hollywood elite, international dignitaries and jet-setting luxury travelers.” Federal authorities in Los Angeles and Washington are hoping to sell it for well north of $100 million in an auction this summer, according to people briefed on the matter.

“Luxury hotels in Beverly Hills don’t often come up for sale,” said Michael M. Eidelman, a Chicago bankruptcy lawyer hired as the special master for the auction. “We have received inquiries from a number of different groups, and groups from a number of different countries.”

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Credit…Viceroy L’Ermitage Beverly Hills

But how aggressive the bidding will be remains an open question, with the future of the tourism industry very much in doubt. A resurgence of coronavirus infections is putting off — or reversing — reopening plans throughout the country, just as hotels were getting a chance to claw out of the hole opened up by lockdown orders.

Balance sheets are feeling the effects. A week ago, Blackstone Group, the big private equity firm, reported that it had missed a payment on a $274 million loan to four hotels that were in financial trouble even before the pandemic. In May, Tom Barrack’s Colony Capital said it was in default on $3.2 billion in debt for some 245 hotels in its portfolio.

Luxury properties have been hit particularly hard. Fitch Ratings, the credit rating firm, estimates that occupancy levels at those hotels were under 9 percent, partly because many have simply closed for now. The industry over all has been running at around 40 percent occupancy. It could take a long time to get back to normal: STR, a hospitality industry data firm, said it did not expect occupancy to rise above pre-pandemic levels before 2023.

But federal authorities aren’t interested in waiting to wrap up the five-year investigation into 1MDB. One of history’s most complex kleptocracy cases, it toppled the government of the former Malaysian prime minister Najib Razak and prompted a foreign bribery investigation of Goldman Sachs.

One former Goldman banker, Tim Leissner, has already pleaded guilty. He said he and others at the bank had conspired to circumvent internal controls to work with Mr. Low, paying bribes to officials in Malaysia in order to issue the bonds that raised money for the fund, which was intended to finance infrastructure projects in Malaysia. Mr. Leissner, who is married to the fashion designer and model Kimora Lee Simmons, agreed to forfeit up to $43.7 million.

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Credit…Scott Roth/Invision, via Scott Roth, via Invision, via Associated Press

Goldman itself has been in talks with federal prosecutors. The bank lobbied the top brass at the Justice Department this year to let it reach a settlement without having to enter a guilty plea to a felony charge. The bank and nearly two dozen employees have been charged with fraud in Malaysia as well, and Goldman has argued that any fine it pays to the federal government should take into account the penalties it could face overseas.

Mr. Low, who has never appeared in federal court to respond to fraud charges, has maintained that he did nothing wrong, according to his lawyers and representatives.

The forfeiture actions involving Mr. Low and his associates have moved on a separate track from the criminal investigation, led mainly by prosecutors in Los Angeles and Washington. In all, federal authorities have seized assets worth as much as $900 million, including Mr. Low’s investment interests in the EMI music publishing portfolio, the Park Lane Hotel in New York, the production rights to three Hollywood movies and a luxury shopper’s list of other assets.

In October, Mr. Low — who is believed to be living in China — and his associates gave up all claims to the seized property. Some has already been sold: Mr. Low’s stake in the EMI portfolio went to Sony for $415 million in 2018, and his share of the Park Lane Hotel, which overlooks Central Park, was sold last year for $139 million.

Federal prosecutors say that, so far, they’ve returned about $500 million to the people of Malaysia from selling seized assets. And they’re still looking for more: On Wednesday, the Justice Department said it was seeking the forfeiture of $96 million in cash and property, including accounts in Luxembourg and Switzerland, real estate in Paris, and two paintings by Andy Warhol.

Malaysia is seizing and selling, too. It collected an additional $126 million from the sale of Mr. Low’s superyacht, a 300-foot vessel with a helipad and 11 guest cabins. The Malaysian government also confiscated tens of millions of dollars in cash, gold and jewelry from Mr. Najib, who is trying to make something of a political comeback even as he stands trial there on corruption charges.

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Credit…Viceroy L’Ermitage Beverly Hills

Mr. Low acquired the Viceroy L’Ermitage for about $40 million in 2010, and later spent the same amount on renovations. The latest sale began in earnest last month with Mr. Eidelman, the special master, and a broker soliciting so-called stalking horse bids, which set a minimum price to discourage frivolous buyers. The auction is expected to be completed sometime this summer, and the government has the right to reject any prospective bidder after a background check.

The buyer will have the right to terminate the management contract of Viceroy, which also runs luxury hotels in several other U.S. cities and Latin America. A spokeswoman for Viceroy declined to comment.

The sale of the L’Ermitage could be a signal of what awaits any other luxury properties that land on the auction block because of bankruptcy filings or foreclosures caused by the pandemic.

The newly reopened Mark Hotel in Manhattan, one of New York’s most exclusive hotels, successfully fended off an attempt by one of its lenders to force a foreclosure auction after it missed an interest payment on a $35 million loan. A New York judge temporarily blocked the foreclosure last month, saying that a small creditor was trying to take advantage of the pandemic to seize control of a hotel worth nearly a half-billion dollars.

Before the judge scuttled the sale, a representative for the lender said in court filings that at least 115 groups had expressed interest in bidding for the Mark Hotel. If that claim is true, Mr. Eidelman may be right in assuming there will be keen interest in the L’Ermitage.

If the country continues to reopen, said Stephen Boyd, a senior director at Fitch Ratings, luxury hotels could rebound faster than other lodgings. The reason: Their guests are ones “who still have jobs and still have money.”

Alexandra Stevenson contributed reporting.

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Carlos Ghosn Defends His Legacy

BEIRUT, Lebanon — Most global fugitives tend to lie low. They do not beckon reporters to televised news conferences or allow themselves to be photographed drinking wine by candlelight days after being smuggled in a box aboard a chartered jet to freedom.

But Carlos Ghosn, the deposed auto executive, is no normal fugitive. Unapologetic and unrelenting, he stood at a lectern in Beirut before more than 100 journalists on Wednesday and laid out his case for how criminal charges of financial wrongdoing in Japan are part of a vast conspiracy to take him down.

The highly choreographed event, during which Mr. Ghosn took aim at the Japanese justice system and his corporate enemies, was scheduled 415 days after he was first arrested and more than a week after a team of operatives helped spirit him away from house arrest in Tokyo, where he was awaiting trial.

“I did not escape justice,” said Mr. Ghosn, 65, wearing an immaculate blue suit, white shirt and red tie. “I fled injustice and political persecution.”

For all the bravado he projects, Mr. Ghosn is a potent symbol of globalism under pressure, an imperial executive in retreat.

Until his arrest, he ruled an automotive alliance that spanned continents, comprising Nissan, Renault and Mitsubishi. As head of Nissan, Mr. Ghosn was one of only a handful of foreign chief executives of a Japanese company. But the alliance now threatens to fall apart, a parallel for a time when the global trade order and the military and political alliances that once held the modern world together are facing their toughest tests in decades.

For nearly three hours on Wednesday, alternating flawlessly through four languages (English, Arabic, French and Portuguese), Mr. Ghosn talked about how “more than 20 books of management have been written about me.” He referred to himself in the third person and talked about the drop in market valuation at the auto companies he once ran. He drew applause from some reporters, and flattered others, promising to take questions from every region.

Mr. Ghosn’s presentation felt, at times, like one he would have delivered to fellow executives and global leaders during one of his regular trips to the World Economic Forum in Davos, the annual gathering in Switzerland that has come to be seen as both a forum for world-changing ideas and a convening of the capitalist and self-congratulatory elite.

In a sit-down interview with The New York Times after the news conference, Mr. Ghosn sounded more subdued than during his fiery performance in front of the cameras. He expressed regrets about whom he had hired to replace him at Nissan, admitting, “Frankly, I should have retired.”

But Mr. Ghosn remained fiercely protective of his legacy, which is badly bruised.

“The revival of Nissan, nobody’s going to take it from me,” he insisted.

Mr. Ghosn’s story isn’t a neat one. Company insiders have described him as increasingly haughty and imperious. Though he blames the Japanese justice system for its unfairness, he agreed last fall to pay $1 million to settle a civil case in the United States, which barred him from serving as an officer or a director of a publicly traded company for 10 years. Mr. Ghosn did not admit wrongdoing under the terms of the settlement, but it essentially ended his chance of ever running another large global business.

A man with passports from several countries and homes across the world, Mr. Ghosn and his wife, Carole, who also faces a Japanese arrest warrant, are essentially stuck in Lebanon, where they have family and own property but are not free from prosecution. On Wednesday, Lebanese prosecutors said Mr. Ghosn must submit to an interrogation over his flight from Japan.

France is also investigating whether Mr. Ghosn used company money from Renault to throw a Marie Antoinette-themed party at Versailles in 2016. And Nissan has accused him of siphoning millions of dollars from the auto company to pay for his yacht, buy houses and distribute cash to members of his family — all of which he denies.

Mr. Ghosn argued that in most countries, he would not have been held for months in jail for these types of allegations. He said he felt he was being treated “like a terrorist.”

During the news conference, he flashed giant slides on a white wall behind him, showing various corporate documents. In explaining some of the questionable personal expenses, Mr. Ghosn used a defense common on Wall Street: He said other executives at Nissan had signed off on the transactions, which made them authorized by the company.

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Credit…Diego Ibarra Sanchez for The New York Times

Since his arrest in Japan in November 2018, Mr. Ghosn and his supporters have worked aggressively to tell his side of the story and attack his critics.

He has employed lawyers on at least three continents, talked to a Hollywood producer about making a movie about his legal ordeal and hired a public relations firm that advised the National Football League on its efforts to reduce head injuries.

In France, the “Committee to Support Mr. Carlos Ghosn” formed on Facebook. Some of his supporters there blame the government for failing to stand up for Mr. Ghosn, a French citizen, for fear of angering the country’s “yellow vest” protesters railing against the global elite.

In Lebanon, where Mr. Ghosn grew up, he is celebrated as a member of the diaspora of business leaders and artists who have achieved worldwide success. Hours after he landed in Beirut, Mr. Ghosn met with the country’s president, Michel Aoun, and other top leaders, and operatives who helped him carry out his escape had ties to the country.

Lebanese supporters paid for billboard ads across Beirut with the executive’s face on them and the message: “We are all Carlos Ghosn.” But in truth, there are few people in the world who have Mr. Ghosn’s money and influence.

A grandson of a Lebanese entrepreneur who ran several companies in South America, Mr. Ghosn was born in Brazil in 1954. His family moved back to Lebanon when he was 6, and he later attended college in France.

“I’ve always been someone who was different,” he wrote in his autobiography in 2003.

Mr. Ghosn went to work in the auto industry after college and made his mark revitalizing Renault. In the 1990s, he helped turn around Nissan by slashing jobs and upending its corporate culture.

“It was a dead company,” he said on Wednesday.

Mr. Ghosn expanded his auto empire further by creating the alliance of Renault, Nissan and another Japanese company, Mitsubishi.

His leadership of Renault, which the French government partly owns, gave him political standing in France. In Lebanon, some people hoped he would run for public office, maybe even president.

Mr. Ghosn’s personal and professional empire collapsed when he was arrested at the Tokyo airport on his return from a trip to Lebanon. By that point, he had stepped down as chief executive at Nissan, but was still its chairman.

From the airport, Mr. Ghosn was taken to jail, where he was forced to live in solitary confinement for weeks at a time. He was allowed to shower twice a week and was let out of his cell for 30 minutes a day. Prosecutors, he said, hid the evidence against him and prohibited him from contacting his wife in Lebanon.

He was released on bail, but he was jailed again in April after he announced that he planned to speak with the press.

Last fall, Mr. Ghosn said, his lawyers told him that his case could drag on for five years, which he said was a violation of a basic human right to a speedy trial.

It wasn’t all glum. Two days before his Dec. 29 escape, his secretary made him a reservation at a Tokyo restaurant where he enjoyed his favorite salad with sesame dressing, according to the restaurant’s manager. He posed for photos with about 40 customers.

Mr. Ghosn wouldn’t talk on Wednesday about how he got from Japan to Beirut, despite reporters’ attempts.

Government-authorized media accounts from Turkey, where Mr. Ghosn landed on the first leg of his journey, have said he was smuggled inside of a large box from an airport in Osaka, Japan.

The box was loaded into the storage area of a private plane, which was accessible from where the passengers sat, according to the Turkish account. The two operatives working with Mr. Ghosn told the flight attendant not to bother them.

After takeoff, Mr. Ghosn was let out of the box and sat in the passenger area, which contained a bed and sofa and was separated from the front of the plane by a locked door.

For about 12 hours, the quintessential global citizen was officially stateless, flying high above Asia in secret.

The Bombardier jet landed in the rain at Ataturk International Airport in Istanbul. A car pulled up to the plane and then drove to another jet parked a short distance away, according to the Turkish media. That second plane then took off for Beirut.

At least 15 operatives were involved in the operation, and some of them were not aware of whom they were extracting from Japan, according to a person briefed on the operation. They assumed that the plan was to rescue a kidnapped child.

In the interview on Wednesday, Mr. Ghosn said he had planned the escape himself, but with help from others, whom he wouldn’t disclose. “Little by little,” he said, he began to think through a strategy for getting out. “When I started to do that, it kept me motivated. It kept me alive.”

During the escape, he kept telling himself: “You need to always remember what happened to you. No matter what, never forget that.”

Ben Dooley reported from Beirut, and Michael Corkery from New York. Reporting was contributed by Vivian Yee from Beirut, Hisako Ueno from Tokyo, Liz Alderman from Paris, and Emily Flitter and David Yaffe-Bellany from New York.

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NYT > Business