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Malaysia: New US Suit Seeks to Recover $540 Million in 1MDB-Linked Assets

Ray Sherman
Kuala Lumpur
2017-06-16
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Malaysian Prime Minister Najib Razak and his wife, Rosmah Mansor, arrive at the opening ceremony of the Association of Southeast Asian Nations leaders’ summit in Manila, April 29, 2017.
AFP

United States authorities have stepped up efforts to seize assets, including a diamond necklace for Prime Minister Najib Razak’s wife, bought with money allegedly stolen from Malaysia’s sovereign wealth fund, according to a lawsuit filed in a California court this week.

In the suit lodged at the U.S. District Court in Los Angeles on Thursday, the Justice Department moved to recover about U.S. $540 million (2.3 billion ringgit) in assets allegedly stolen by businessmen associated with the 1Malaysia Development Berhad fund, known as 1MDB, established by Najib to promote economic development.

About a year ago, the United States filed court papers to “forfeit and recover” more than $1 billion (4.2 billion ringgit) in assets associated with what it called a global conspiracy to launder funds stolen from 1MDB.

This week, U.S. Justice officials said a total of $4.5 billion (19.2 billion ringgit) had been misappropriated from 1MDB. It did not name Najib in both the suits, but Malaysian and U.S. government officials previously confirmed that “Malaysian Official 1” cited in court documents referred to the prime minister.

“Today’s complaints reveal another chapter of this multi-year, multi-billion-dollar fraud scheme, bringing the total identified stolen proceeds to $4.5 billion,” acting assistant Attorney General Kenneth A. Blanco said in a statement Thursday.

“This money financed the lavish lifestyles of the alleged co-conspirators at the expense and detriment of the Malaysian people,” he said. “We are unwavering in our commitment to ensure the United States is not a safe haven for corrupt individuals and kleptocrats to hide their ill-gotten wealth or money, and that recovered assets be returned to the victims from which they were taken.”

Nearly $28 million (119 million ringgit) allegedly from siphoned proceeds from a bond sale linked to the 1MDB scandal was used to buy jewelry for Najib’s wife, Rosmah Mansor, according to the civil lawsuit.

“Funds traceable to the diverted proceeds of the 2013 bond sale were used to purchase a 22-carat pink diamond, set in a diamond necklace, for the wife of Malaysian Official 1,” according to the court documents.

“The stone and necklace were purchased from New York-based jeweler and jewelry designer Lorraine Schwartz Inc., which specializes in high-end bespoke diamond jewelry. The total purchase price for the stone and necklace was $27,300,000.”

‘A deeply flawed case’: Jho Low

Other assets sought by the U.S. authorities include a Picasso painting given to American film star Leonardo DiCaprio and the rights to two Hollywood films.

The jewelry purchases for Rosmah were allegedly arranged by controversial Malaysian financier Low Taek Jho, or Jho Low, who is also accused of giving DiCaprio the Picasso.

In a statement issued through a representative, Low said the Justice Department’s actions were “a further example of global overreach in pursuit of a deeply flawed case,” according to Reuters news agency.

“The U.S. Department of Justice’s latest move continues its inappropriate efforts to seize assets despite not having proven that any improprieties have occurred,” the statement said.

A spokesman for DiCaprio on Thursday said the actor had begun proceedings to transfer ownership of the Picasso to the U.S. government, having in July 2016 initiated the return of gifts he had received from financiers connected to the 1MDB case, Reuters also reported.

Najib had been tied to the 1MDB scandal for the past two years since the Wall Street Journal (WSJ) reported in July 2015 that nearly $700 million ended up in his private bank accounts. He has denied wrongdoing or taking money for personal gain over the 1MDB affair.

Malaysian Attorney General Apandi Ali previously said the funds that went into Najib’s account were a legal political donation from Saudi Arabia and most of the money was returned.

On Friday, he again came to Najib’s defense, saying the U.S. Justice Department was making insinuations against the premier.

“At no point in the civil claims is the prime minister named as a defendant or has been alleged to have committed any criminal wrongdoing,” Apandi said, adding there was no evidence of misappropriation of money from the state fund.

“After review, we found that no crime was committed,” Apandi said, noting there was an ongoing investigation by Malaysian police.

The country’s top government lawyer also expressed his frustration that the U.S. Justice Department had failed to “inform or alert” his office over the latest suit.

Former Malaysian Law Minister Zaid Ibrahim questioned Apandi’s stand.

“The U.S. Dept of Justice complaint on 1MDB is 250 pages long, and AG Apandi is still insisting it is without basis?” Zaid said on his Twitter account.

The cash-strapped and state-run Malaysian fund is the target of money-laundering probes in at least one-half dozen countries including neighboring Singapore.

Najib’s press secretary, Tengku Sariffuddin Tengku Ahmad, also came to the premier’s defense, suggesting the suit went “beyond the objective of seizing assets.”

“The judicial process is not served by headline seeking. Malaysia stands firm in its support of transparency and good governance. That includes ensuring that accusations have a basis in fact, rather than smears briefed by political opponents,” he said in a statement.

Eric Paulsen, executive director of Lawyers for Liberty, a local NGO, said Malaysian enforcement authorities must first question Jho Low before criticizing the Justice Department’s move.

However, Malaysian police chief Khalid Abu Bakar indicated his department would not extend any help to the Federal Bureau of Investigation (FBI) in its probes related to 1MDB.

“No (cooperating with FBI) in civil matters,” he said Friday.

A statement by 1MDB on Friday said it was not a party to the civil lawsuit and it had not been contacted by the Justice Department.

“1MDB notes that the civil lawsuit does not contain any appendices with documentary proof or witness statements to support the allegations made by the DOJ,” 1MDB said, adding the company would cooperate fully with any foreign lawful authority subject to international protocols.

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