US Pursuing Criminal Probe into Malaysia’s 1MDB Fund

Roni Toldanes
170811-MY-rally-1000.jpg Student activists march during a protest over a financial scandal involving state fund 1MDB in Kuala Lumpur, Aug. 27, 2016.

The United States has launched a criminal probe into billions of dollars allegedly stolen from a Malaysian state fund and is asking a court to put aside lawsuits filed over the past year, in order to protect evidence, witnesses and targets of that investigation, court documents show.

The U.S. Department of Justice had filed 29 civil cases since July 2016 in a bid to seize assets purchased via U.S. financial institutions in an alleged attempt to launder money diverted from 1Malaysia Development Berhad (1MDB), a state-owned investment fund.

Now, it is seeking to put those suits on hold, according to a court document filed in U.S. District Court in Los Angeles and obtained by BenarNews on Friday.

“The United States makes this Motion on the ground that proceeding with the case is likely to have an adverse effect on the ability of the government to conduct a related federal criminal investigation,” the document said.

Details of the investigation are likely to become public due to the ability of parties in a lawsuit to request evidence from the other side, it noted.

“Such disclosures could result in the destruction of evidence, flight of potential subjects and targets, or the identification and intimidation of potential witnesses,” according to an FBI special agent’s declaration included in the court document.

The document, filed Thursday, revealed that U.S. officials had opened a criminal probe into 1MDB before they lodged the 29 related law suits.

“The related criminal investigation is global in scope, because the underlying crimes were committed over several years in numerous jurisdictions,” special agent Jill Enyart said.

“A significant amount of the evidence and witnesses with knowledge of these violations are located in foreign jurisdictions, and will take time to pursue.”

Debt-laden 1MDB is the target of money-laundering probes in at least a half-dozen countries, and has been tied to corruption allegations surrounding Prime Minister Najib Razak, who founded the fund but has denied any wrong doing.

‘This is nothing new’: Government official

On Friday, 1MDB officials in Kuala Lumpur did not issue any statements reacting to reports about the American criminal probe. Malaysian Second Finance Minister Johari Abdul Ghani did not immediately respond to requests for comment from BenarNews.

Eric See-To, strategic communications deputy director of Barisan Nasional (National Front), the country’s ruling coalition, belittled the reports about a criminal probe.

“This is nothing new as more than a year ago, there were periodic news reports that criminal charges were imminent – but until today, no criminal charges have been filed,” he told the news website Free Malaysia Today.

“I also note that the U.S. Justice Department had asked for an indefinite suspension of the civil suit, which is unusual as there is usually a time limit to such requests,” he said. “Let the courts and the individuals involved prove whether they are guilty or innocent.”

Also responding to the developments Friday, Lim Kit Siang, leader of the opposition Democratic Action Party (DAP), said that “it may not be possible for the Najib government to continue with the national and international charade pretending that the 1MDB scandal does not exist.”

‘For the personal benefit of various individuals’

In its court motion this week, the Justice Department alleged that between 2009 and 2014, “multiple individuals, including public officials and their associates, conspired to fraudulently divert billions of dollars from 1MDB through various means.”

The document described in great detail alleged criminal conduct carried out over five years.

Between 2009 and 2011, under the pretense of investing in a joint venture between 1MDB and PetroSaudi International, a private Saudi mineral extraction company, officials of 1MDB and others arranged for the fraudulent transfer of more than $1 billion from 1MDB to a Swiss bank account held in the name of Good Star Limited, the document said.

“That Good Star account was not owned by PetroSaudi or the joint venture, but by Low Taek Jho (alias Jho Low), a Malaysian who had no formal position with 1MDB, but who was involved in its creation and exercised significant control over its dealings,” the document added.

Low allegedly laundered more than $400 million stolen from 1MDB through acquisition of properties in California, New York and London, and a jet plane purchased for $35 million, the papers said.

In 2012, 1MDB officials and others diverted about $1.4 billion through a wire transfer to a Swiss bank belonging to a British Virgin Islands entity called Aabar Investments PJS Limited, the documents alleged. These funds were eventually used “for the personal benefit of various individuals” and to purchase real estate as well as interests in three motion pictures, including “Dumb and Dumber To,” it added.

In 2013, several individuals diverted more than $1.26 billion out of a total of $3 billion that 1MDB had raised that year, the court papers said. Those funds were allegedly used to finance, among other things, the Park Lane Hotel in New York for $218 million, a yacht, and artworks by Van Gogh, Claude Monet, and Pablo Picasso.

In 2014, 1MDB borrowed approximately $1.2 billion from a syndicate of banks led by Deutsche Bank in Singapore, of which some $850 million was misappropriated and used to buy millions of dollars worth of fine jewelry, among other assets, the court document said.

“Use of the U.S. financial system was an essential feature of both the fraudulent diversion of 1MDB funds and of the subsequent movement of ill-gotten proceeds around the world,” the court document said.

Ray Sherman in Kuala Lumpur contributed to this report.


Add your comment by filling out the form below in plain text. Comments are approved by a moderator and can be edited in accordance with RFAs Terms of Use. Comments will not appear in real time. RFA is not responsible for the content of the postings. Please, be respectful of others' point of view and stick to the facts.