Malaysia: Mahathir Begins Investigation of 1MDB

Updated at 11:25 a.m. ET on 2018-05-15

Malaysia Prime Minister Mahathir Mohamad on Saturday said police were ordered to remove the 1Malaysia Development Berhad (1MDB) report from the Official Secrets Act to determine if legal action can be taken against those responsible for mishandling billions of dollars.

The prime minister also started the process of establishing his own government, naming three cabinet members. Meanwhile, Mahathir’s expected successor, Anwar Ibrahim, who is waiting for royal pardon, is expected to be released from a prison hospital on Tuesday, Anwar’s daughter said.

“We will be investigating as soon as possible money laundering and we have to contact America, Singapore, Switzerland and Luxembourg. We also have to sit through the evidence to determine whether it’s valid. It will take time but we want to act as soon as possible,” Mahathir said.

His announcement came minutes after the man he replaced as prime minister, Najib Razak, resigned as chairman of the United Malay National Organization (UMNO) political party and the Barisan Nasional (BN) coalition. Najib has denied all allegations that he improperly received millions of those dollars from 1MDB.

Najib’s resignation followed pressure from those within the party over BN’s upset by Mahathir’s Pakatan Harapan (PH) in Wednesday’s election.

The U.S. Department of Justice is trying to recover more than $1.7 billion in real estate and other assets allegedly siphoned off through complex transactions from 1MDB, which Najib formed in 2009 ostensibly to pursue projects that would benefit Malaysian citizens through development projects.

Court documents allege that about U.S. $681 million of 1MDB funds were diverted into Najib’s personal bank accounts, but Najib said the money came as a political donation from a member of the Saudi royal family.

Earlier on Saturday, Najib told reporters he decided to resign, calling it a moral responsibility because his party lost power for the first time since Malaysia’s independence in 1957. Najib thanked party leadership and reminded everyone of its contribution to the nation over the last six decades.

“Maybe a lot of this had to do with the question of perception rather than reality, but that’s how it is. … Whoever wins the war on perception, they may be able to win the support of the people,” he said in an attempt to explain the election loss.

Najib's news conference was held after his plan for a short family trip to Indonesia was cancelled because the immigration department issued a travel ban for him and his wife.

Later, Mahathir confirmed he had asked the authorities to issue the ban.

“There are a lot of complaints against Najib so we have to look into all this,” said Mahathir, adding he wants to settle a 1MDB investigation as soon as possible. “We do not want to be saddled with extradition requests.”

New cabinet members

Mahathir turned to leaders of PH coalition parties to fill three of what is expected to be 10 cabinet seats. The prime minister named Lim Guan Eng of the Chinese-dominated Democratic Action Party (DAP) as finance minister, Mohamad Sabu from faith-based National Trust Party (Amanah) as defense minister and Muhyiddin Yassin from Mahathir’s Malaysian United Indigenous Party (Bersatu) as home minister.

Earlier this week, Anwar’s wife, Wan Azizah Wan Ismail, was named deputy prime minister.

“We need this administration to be familiar with finance and defense initially,” Mahathir said. “Then home/internal affairs would have to be familiarized after that. Other ministries will be familiarized accordingly.” 

Anwar, the leader of the People’s Justice Party (PKR), is expected to leave the prison hospital on Tuesday, a month earlier than his scheduled release in June, according to his daughter, Nurul Izzah. Mahathir has promised to serve as prime minister until Anwar, 70, receives a royal pardon for his second conviction on sodomy charges.

Mahathir also announced the formation of a “team of eminent persons” to advise the government on economic and financial matters during the transitional period.

“We realized, of course, that many of us have no or little experience in running a government. Of course this expertise must come from those with experience in running previous governments, or having held some responsible posts,” Mahathir said.

The team will be headed by former finance minister Daim Zainuddin, former central bank governor Zeti Akhtar Aziz, former president and CEO of Petronas Hassan Marican, businessman Robert Kuok and economist Jomo Kwame Sundaram.

“In the interim before we have proper ministries going, we need to investigate a lot of things and some may involve ministries and personnel themselves. So we need people who aren’t involved to study the reports,” Mahathir said.

The team is to exist for 100 days, according to a statement regarding its formation.

While those named to cabinet and transition roles have government experience, Mahathir told reporters he was committed to a diverse cabinet.

“There needs to be women and youth representation in cabinet. That’ll be announced in due course,” he said.

Since the election upset, women’s rights advocates have been calling for greater representation in the government.

“While we celebrate Pakatan Harapan’s decision to make Wan Azizah Malaysia’s first deputy prime minister, her appointment alone is not enough,” Rozana Isa, executive director of Sisters in Islam, and Angela M. Kuga Thas from the Committee on the Elimination of Discrimination against Women, said in a joint statement.

“The new cabinet will be largely made up of people, including men, who have little or no experience in federal government. This presents a great opportunity to reflect the new government’s commitment to include women in decision making posts.”

Hareez Lee in Kuala Lumpur contributed to this report.

Correction: This story was updated to reflect that Wan Azizah Wan Ismail was named but not sworn in as deputy prime minister.