By BRADLEY HOPE and COLLEEN MCCAIN NELSON
Wall Street Journal
Oct. 13, 2016
Investigators look into whether money embezzled from the fund paid for lobbying seeking closer U.S.-Malaysian relations
WASHINGTON — Malaysia’s government-fund scandal, one of the world’s biggest alleged white-collar crimes, has been connected to a Hollywood studio, high-end U.S. real estate — and now, a visit to the White House.
Federal investigators are looking into whether money improperly obtained from the Malaysian fund was paid to a businessman who later arranged an Oval Office visit for relatives of the Malaysian prime minister, according to people familiar with the probe.
The businessman is Frank White Jr., an entrepreneur who helped start an investment firm called DuSable Capital Management LLC, along with partners including a rap star. Mr. White has also raised funds for President Barack Obama and Hillary Clinton.
Investigators believe about $10 million allegedly embezzled from 1Malaysia Development Bhd., known as 1MDB, flowed indirectly to Mr. White in a business deal, said people familiar with the probe.
Additionally, 1MDB paid $69 million to buy a DuSable unit out of a deal they had agreed on to build solar-power plants, the firms said last year.
The investigation of the payments is part of the wider inquiry into 1MDB, a fund that Malaysian Prime Minister Najib Razak set up in 2009 to spur development. Investigators in several countries believe up to $6 billion was improperly diverted from the fund. Malaysia’s attorney general cleared Mr. Najib of wrongdoing, and 1MDB has denied wrongdoing. Both have pledged to cooperate with investigators.
Mr. White and DuSable have provided information to investigators, said a person familiar with their position. The investigation hasn’t resulted in any allegations of wrongdoing against Mr. White or DuSable.
A spokesman for Mr. White and DuSable said the dealings with 1MDB were “intended to provide renewable energy in Malaysia, create jobs in the United States and earn support for Malaysia in the United States.” At the time, they were aware of no allegations 1MDB was the “victim of theft,” said the spokesman, Erik Smith.
U.S.-Malaysian ties have warmed in recent years, with Mr. Obama in 2014 making the first visit to Malaysia by a U.S. president in over 50 years.
This July, the U.S. Justice Department moved to seize $1 billion of real estate, art and other assets investigators believe were purchased with proceeds from the alleged 1MDB fraud. Civil forfeiture suits filed by the Justice Department are pending.
Mr. White’s Malaysian connections were on display in December 2013 when he escorted to the Oval Office a delegation that included the son and stepson of Malaysia’s prime minister, according to visitor records. Actor Leonardo DiCaprio and director Martin Scorsese accompanied them to present to the president a copy of “The Wolf of Wall Street,” a film the stepson, Riza Aziz, co-produced.
The Justice Department said in its July lawsuits the film was partly funded by money stolen from 1MDB, an allegation The Wall Street Journal had reported in April. Mr. Aziz has denied wrongdoing and his production company said it believed the money came from a legitimate partner. Mr. White’s spokesman said he had no dealings with Mr. Aziz.
There is no indication Mr. Obama or the White House were aware of any 1MDB links with Mr. White, or of any issue with the movie’s financing.
Deputy White House press secretary Eric Schultz called Mr. White “a prominent supporter of the president” but stressed that U.S.-Malaysia policy has been driven by what is best for the U.S. and not by outside influences.
Mr. Schultz said Mr. Obama has privately discussed with Mr. Najib “the importance of transparency, accountability, and rooting out corruption” and has raised this issue publicly as well. He wouldn’t comment on Justice Department proceedings.
Mr. DiCaprio declined to comment. Mr. Scorsese didn’t respond to comment requests.
Mr. White in 2007 sold an information-technology company he founded called Advanced Concepts Inc. He raised millions of dollars for Mr. Obama’s 2008 and 2012 campaigns.
Mr. White is listed on Mrs. Clinton’s website as a “Hillblazer” who contributed or raised at least $100,000. He has donated between $1 million and $5 million to the Bill, Hillary and Chelsea Clinton Foundation, its website says.
A campaign official said Mr. White has hosted events for Mrs. Clinton, but that is the extent of their relationship.
Malaysia’s government has long sought to deepen ties with the U.S., to attract investment and burnish its standing as a moderate Muslim nation.
Jho Low, a Malaysian businessman who U.S. investigators believe played a central role in the alleged 1MDB fraud, helped come up with the solar-power project on which Mr. White’s firm cooperated, said people familiar with the matter. They said Mr. Low told others his efforts in arranging it helped Mr. Najib get closer to Mr. Obama, who golfed with the prime minister in Hawaii at Christmastime in 2014.
Mr. Najib’s office declined to comment on the power project. Mr. Low didn’t respond to comment requests.
Mr. White, whose sister is married to a cousin of First Lady Michelle Obama, knew Mr. Low through friends involved with New York nightclub circles, people familiar with the matter say.
In 2012, Mr. White was paid about $10 million by a company called MB Consulting LLC, owned by an Abu Dhabi business partner of Mr. Low, said people familiar with the payment. It was part of a consulting agreement, said one of the people. The Abu Dhabi partner declined to comment.
Part of the money allegedly embezzled from 1MDB was sent to MB Consulting, U.S. prosecutors stated in their July lawsuits, without saying where it went next.
In May 2013, Mr. White formed DuSable Capital with Shomik Dutta, a former White House special assistant and 2012 Obama fundraiser, and with Pras Michel, an original member of the hip-hop group the Fugees and the artist behind the hit “Ghetto Supastar (That Is What You are).”
Messrs. Dutta and Michel declined to comment.
Later in 2013, Mr. White registered DuSable, which calls itself an investment firm focused on renewable energy and infrastructure, as a lobbyist for 1MDB. The filing said DuSable would “encourage the U.S. government to provide non-financial support” for a solar project in Malaysia.
On Dec. 18, 2013, Mr. White escorted the Malaysian prime minister’s family members on their Oval Office visit, where they met President Obama.
In April 2014, a DuSable unit agreed with 1MDB to jointly develop the solar-power project. The deal was done without a public tender, according to 1MDB board minutes reviewed by the Journal. The minutes say 1MDB executives presented it to the 1MDB board as a “government-to-government” deal between Malaysia and the U.S. Mr. White’s spokesman said the U.S. government wasn’t a party to the deal.
Mr. Obama arrived in Malaysia on April 26, 2014.
Four months later, 1MDB moved to buy the DuSable unit out of the project, which had seen no construction, to prepare 1MDB’s energy assets for a public offering.
Mr. Najib signed a resolution to pay DuSable $95 million for its interest in the solar project. The price was renegotiated and 1MDB paid $69 million, said a 1MDB/DuSable joint statement last year.