The FBI Has Its Eyes On Malaysia’s Embattled Prime Minister

By Shannon Hayden
September 22, 2015

Malaysia’s prime minister is elbows-deep in a mess of trouble, and it looks like it’s only going to get worse. The fallout from $700 million that somehow found its way into Malaysian Prime Minister Najib Razak’s personal bank account continued over the weekend, with the arrest of a prominent critic of Razak’s while he attempted to leave the country, reports of further missing payments, and news that the FBI is now on the case.

The once-domestic issue now involves unusually “generous” unnamed Middle Eastern donors, frozen accounts in Switzerland and Singapore, and nationwide demonstrations calling for Najib’s resignation. Najib’s attempts to delay further investigation have partially succeeded, but his remaining time in office is uncertain.

The 1Malaysia Berhad Development (1MDB) fund, established by Najib in 2009 to expand Malaysia’s economy, has amassed $11 billion in debt and long been the target of investigation. Four separate government probes are ongoing, led by Malaysia’s central bank, a parliamentary committee, the auditor general, and the police. International attention spiked this summer with a July Wall Street Journal report that Malaysian government investigators has traced nearly $700 million from 1MDB to the prime minister’s personal accounts.

This disclosure prompted the involvement of Malaysia’s Anti-Corruption Commission (MACC). In August, MACC published its findings, concluding that the money in Najib’s account was not from 1MDB, but rather was a “donor contribution” from the Middle East. MACC offered no further details. Najib supporters claimed the 1MDB funds were not for his personal use and would be expended in upcoming elections to support the ruling United Malays National Organization (UMNO) party.

Related: Malaysia’s Scandal-Plagued Prime Minister Just Purged His Cabinet

During the investigations, Najib removed Attorney General Gani Patail and reshuffled his cabinet. As a result, four men charged with probing 1MDB were promoted to cabinet positions — and away from such investigative roles. (Simultaneously, hearings in those probes were suspended through October.) Two newspapers critical of Najib were suspended, and access to NGO watchdog Sarawak Report was blocked in Malaysia. On Monday, Malaysia’s High Court overturned the suspensions, stating they were “tainted with illegality.” Najib’s critics have found themselves in trouble before; opposition leader Anwar Ibrahim was jailed on sodomy charges earlier this year, effectively barring him from participation in national politics.

“Despite a fairly active civil society, the Malaysian government’s resources are pretty powerful,” said Scott Harold, deputy director of the Center for Asia-Pacific Policy at the RAND Corporation. “When even the most astonishing of allegations appear in public, we’ve seen effective responses from the government to preserve the prime minister’s position in power.”

Recent developments have furthered the narrative of Najib’s crackdown on his critics. On Friday, a former UMNO division chief was arrested in Kuala Lumpur under suspicion of providing 1MDB-related documents to the Swiss Attorney-General’s Chambers. Datuk Seri Khairuddin Abu Hassan, who is now barred from leaving Malaysia, confirmed through his lawyer that he had intended to deliver information to several foreign government agencies. Responding to wide criticism, Malaysia’s inspector-general of police, Tan Sri Khalid Abu Bakar, insisted Khairuddin should have provided his evidence to local investigators instead.

“This is clearly an act intended to challenge Malaysia’s legal system, damage the credibility of local enforcement agencies, and invite foreign interference into the country’s democratic system,” Khalid said.

Over the weekend, additional reports surfaced questioning missing funds that were allegedly transferred between 1MDB and an Abu Dhabi fund, the International Petroleum Investment Co.; officials at 1MDB subsequently offered explanations and audited financial reports. The Swiss Attorney-General’s Chambers is investigating 1MDB executives for corruption and money-laundering, and Singapore too is looking into the fund — the two nations have frozen tens of millions of dollars in accounts related to 1MDB. Officials at 1MDB deny its accounts have been frozen. On Saturday, the Wall Street Journal reported that sources said the FBI was also pursuing a money-laundering investigation against 1MDB.

Tens of thousands rallied earlier this month in Kuala Lumpur, and around the country, to demand Najib’s resignation and changes to the political system. Organized by a group of NGOs called the Coalition for Clean and Fair Elections in Malaysia, the peaceful Bersih rallies — bersih means “clean” in Malay — were the fourth of their kind since the group’s inception in 2005, and the first since 2012. In attendance this time was 90-year-old Mahathir Mohamad, the “father of modern Malaysia” and its longest-serving prime minister. During the rally, Mahathir called for Najib’s resignation.

“There’s no more rule of law,” Mahatir said. “The only way for the people to get back to the old system is for them to remove this prime minister. And to remove him, the people must show people’s power. The people as a whole do not want this kind of corrupt leader.”

Described as a “political terminator” who has already driven two prime ministers from office, Mahathir is said to be promoting his son, Mukhriz, as a potential replacement for Najib.

Last week supporters of Najib and the government organized a counter-rally of red-shirts (Bersih protesters wear yellow shirts) to show their support, though the demonstrations’ focus on indigenous Malay rights highlighted tensions between the ethnic Chinese minority population; many opposition members come from the Chinese community. The redirection of political grievances toward indigenous rights will likely contribute to Najib’s staying in power, but, that doesn’t mean the end of his problems.

“The government has not convinced anyone to let the [broader] issues drop,” Harold said. “They have succeeded in preserving the prime minister in power and kept him from being pushed out of office. But Bersih has shown that many Malaysians share the same concerns — making government responsive to the people, making sure elections are not rigged. Bersih has put these issues on the public’s agenda and they are changing the narrative of politics in Malaysia.”

At the opening of a new UMNO regional headquarters this weekend, Najib said his critics should look at their own mistakes instead of finding fault in others, and advised his own UMNO party to remain strong and “stop playing politics among themselves.”

  1. #1 by good coolie on Saturday, 26 September 2015 - 2:07 am

    Hello, has this Dr. Mahatir really reformed or has he become a mere turn-coat? Dr. Who undermined the rule of law? Dr. Who started the rot by undermining the institutions of our parliamentary system. If you ask me who is worse, Mahatir or Najib, I would have no hestitation at pointing to the good doctor. Najib took a wee-little donation from the middle-east which he says he used for the benefit of the country. Mahatir, however, undermined the judiciary and suppressed freedom of speech and assembly. I wish that the silly offence of “undermining parliamentary democracy” could be applied with retrospective effect, catching Dr. M’s activities back then.

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