David J Lynch in Washington
Financial Times
20.7.2016
Van Gogh paintings, Beverly Hills properties and the rights to profits from the hit movie The Wolf of Wall Street were among $1bn in assets US prosecutors moved to seize on Wednesday as part of a sprawling anti-money laundering investigation into Malaysia’s sovereign wealth fund.
In one of the largest seizures in US history, federal law enforcement agents also appeared to link Najib Razak, Malaysia’s prime minister, to a web of corrupt officials receiving stolen funds.
The US justice department case represents the most detailed and sweeping allegations to be brought in the multinational probe into a global scheme to siphon more than $3.5bn from the Malaysian government fund, known as 1MDB.
It is also the first time Mr Najib has been officially tied to the scandal. Mr Najib is not identified by name in court documents but the description of a “Malaysian Official 1” matches his biography and job responsibilities. On several occasions, that official received funds misappropriated from 1MDB, prosecutors say. Mr Najib has repeatedly denied any wrongdoing.
1MDB was created in 2009 as a government-owned vehicle to promote economic development through global partnerships and foreign investment.
But funds intended to benefit the Malaysian people were instead diverted to buy real estate, works of art and jewellery, pay casino bills and hire musicians and celebrities for the conspirators’ “lavish lifestyles”, the complaint says. More than $200m was spent on art alone, prosecutors allege.
A spokesman for the Malaysian government said a statement would be made later.
The case accuses Malaysian officials and business executives with receiving laundered 1MDB funds through banks in Singapore, Switzerland, Luxembourg and New York. The Malaysian officials “treated this public trust as a personal bank account”, said Lorretta Lynch, US attorney-general.
The misappropriation occurred over four years beginning shortly after Mr Najib set up the fund in 2009, according to the complaint.
It alleges that in March 2013, $681m in proceeds from a 1MDB bond offering were transferred into an account belonging to the official matching Mr Najib’s description. Five months later, $620m of that amount was shifted to a different account to which a 1MDB official was an authorised signatory.
Likewise, the proceeds of two 2012 bond offerings were diverted to “make substantial payments” to the Malaysian official and others, prosecutors say.
The filings also quote a Malaysian attorney-general description in January 2016 of a transaction in those amounts involving Mr Najib, which describes the money as a “personal donation” to him from the Saudi royal family.
At the centre of the action is Taek Jho Low, a Malaysian businessman also known as Jho Low, who held no formal role with the fund but was deeply involved in its operations, the complaint says. Mr Low has denied any role in the fund after its creation.
Officials at 1MDB and others began diverting money shortly after the fund was created in September 2009 under the guise of investing in a joint venture with a private Saudi oil extraction company, PetroSaudi International. More than $1bn was transferred to a Swiss bank account held by Good Star Ltd, which was owned by Mr Low, prosecutors allege.
The misdirected monies “were used for the personal gratification of Low and his associates”, the complaint alleges.
In 2012, 1MDB officials and others fraudulently diverted $1.4bn in proceeds from two bond offerings arranged by Goldman Sachs, according to the complaint. Representing almost 40 per cent of the total raised, the funds were transferred to a Swiss account controlled by a British Virgin Islands entity called Aabar Investments PJS Limited.
Aabar had been named to suggest a relationship with an Abu Dhabi company, Aabar Investments PJS, an investment arm of the Abu Dhabi government. But funds diverted to the Swiss account ultimately ended up in a Singapore bank account controlled by an associate of Mr Low.
In 2013, several officials including those from 1MDB diverted nearly $1.3bn from another $3bn Goldman bond offering.
The money was supposed to be used to finance a joint venture known as the Abu Dhabi Malaysia Investment Co but was instead funnelled into a Singapore account controlled by Mr Low’s associate, the complaint says.
Andrew McCabe, FBI deputy director, said at a press conference in Washington: “The Malaysian people were defrauded on an enormous scale.”
As well as the official fitting Mr Najib’s description, the complaint lists four other 1MDB officials. None is identified by name.