By YANTOULTRA NGUI, CELINE FERNANDEZ and PATRICK BARTA
Wall Street Journal
Dec. 30, 2016

Government uses assortment of laws to silence critics of its handling of global scandal over state fund

KUALA LUMPUR—Graphic designer Fahmi Reza is facing up to two years in prison. His problem? He painted red clown lips on a picture of Malaysian Prime Minister Najib Razak and sent it around.

Mr. Najib pledged a new era of civic freedom when he came to power seven years ago in a country known for penalizing political foes. Instead, his government has become increasingly intolerant of critics as it tries to limit fallout from a sprawling corruption scandal related to a state economic-development fund.

International investigators believe associates of the prime minister siphoned billions of dollars from the fund, known as 1Malaysia Development Bhd., or 1MDB. The U.S. Justice Department has moved to seize $1 billion of assets prosecutors say were purchased with money misappropriated from the fund.

Mr. Najib and 1MDB have denied wrongdoing and promised to cooperate with lawful investigations. The Malaysian attorney general early in 2016 cleared Mr. Najib of wrongdoing.

While pledging to investigate 1MDB fully, Mr. Najib’s government recently has silenced critics under an assortment of laws, arresting dozens. It has barred some from traveling abroad. The government also shut down a probe related to 1MDB by Malaysia’s anticorruption agency, which, according to a person familiar with the matter, had called for criminal charges against Mr. Najib.

Rafizi Ramli, an opposition legislator, was convicted in November of violating Malaysia’s Official Secrets Act by revealing some details of a government 1MDB audit, which came from an agency whose findings are normally public. According to a person who was briefed on the audit, it said $7 billion in 1MDB assets and transactions overseas couldn’t be verified or traced.

The legislator was sentenced to 18 months in prison. He denies guilt and is appealing.

Malaysian government leaders said the country remains open to dissent and critics are trying to destabilize it. In charging people such as Mr. Rafizi, the government is simply enforcing Malaysian law, said a minister in the prime minister’s office.

Maria Chin Abdullah, head of a group that organized a November rally where some called for Mr. Najib to resign, was held in solitary confinement for 10 days under a counterterrorism law as part of an investigation of possible activity detrimental to parliamentary democracy. Violations carry up to 15 years’ imprisonment. Police haven’t yet said whether they will file charges against Ms. Chin, who is currently free. Her lawyer says she was unfairly targeted.

Mr. Fahmi, the painter of clown lips, has been charged with violating a law prohibiting communications that cause annoyance, because he posted his altered Najib image on social media. Mr. Fahmi, who has pleaded not guilty and is out on bail as he awaits trial, said he was voicing anger that the prime minister hadn’t been held accountable for 1MDB.

“In any other mature democracy, this would be nothing,” Mr. Fahmi said.

Malaysian rights organization Suaram counts 31 instances of people being targeted under the law Mr. Fahmi ran afoul of, called the Communications and Multimedia Act, in the first half of 2016. That compares with five in all of 2014.

In addition, last year at least 91 people were arrested, charged or investigated under a 1948 Sedition Act, according to Amnesty International, which said that was nearly five times the total arrested during the law’s first 50 years.

The clampdown leaves Malaysians with shrinking space to question official accounts about 1MDB, especially since the government also has blocked or pressured news websites reporting on the scandal.

The director of online news portal KiniTV.com was charged under the communications act in November after the site uploaded videos of a ruling-party dissident who criticized government handling of 1MDB. The director, who has pleaded not guilty and said the video was from a news conference, faces up to two years in prison if convicted.

Malaysians who raise questions about 1MDB also may face a hard-line group called the Red Shirts. Videos of Red Shirts activists kicking protesters and punching car windows have gone viral in Malaysia.

Members of Mr. Najib’s ruling United Malays National Organization paid some Red Shirts to show up at one protest demonstration, a politician from the party told local media last year.

“We are here because of money,” a 19-year-old named Faris said last month after arriving at a protest rally on his motorcycle. He and several other Red Shirts said they had been paid to attend. One showed an invitation received via Whatsapp specifying payments equal to $11 a head to attend.

The young men said the message was from a leader of the ruling party. A man answering the number the message came from said he didn’t know who the Red Shirts were. A representative of the ruling party said it didn’t pay Red Shirts, and the government said it wasn’t affiliated with them.

The Red Shirts’ leader was detained after complaints by opposition members and Ms. Chin’s group but was released without charges.

Mr. Najib founded 1MDB in 2009 to spur local development. When he faced a re-election battle in 2013, however, his allies spent millions of dollars of 1MDB money to help his party win, The Wall Street Journal has reported, citing Malaysian investigative documents and people familiar with the matter.

In 2015, with 1MDB-related allegations swirling, Mr. Najib told Malaysia’s auditor general to compile a report, for review by parliament’s Public Accounts Committee.

By mid-2015, Malaysia’s then-attorney general was close to filing criminal charges against Mr. Najib related to 1MDB, according to a person familiar with the matter. The government abruptly announced that the attorney general was leaving, for health reasons.

A successor cleared Mr. Najib of wrongdoing and shut down the separate investigation by Malaysia’s anticorruption agency. The government also declared the auditor general’s report classified.

The former attorney general couldn’t be reached. The current one didn’t respond to a request for comment. He has told local media he would be willing to reopen the anticorruption agency’s probe if it obtained fresh evidence. The agency referred questions to the police, who said they were investigating 1MDB.

The auditor general also didn’t respond to a comment request but has said in the past the report was classified to prevent leaks and so the Public Accounts Committee could do its work without interference.

Mr. Rafizi, the legislator convicted of an Official Secrets Act violation for revealing some details of the audit report, said he had found an excerpt left anonymously on his desk.

The excerpt, he said, showed 1MDB had failed to pay about $90 million it owed to a unit of Malaysia’s armed-forces pension fund. Mr. Rafizi seized on this as evidence 1MDB’s troubles were hurting Malaysians, with some veterans not getting their checks. He was arrested about a week later.

The 1MDB fund confirmed it had a cash-flow mismatch in 2015 but said this didn’t affect pension payouts. The pension fund said there were payment delays but they were related to incomplete documentation rather than 1MDB.

After Mr. Rafizi’s arrest, parliament’s Public Accounts Committee said it found weaknesses at 1MDB and unexplained payments. It called for further investigation. The police who are investigating have given no timetable for a result.