David J Lynch in Washington
Financial Times
June 15, 2017
Latest move to recover money allegedly stolen from Malaysian sovereign wealth fund
The US Department of Justice on Thursday moved to seize an additional $540m in assets purchased with funds stolen from Malaysian sovereign wealth fund 1MDB, including a luxury yacht, a Picasso painting, jewellery and rights to the movie Dumb and Dumber.
The suit, which was filed in federal court in Los Angeles, is the latest move in an ambitious US effort to recover money allegedly siphoned from the fund in a sophisticated operation that ran from 2009 until 2015.
The US now estimates that a total of $4.5bn was pilfered by Malaysian public officials and their associates including Jho Low, a well-connected Malaysian businessman who held no formal role in the project.
Including the new lawsuit and earlier civil forfeiture actions, the US government has moved to recover $1.7bn of that amount, according to Kendall Day, acting deputy assistant attorney-general. This represents the largest such US seizure action under a DoJ initiative aimed at recovering money stolen by corrupt foreign officials.
Mr Day said the latest action was aimed at recovering “proceeds of a massive fraud”.
The scheme involved $1.2bn that 1MDB borrowed from Deutsche Bank in 2014, ostensibly to repay options connected with an earlier bond offering, prosecutors say. Of that borrowing, $850m was stolen to fund the lavish lifestyles of individuals including Mr Low and an official identified only as “Malaysian official 1”, a designation that in previous court filings has matched the biography of Malaysian Prime Minister Najib Razak.
The prime minister has denied any wrongdoing, as has Mr Low.
In a statement on Thursday the Malaysian government said it would co-operate with any lawful investigation of the country’s companies or citizens but expressed concern “that again the DoJ has failed to seek such co-operation from the Malaysian government or 1MDB”.
The proceeds from two Deutsche Bank loans also were used to operate a Ponzi scheme designed to show that an earlier 1MDB investment in a joint venture with PetroSaudi International, a private Saudi Arabia-based oil services company, had been profitable.
In reality, none of the fund’s investments, which were to have promoted economic growth and foreign direct investment in Malaysia, paid off, according to Mr Day.
The fund obtained the loans “through material misrepresentations and omissions to Deutsche Bank”, according to the lawsuit. At one point, when bank officials requested documentation verifying key financial details, a 1MDB official replied that the fund had suffered a “server breakdown and all files were lost”, according to court filings.
The fund eventually defaulted on the larger of the two loans.
Several 1MDB officials, along with their relatives and associates, used a global network of shell companies and bank accounts in the US, Singapore, Switzerland, and Luxembourg to pull off the heist, prosecutors say.
Mr Day said the investigation is continuing. The Financial Times reported last year that prosecutors are investigating Goldman Sachs’ handling of the proceeds of $6.5bn in bond offerings it conducted for the fund to determine whether it complied with reporting requirements of the Bank Secrecy Act. The bank has not been accused of any wrongdoing.
Among the assets targeted in the civil lawsuit filed on Wednesday was a $261m yacht called “The Equanimity”, which prosecutors said was constructed in 2014 and could hold 25 guests and a crew of 33. The 300 feet long vessel boasted a helicopter pad, a gymnasium, cinema, and plunge pool, prosecutors said.
Jho Low, a businessman with Hollywood ties, is at the centre of an alleged money laundering scheme
The US also moved to seize 2.5m shares of Palantir stock, a Madison Avenue condominium, a framed colour poster for the 1927 silent movie Metropolis, and rights to the movie Daddy’s Home, which starred Will Ferrell and Mark Wahlberg.
The lawsuit also targeted several diamonds, including a nearly 12-carat heart-shaped item, and the painting “Nature Morte au Crane de Taureau” by Picasso.
The Picasso was given in January 2014 as a birthday gift to the actor Leo DiCaprio, who starred in the movie The Wolf of Wall Street. The film was produced by Red Granite, which was backed financially by individuals allegedly involved in the scandal, including Riza Aziz, a relative of Mr Najib, and Mr Low.
Through a spokesman, Mr DiCaprio said on Thursday that before the government filed its latest action, he had “initiated return of these items, which were received and accepted by him for the purpose of being included in an annual charity auction to benefit his eponymous foundation”.
The actor also has returned an Oscar originally won by Marlon Brando, which he received as another gift from Red Granite.
The company, which also produced Dumb and Dumber and Daddy’s Home, said it “is actively engaged in discussions with the Justice Department aimed at resolving” the civil litigation.
Last year, the US filed civil forfeiture actions seeking more than $1bn in assets purchased with money allegedly stolen from the 1MDB fund.
The new suit says assets belonging to several individuals or businesses such as Jho Low; Low Taek Szen; JW Hospitality (VHG Intl) Ltd; FFP (Cayman) Ltd; Mubadala Development Company PJSC; Viceroy Hotel Group; and Jynwel Capital Ltd, may be affected by the action.
