by David J Lynch in Washington
Financial Times
18th Sept. 2017
A federal judge in Los Angeles has granted a US government request to delay its attempt to seize assets allegedly purchased with funds stolen from the 1MDB Malaysian state investment fund while a criminal investigation proceeds.
The ruling came one day after President Donald Trump proclaimed it “a great honour” to welcome to the White House the Malaysian Prime Minister Najib Razak, who is linked to the investigation but denies any wrongdoing.
The US Department of Justice has been pursuing the alleged misappropriation of $4.5bn from the 1MDB fund along two paths.
Prosecutors have filed court claims against $1.7bn in assets purchased with allegedly stolen funds, in the hopes of returning the proceeds to Malaysian taxpayers. And the DoJ is investigating possible criminal charges against those who laundered the money through the US financial system in order to buy those assets.
The forfeiture cases are being halted to avoid tipping potential criminal defendants to the witnesses and evidence against them.
“The court is satisfied that the continuing prosecution of these civil forfeiture cases would adversely affect the prosecution of the related criminal investigation,” US district court Judge Dale Fischer wrote in the September 13 order.
The US has moved to seize a total of $1.7bn in assets, including Manhattan real estate, jewellery, and jet aircraft. In June, the US Department of Justice targeted $540m in assets, including a luxury yacht, a painting by Picasso and the rights to the film Dumb and Dumber, which it alleged had been purchased with some of the money stolen from the Malaysian fund.
The US is also investigating money laundering allegations arising from the misappropriation centred on Jho Low, the owner of several suspect assets and a politically well-connected Malaysian businessman who had no formal role in the $8bn fund, according to court documents.
Judge Fischer’s grant of an indefinite stay came a little more than a week after prosecutors filed a Federal Bureau of Investigation agent’s warning that proceeding with the forfeitures could imperil witnesses in the criminal case.
Several overseas individuals who have provided information to US investigators have “expressed concerned for their own safety and security if their contact with the United States became known”, said Robert Heuchling, a special agent with the FBI in New York.
Mr Heuchling’s declaration also cited Malaysian press reports of individuals involved in the 1MDB case who had been arrested by authorities in Kuala Lumpur or become the victims of violence.
At the centre of the 1MDB scandal is Mr Low, a gregarious businessman who befriended Hollywood stars such as Leonardo DiCaprio while allegedly diverting money from the Malaysian fund to finance a lavish lifestyle, according to court documents. Some of the looted funds were allegedly used to finance production of The Wolf of Wall Street film.
The film production company, Red Granite Pictures, which also made “Dumb and Dumber,” said in a court filing on Friday that it had reached a settlement in principle of the government’s claims. Terms were not disclosed.
More than two-thirds of a $1.2bn Deutsche Bank loan to 1MDB in 2014 also was siphoned into accounts controlled by Mr Low and an official identified in court documents only as “Malaysian official 1”, whose biography matches that of Prime Minister Najib.
No charges have been filed against either man, and Mr Low also denies any wrongdoing.
In the US legal system, defendants are entitled to see material the government intends to use in court. Owners of the assets targeted by the US had sought bank records, FBI agent interview summaries, and the details of US government requests to foreign law enforcement agencies, Mr Heuchling said.
In one of the forfeiture actions, lawyers trying to protect a $39m Los Angeles mansion that prosecutors say Mr Low bought with 1MDB money, filed 358 separate document requests, Mr Heuchling said.
They included “specific money laundering transactions” and details of “the involvement of any one of more than thirty banks involved” in the financial dealings described in the government’s complaint, he said.
Other requests were aimed at divining the names of potential witnesses. The combined effect could be to “potentially conceal, alter, or destroy evidence, as well as intimidate and/or retaliate against potential witnesses”, Mr Heuchling told the court.
