KUALA LUMPUR (Reuters) - Malaysia’s new government, led by 92-year-old Prime Minister Mahathir Mohamad, has vowed to bring back billions of dollars allegedly stolen from state fund 1Malaysia Development Berhad (1MDB).
The alleged misappropriation of $4.5 billion from the fund, founded by ousted premier Najib Razak, is under investigation by the U.S. Department of Justice and other countries like Switzerland and Singapore.
In the past three years, the scandal has led to arrests, the shuttering of several banks, and seizures of multi-million dollar assets around the world. It also played a role in the ouster of Najib in the May 9 election, political analysts have said.
The case has dogged Najib since the Wall Street Journal reported in August, 2015, that about $700 million in 1MDB funds flowed into his personal account. U.S. Department of Justice (DOJ) lawsuits later showed he received transfers of more than $1 billion from 1MDB. Najib has denied any wrongdoing.
Following are the details:
1MDB is a state investment fund founded in 2009 by Najib, who chaired the fund’s advisory board until 2016.
The fund, aimed at promoting economic development, was set up allegedly with the help of a Malaysian financier, Low Taek Jho, better known as Jho Low.
Between 2009 and 2013, 1MDB raised billions of dollars in bonds for use in investment projects and joint ventures.
With the aid of several high-level 1MDB officials, their associates and bankers, the U.S. DOJ said $4.5 billion was instead diverted to offshore bank accounts and shell companies, many of which were linked to Low and some of his associates.
The siphoned funds were allegedly used to buy luxury assets and real estate for Low and his associates.
Since July 2016, the DOJ has filed civil lawsuits seeking to seize a total of $1.7 billion in 1MDB-linked assets.
The assets include gifts given by Low to celebrity friends, such as a Picasso painting for Hollywood actor Leonardo DiCaprio, and jewelry for Australian model Miranda Kerr, the lawsuits say. DiCaprio and Kerr have since handed the items to U.S. authorities and say they are cooperating with the investigation.
Other assets include a private jet, real estate in London, Los Angeles and New York, and a $107-million stake in EMI Music Publishing.
Low, through spokesmen, has consistently denied wrongdoing. His current whereabouts are unknown.
According to the DOJ, other beneficiaries of 1MDB funds included Riza Aziz, Najib’s stepson and a friend of Low’s.
Some of the funds were used to finance the Hollywood films “The Wolf of Wall Street” and “Dumb and Dumber To”, both produced by Red Granite, a film company co-founded by Riza.
Red Granite has agreed to pay the U.S. $60 million as part of a settlement deal.
A person described in the U.S. lawsuits as “Malaysian Official 1” was said to have received more than $1 billion in 1MDB funds, some of which was used to buy jewelry for the person’s wife.
U.S. and Malaysian sources have said “Malaysian Official 1” refers to Najib.
Riza and Najib have consistently denied wrongdoing. The Malaysian government said the money in Najib’s account was a donation from a member of the Saudi Arabian royal family.
At least six countries have launched money-laundering, financial mismanagement and criminal probes into 1MDB’s business dealings.
Malaysia’s attorney-general cleared Najib of wrongdoing in 2016, saying the funds in his account were a legitimate donation. The country’s central bank, however, has fined 1MDB and several banks for unspecified breaches of banking regulations.
As part of an extensive review into 1MDB-related transactions, Singapore shut down the local units of Swiss bank BSI and Falcon Bank in 2016 citing failures of money laundering controls and improper conduct by senior management, froze millions of dollars in bank accounts, and charged several private bankers.
In Switzerland, financial watchdog FINMA has confiscated 104 million Swiss francs ($110 million) in illicit profits from 1MDB-related deals by banks BSI, Falcon, and Coutts & Co since mid-2016.
U.S. prosecutors last year requested a stay on its civil lawsuits in order to conduct a criminal probe.
In February, U.S. and Indonesian authorities seized the Equanimity, a $250-million yacht believed to be owned by Low and bought with 1MDB funds, at a port in Bali, Indonesia.
Najib withstood multiple calls to resign and sacked the deputy prime minister and the attorney-general in actions seen linked to the scandal.
The government has also taken steps seen by critics as limiting discussion of 1MDB, including detaining civil rights activists, suspending a newspaper, and blocking websites and blogs.
In 2016, Mahathir resigned from the ruling coalition saying he was disgusted by the 1MDB scandal, and later joined forces with opposition leader Anwar Ibrahim, his former foe.
Their alliance succeeded in ousting Najib in a stunning election win on Wednesday, with political analysts crediting public anger over 1MDB as a key factor.
After being sworn in as prime minister, Mahathir vowed to investigate 1MDB and said Najib “would face the consequences” if he was found to have broken any laws.
He also said he would review the conduct of and possibly replace the heads of government departments that previously investigated the scandal, including the anti-corruption commission, and the attorney-general who cleared Najib.
Mahathir is also planning to appoint a finance ministry adviser who would oversee efforts to investigate and recover 1MDB funds abroad, two sources told Reuters.
Reporting by Rozanna Latiff and Praveen Menon; Editing by Raju Gopalakrishnan