This article first appeared in The Edge Financial Daily on November 2, 2018

Malaysian financier Low Taek Jho, aka Jho Low, and former banker Ng Chong Hwa, aka Roger Ng, indicted for conspiring to launder billions of dollars in illegal proceeds and to pay hundreds of millions of dollars in bribes in connection with the 1MDB fund. Former banker Tim Leissner pleaded guilty to conspiring to launder money and to violate the Foreign Corrupt Practices Act related to 1MDB

NEW YORK: A three-count criminal indictment was unsealed yesterday in federal court in the eastern district of New York charging Low Taek Jho, also known as Jho Low, and Ng Chong Hwa, also known as Roger Ng, with conspiring to launder billions of dollars embezzled from 1Malaysia Development Bhd (1MDB), a government strategic investment fund, and conspiring to violate the Foreign Corrupt Practices Act (FCPA) by paying bribes to various Malaysian and Abu Dhabi officials.

As part of the three-count indictment, Ng is also charged with conspiring to violate the FCPA by circumventing the internal accounting controls of a major New York-headquartered financial institution (Financial Institution), which underwrote more than US$6 billion in bonds issued by 1MDB in three separate bond offerings in 2012 and 2013, while Ng was employed at the Financial Institution as a managing director (MD). Ng was arrested earlier yesterday in Malaysia, pursuant to a provisional arrest warrant issued at the request of the US. Jho Low remains at large.

Also unsealed yesterday in federal court in the eastern district of New York was the guilty plea of Tim Leissner, the former Southeast Asia chairman and participating MD of the Financial Institution, to a two-count criminal information charging Leissner with conspiring to launder money and conspiring to violate the FCPA by both paying bribes to various Malaysian and Abu Dhabi officials and circumventing the internal accounting controls of the Financial Institution while he was employed by it. According to court filings, Leissner has been ordered to forfeit US$43.7 million (RM182.67 million) as a result of his crimes.

Richard P Donoghue, US attorney for the eastern district of New York, John P Cronan, principal deputy assistant attorney-general of the Department of Justice’s criminal division, William F Sweeney, Jr, assistant director-in-charge, Federal Bureau of Investigation (FBI), New York Field Office, and R Damon Rowe, special agent-in-charge, Internal Revenue Service-Criminal Investigation (IRS-CI), Los Angeles Field Office, announced the charges.

The criminal scheme

1MDB is a Malaysian state-owned and controlled fund created to pursue investment and development projects for the economic benefit of Malaysia and its people. As alleged in court filings, between approximately 2009 and 2014, as 1MDB raised money to fund its projects, billions of dollars were misappropriated and fraudulently diverted from 1MDB, including funds 1MDB raised in 2012 and 2013 through three bond transactions that it executed with the Financial Institution. As part of the scheme, and as alleged in court filings, Jho Low, Ng, Leissner and others conspired to bribe government officials in Malaysia, including at 1MDB, and Abu Dhabi to obtain and retain lucrative business for the Financial Institution, including the 2012 and 2013 bond deals. They also allegedly conspired to launder the proceeds of their criminal conduct through the US financial system by purchasing, among other things, luxury residential real estate in New York City and elsewhere, and artwork from a New York-based auction house, and by funding major Hollywood films.

As alleged, Jho Low’s close relationships with high-ranking government officials in Malaysia and Abu Dhabi were central to the scheme. Ng, Leissner, and others at the Financial Institution allegedly knew Jho Low was close to these government officials, including a high-ranking Malaysian government official who had authority to approve 1MDB business decisions (Malaysian Official #1).

According to allegations in court filings, beginning in approximately 2009 and continuing through 2014, Jho Low, Ng, Leissner, and the other co-conspirators used Jho Low’s relationships to obtain and retain business for the Financial Institution through the promise and payment of hundreds of millions of dollars in bribes, including to ensure 1MDB awarded the Financial Institution a role on three bond transactions known internally at the Financial Institution as “Project Magnolia,” “Project Maximus” and “Project Catalyze.”

As a result of its work for 1MDB during that time, the Financial Institution allegedly received approximately US$600 million in fees and revenues along with increased reputational prestige. At the same time, Ng, Leissner, and others allegedly received large bonuses and enhanced their own reputations at the Financial Institution. In total, according to allegations in court filings, more than US$2.7 billion was misappropriated from 1MDB and Jho Low, Ng, Leissner, and others conspired to launder this money through the US financial system to pay bribes to foreign officials and for the personal benefit of themselves and their relatives.

Project Magnolia

In early 2012, according to allegations in court filings, following a series of meetings in Malaysia and the UK, Jho Low, Leissner, Ng and the co-conspirators agreed that, with the assistance of the Financial Institution, 1MDB would issue US$1.75 billion in bonds guaranteed by an entity wholly-owned and controlled by the government of Abu Dhabi. Jho Low allegedly explained to Ng, Leissner and others at the time that, to complete the transaction, bribes would need to be paid to officials in Malaysia and Abu Dhabi and, as alleged, hundreds of millions of dollars were actually paid to officials in these countries. Jho Low, Ng, Leissner, and other co-conspirators also knew that Jho Low intended to use funds misappropriated from the bond transaction to bribe and influence the officials to obtain the necessary approvals and any additional assistance needed to execute Project Magnolia for the Financial Institution and to pay kickbacks to Ng, Leissner and others.

In or around March 2012, 1MDB allegedly selected the Financial Institution to be the sole book runner and arranger for Project Magnolia. As part of the scheme, Jho Low and other co-conspirators enlisted the assistance of 1MDB officials, promising to pay them bribes and kickbacks. In one instance, as alleged in court filings, in connection with Project Magnolia, Jho Low told one 1MDB official that he would “[g]ive [the official a] big present” when the transaction closed. According to allegations in court documents, the fact that bribes and kickbacks were being paid in connection with Project Magnolia was known to Ng, Leissner and other employees of the Financial Institution.

After Project Magnolia closed on or about May 21, 2012, more than US$500 million of the bond proceeds were misappropriated and diverted from 1MDB through numerous wire transfers to bank accounts in the name of shell companies beneficially owned and controlled by Jho Low, Leissner, Ng and other co-conspirators, including a high-level official at the Abu Dhabi entity that guaranteed the Project Magnolia bonds and a close relative of Malaysian Official #1. As alleged, the bond proceeds transferred to Malaysian Official #1’s close relative were later used by the relative’s US motion picture company to assist in the production of the film The Wolf of Wall Street, a movie based on a previous eastern district of New York prosecution.

Project Maximus and Project Catalyze

Court filings further allege that from May 2012 and continuing through 2013, Jho Low, Ng, Leissner and their co-conspirators continued to work to ensure that the Financial Institution obtained and retained additional 1MDB business, including the bond transactions known as “Project Maximus” and “Project Catalyze”, whose transactions generated substantial fees and revenues for the Financial Institution. As alleged, although both transactions were designed to raise more than US$4 billion for 1MDB’s investment and development projects, Jho Low, Ng, Leissner and other co-conspirators allegedly used the transactions to further the criminal scheme, ultimately laundering hundreds of millions of dollars of diverted funds from these transactions into bank accounts beneficially owned and controlled by, among others, the co-conspirators, including Jho Low, Leissner and officials in Malaysia and Abu Dhabi. As alleged in court filings, throughout this time, Ng, Leissner and at least one other employee of the Financial Institution knew that Jho Low would and did pay bribes to influence officials in Malaysia and Abu Dhabi to obtain the necessary approvals to execute Project Maximus and Project Catalyze. Jho Low, Ng, Leissner and others allegedly knew that large portions of the bond proceeds would be illegally diverted to themselves and others, including to foreign government officials.

As part of the scheme alleged in court filings, Jho Low, Ng, Leissner and other co-conspirators again used a series of wire transfers to launder billions of dollars of misappropriated and fraudulently diverted funds from Project Maximus and Project Catalyze. As alleged, following the close of Project Maximus, approximately US$790 million of the bond proceeds was transferred through a series of shell company accounts beneficially owned and controlled by Jho Low, Leissner and others, including accounts of officials in Malaysia and Abu Dhabi. In particular, Leissner and Ng caused millions of dollars of these funds to be transferred to accounts of 1MDB officials or relatives of such officials in exchange for their assistance in obtaining and retaining business for the Financial Institution. Over US$35 million of the bond proceeds also allegedly was used by a co-conspirator to help acquire a condominium in New York, New York beneficially owned by Jho Low.

Similarly, according to allegations in court filings, after Project Catalyze closed in March 2013, more than US$1 billion dollars of diverted funds, traceable to the transaction, were laundered, at Jho Low’s direction, to bank accounts in the name of entities beneficially owned and controlled by Jho Low, Leissner and others, including 1MDB officials. As alleged, more than US$4 million of the funds were transferred to a bank account beneficially owned by a relative of Ng. Additionally, as part of the scheme, Jho Low used a shell company account to receive more than US$1 billion of the Project Catalyze bond proceeds and spent approximately US$137 million of these funds to purchase works of art at a high-end art auction house in New York.

Post-Catalyze 1MDB transactions at the Financial Institution

The Financial Institution continued to seek business from 1MDB after Project Catalyze. As alleged, Leissner and others were particularly focused on securing a role for the Financial Institution on a proposed initial public offering (IPO) of 1MDB’s energy assets. To influence certain officials to award the Financial Institution a role in the proposed IPO, Jho Low and Leissner allegedly continued to pay bribes to certain officials at 1MDB.

For example, as alleged, in an online chat between Jho Low and Leissner in June 2014, Jho Low and Leissner discussed the need to “suck up to” a 1MDB official and to send “cakes” to a person believed to be the wife of Malaysian Official #1. A few months after this chat, a bank account owned and controlled by Leissner and his relative was used to transfer approximately US$4.1 million to a high-end New York jeweller, in part, to pay for gold jewellery for the wife of Malaysian Official #1.

The charges in the indictment as to Low and Ng are allegations, and those defendants are presumed innocent unless and until proven guilty.

The investigation was jointly conducted by the FBI’s International Corruption Unit and IRS-Criminal Investigation. The government’s criminal case is being handled by the Business and Securities Fraud Section of the US Attorney’s Office for the eastern district of New York and the Criminal Division’s Money Laundering and Asset Recovery Section and Fraud Section. Assistant US attorneys Jacquelyn M Kasulis and Drew Rolle and Trial Attorneys Jennifer E Ambuehl, Woo S Lee, Mary Ann McCarthy, Katherine A Nielsen and Nikhila Raj are prosecuting the case. Additional Criminal Division trial attorneys and assistant US attorneys within the US Attorney’s Offices for the eastern district of New York and central district of California have provided valuable assistance with various aspects of this investigation, including with civil and criminal forfeitures.

The Criminal Division’s Office of International Affairs provided critical assistance in this case. The Department also appreciates the significant cooperation and assistance provided by the US Securities and Exchange Commission, and the Board of Governors of the Federal Reserve System along with the Federal Reserve Bank of New York. The Department also appreciates the significant assistance provided by the Attorney-General’s Chambers of Malaysia, the Royal Malaysian Police, the Malaysian Anti-Corruption Commission, the Attorney-General’s Chambers of Singapore, the Singapore Police Force-Commercial Affairs Division, the Office of the Attorney-General of Switzerland, the Judicial Investigating Authority of the Grand Duchy of Luxembourg, and the Criminal Investigation Department of the Grand-Ducal Police of Luxembourg.

The Defendants:

LOW TAEK JHO

Age: 36

NG CHONG HWA

Age: 51

EDNY. Docket No 18-CR-538 (MKB)

TIM LEISSNER

Age: 48

EDNY Docket No 18-CR-439 (MKB)