NEW YORK/WASHINGTON (Dec 1): A bizarre scheme to pressure the US to go easy on Malaysians involved in one of the biggest financial scandals in years relied on an unlikely middleman – a US Justice Department employee.

In court papers Friday, the US Justice Department laid out evidence showing how one of its own used shell companies to funnel US$74 million into the US at a time when no banks would handle deposits from the Malaysians involved. The official, George Higginbotham, pleaded guilty Friday to conspiring to lie to banks about the source and purpose of those funds.

Higginbotham, who left the department in August, admitted he worked with two unidentified co-conspirators in early 2017 to get the money into the country under false pretenses. According to court papers, that money was to pay for a lobbying effort that sought to influence an investigation into the looting of the Malaysian state investment fund. The same filing identifies the source of the money as Jho Low, who has been accused of money laundering and diverting hundreds of millions of dollars from Malaysia’s 1Malaysia Development Bhd (1MDB) fund.

Higginbotham, 46, is cooperating with prosecutors, who said their investigation of Low and the fund’s embezzlement was unimpeded by the plot.

A US Justice Department forfeiture complaint describes evidence involving “Individual 1,” who isn’t identified but matches the description of Elliott Broidy, a friend of US President Donald Trump whose emails were leaked to the media this year after his money-management firm was hacked. The lawsuit references a cyber-intrusion of Individual 1 and describes an email from that hack. The text of that email matches one sent by Broidy and reviewed by Bloomberg News.

The trove of hacked documents shows that Broidy, a Republican fundraiser, and his wife engaged in contract negotiations to represent Jho Low in 2017, after Trump became president. The emails included talking points to be used with the White House explaining why the US should drop its probe. One draft contract called for Broidy’s wife’s firm to make US$75 million if it succeeded. That number closely matches the amount the government is seeking from Higginbotham-related accounts in its forfeiture lawsuit.

A lawyer for Broidy, Christopher Clark, said the court filing doesn’t refer to Broidy and “anything other is pure speculation.”

The US claims a small coterie of Malaysians led by Low moved money from the fund, formally known as 1MDB, into personal accounts disguised to look like legitimate businesses, and also kicked back some funds to officials. Malaysian prosecutors say some money ended up with former Prime Minister Datuk Seri Najib Razak and his family. Low and two former Goldman Sachs Group Inc bankers have been charged by the US with conspiracy; one of the bankers pleaded guilty.

Senior Specialist

The new allegations are spelled out in the lawsuit Friday seeking to seize US$74 million from Higginbotham’s law firm account and two other entities. The filing takes the 1MDB scandal inside the Justice Department where Higginbotham worked as a senior congressional affairs specialist for two years beginning in July 2016, according to prosecutors.

The US describes an elaborate and at times disorganised campaign by Low to move money into the US to pay people claiming they could quash the Justice Department probe – specifically, forfeiture cases filed in California seeking more than US$1 billion in assets tied to the alleged 1MDB embezzlement.

The effort was led by entertainer and businessman Pras Michel, according to the lawsuit. In September 2017, Michel and Higginbotham traveled to Macau to meet with Low to discuss ways to continue moving money into the US to pay for the lobbying campaign. Low and Michel agreed that the best way to avoid US detection would be to claim to banks that the funds would be used for entertainment purposes, the US said. Michel couldn’t be reached for comment on Friday.

Higginbotham later offered to have money deposited into his attorney escrow account with Citibank in Washington, and US$41 million was then wired into the account, the US said.

False Explanations

When the financial institutions sought explanations for the various wire transfers, Higginbotham came up with several false explanations, according to prosecutors.

He told Citibank that the US$41 million was a corporate investment for a media consulting venture. He told City National Bank in California, which received tens of millions in deposits, that the money was from a company that manufactured souvenirs and that he was hired to represent it in a highly complex civil matter. He told Morgan Stanley that the funds came from an investor in a slate of projects, the US said.

Michel passed money on to Individual 1, identified as an investment firm owner in the court filing, and his associate, a longtime political fundraiser identified as Individual 2.

The lawsuit doesn’t describe how Michel came to know Higginbotham, though the two allegedly developed the code name "Wu Tang" for Low in email messages.

In pleading guilty, Higginbotham admitted he helped arrange the transfer of tens of millions of dollars from foreign bank accounts to the US to finance a lobbying campaign to resolve criminal and civil matters related to 1MDB. He also said he worked on fake loan and consulting documents, and admitted he aided a lobbying campaign aimed at having another foreign national living in the US on a temporary visa removed and sent back to his country.

At the Justice Department, he wasn’t part of the US investigation of 1MDB and had no influence on its outcome, the US said.

US District Judge Colleen Kollar-Kotelly said she wouldn’t set a sentencing date yet because of Higginbotham’s cooperation. He faces as long as five years in prison but would probably receive far less in exchange for his cooperation.