This article first appeared in The Edge Financial Daily, on July 21, 2016.
WASHINGTON/KUALA LUMPUR: The US Justice Department is seeking to seize more than US$1 billion (RM4.03 billion) in assets, including real estate, arts and proceeds from The Wolf of Wall Street movie that it says were illegally acquired through money diverted from embattled fund 1Malaysia Development Bhd (1MDB).
Funds diverted from 1MDB were used for the personal benefit of public officials and their relatives and associates to purchase luxury real estate in the US, pay gambling expenses at Las Vegas casinos and acquire more than US$200 million in artworks, the Justice Department said in a court filing yesterday in the federal court in California.
“1MDB maintained no interest in these assets and saw no returns on these investments,” the government said.
The Malaysian fund is at the centre of several international investigations into alleged corruption and money laundering by public officials. Prosecutors in at least four countries — Singapore, Switzerland, Luxembourg and the US — are looking into money flows from the investment vehicle, which was established for national development.
Among the questions asked by some international authorities is whether politically connected individuals in Kuala Lumpur benefited financially from the fund, whose advisory board was headed by Prime Minister Datuk Seri Najib Razak. Both 1MDB and the prime minister have denied wrongdoing.
Najib’s family has been entangled in various alleged links to 1MDB funds, alongside a separate donation scandal that has caused more than a year of political tension in Malaysia. The nation’s attorney-general this year cleared Najib of graft over revelations that US$681 million appeared in his accounts before the 2013 general election. The money was a donation from the Saudi royal family and most was later returned, the government said.
The California complaint mentioned Najib’s stepson, Riza Aziz, and financier Low Taek Jho, who is known as Jho Low. Riza partly owns Red Granite Pictures, a Hollywood production company that backed The Wolf of Wall Street.
A spokesman for 1MDB didn’t respond to a request seeking comment. 1MDB in April said it had “never invested in nor transferred funds to Red Granite Pictures, whether directly or via intermediaries”, and has denied wrongdoing more broadly over its finances.
Low, who is a close friend of Riza, has said he provided consulting to 1MDB that didn’t break any laws. Singapore said in May it is closing Swiss bank BSI SA’s unit in the city state, and Switzerland began criminal proceedings against the firm as investigations into 1MDB reverberated throughout the private bank’s international operations.
US Attorney General Loretta Lynch planned to announce the forfeiture actions yesterday at a news conference in Washington.
Among the assets the government is seeking are royalties from The Wolf of Wall Street, homes in Beverly Hills, California, a penthouse in the Time Warner building in Manhattan, and a Vincent van Gogh drawing, according to the filing. They total more than US$1 billion, the Justice Department said in a statement.
Red Granite Pictures in May said it’s confident that all money it received had been proper and from a variety of sources, including US commercial and investment banks.
The 1MDB affair has stretched from Malaysia to Singapore, Abu Dhabi, Switzerland, the Caribbean, Hong Kong and the US, and touched the upper reaches of global finance.
Swiss authorities have estimated that about US$4 billion may have been misappropriated from state companies in Malaysia. A Malaysian parliamentary committee has identified at least US$4.2 billion of irregular transactions by the fund.
The suspected fraud occurred in three phases, in which money was laundered through bank accounts in Singapore, Switzerland, Luxembourg and the US, the government said in the court filing.
In 2009, after 1MDB was set up, officials of 1MDB and others, under the pretense of investing in a joint venture between 1MDB and a Saudi oil company, transferred more than US$1 billion to a Swiss bank account.
In 2012, 1MDB officials and others diverted proceeds raised through two separate bond offerings arranged by Goldman Sachs Group Inc, according to the Justice Department. More than 40% of the proceeds, or US$1.4 billion, were transferred to a Swiss bank account belonging to a British Virgin Islands entity. More than US$1 billion was diverted from another bond offering arranged by Goldman Sachs in 2013. — Bloomberg