1MDB: Malaysia’s extraordinary financial scandal
Malaysian Prime Minister Najib Razak has been under fire since 2014 over allegations that billions of dollars were looted from state investment fund 1MDB in an audacious campaign of fraud and money-laundering. On Saturday, an influential pro-reform group is planning a rally in downtown Kuala Lumpur to demand Najib’s ouster over the affair. Here are some answers to key questions in the saga.
What is 1MDB?
1Malaysia Development Berhad (1MDB) is a state investment fund Najib launched in 2009 shortly after assuming office. Its portfolio has included power plants and other energy assets in Malaysia and the Middle East, and real estate in Kuala Lumpur. The fund has been closely overseen by Najib. Whistle-blowers say Low Taek Jho, or “Jho Low”, a shadowy, jetsetting Malaysian financier close to Najib but who has no official positions, helped set up 1MDB and made key financial decisions.
How did the scandal emerge?
Concerns escalated in 2014 as 1MDB slid into an $11 billion debt hole, and the intensifying public scrutiny led to a string of revelations concerning missing funds. The issue exploded in July 2015 when the Wall Street Journal published documents showing Najib received at least $681 million in payments to his personal bank accounts. The US Justice Department piled on the pressure this year by filing lawsuits to seize more than $1 billion in assets it said were purchased with stolen 1MDB money.
Some key allegations
US authorities said a figure it calls “Malaysian Official 1” knowingly received huge sums of 1MDB money. A Malaysian Cabinet minister has since confirmed that official was Najib. From 2009-11, at least $1 billion was secretly diverted from a 1MDB joint venture with a Saudi energy firm to bank accounts controlled by Low, who has been photographed partying with the likes of Paris Hilton and Leonardo DiCaprio. $1.37 billion was diverted from a pair of 2012 bond offerings to accounts in the British Virgin Islands and Singapore, believed controlled by Low, as was $1.26 billion raised in a 2013 bond sale. Tens of millions of dollars in stolen money were used in 2012 by Najib’s stepson Riza Aziz, an aspiring film producer, to fund the Hollywood film “The Wolf of Wall Street” starring DiCaprio. Hundreds of millions were used, mainly by Riza and Low, to purchase high-end real estate in Beverly Hills, New York, and London, a Monet painting for $35 million, a Van Gogh for $5.5 million, a $35 million Bombardier jet and a $100 million stake in EMI Music Publishing.
Has anyone faced justice?
A Singaporean private banker was sentenced last week to 18 weeks in jail for facilitating illicit money flows, and another banker in the city-state has been hit with similar charges. Singapore has also shut down the local operations of two Swiss-based banks involved in the scheme. But so far no big fish have been hooked. Najib shut down domestic Malaysian investigations last year, denying wrongdoing and saying the scandal was concocted by his political enemies. The US lawsuits do not target any individual for prosecution, but investigations in several countries are continuing.
What is the impact?
Since the scandal emerged, Najib has purged 1MDB critics from his government, curbed domestic investigations, enacted a tough new security law and generally lurched to the right. Political analysts say Najib’s strengthened hold makes it unlikely he will come clean, but critics accuse him of imperiling Malaysia’s already fragile democracy just to save his skin. Tension over 1MDB simmers, with the pro-reform group Bersih saying it will proceed with its rally in Kuala Lumpur on Saturday despite authorities declaring it illegal. Past Bersih protests have ended in clashes with police. But pro-government rightists are threatening to disrupt the demonstration, raising fears of violence.—
KUALA LUMPUR: Malaysian Prime Minister and Finance Minister Najib Razak (right) speaks as he unveils the Malaysia’s 2017 budget at Parliament in Kuala Lumpur, Malaysia.