No let-up on US probe

LAST week a US Court granted a stay of the proceedings of several civil cases filed to forfeit assets said to have been purchased with funds allegedly stolen from the Malaysian sovereign wealth fund – 1Malaysia Development Bhd (1MDB).

This means that proceedings with regard to these cases – 14 out of the 21 filed by the US Department of Justice (DOJ) – will not proceed for the moment.

The DOJ requested for this stay because it said that criminal investigations of “a large group of individuals and entities” linked to the diversion of the stolen money (money laundering) were ongoing.

The DOJ fears that facts disclosed in these civil forfeiture cases could expose the witnesses and informants in the criminal investigations to intimidation or retaliation; and jeopardise the probe and the safety of these witnesses and informants. Evidence could be destroyed by the culprits. 

The DOJ application said given the complex nature of the alleged crimes and the sensitive political and diplomatic issues involved, it is apparent that the revelation of any significant amount of information by the government could endanger the criminal investigation.

Justice Dale Fischer granted the application. “Based on the government’s presentation, the court is satisfied that the continuing prosecution of these civil forfeiture cases would adversely affect the prosecution of the related criminal investigation,” ruled the judge.

Earlier the prosecutors had filed a 249-page amended forfeiture complaint claiming that 1MDB officials and co-conspirators had started looting the fund soon after it was set up in 2009. They thus violated both US and foreign laws, said the court documents.

Reportedly, listed in the amended complaint are 11 “relevant individuals” including:

» Riza Aziz, Najib Razak’s stepson and Hollywood film producer;
» Jho Low, a financial adviser;
» 1MDB general counsel “Jasmine” Loo Ai Swan;
» Other 1MDB executives; and
» Two executives at a state-owned investment firm in Abu Dhabi.

Although it is reported that included in the list is an unnamed “high-ranking” official, this cannot be confirmed until the amended complaint is made available and viewed.

The DOJ claims the scheme took various shapes between 2009 and 2014 with more than US$2 billion allegedly siphoned from three 1MDB bond offerings. These were underwritten at an extraordinarily high commission rate by Goldman Sachs – a finance company.

According to the complaint, the conspirators also diverted US$1 million from 1MDB via a false joint venture with Saudi energy firm PetroSaudi International and stole US$850 million that 1MDB had borrowed from Deutsche Bank and other financial institutions under false pretexts – such as buying back the bond options.

The proceeds of the fraud were used to buy real estate, investments and luxury items.

The list includes:
» properties in Beverly Hills;
» properties in New York;
» properties in London;
» a private jet;
» diamond jewellery;
» highly prized art pieces;
» proceeds from Martin Scorsese’s financial fraud drama film The Wolf of Wall Street and two other films, produced by Aziz’s Red Granite company; and
Low’s US$107 million stake in EMI Music, a multinational music company based in London.

Implications of the stay?

First, the properties allegedly bought with the stolen funds remain frozen – until the 21 forfeiture cases are heard and disposed of. When these forfeiture cases come up to be decided, the question for the court to decide then will be: whether or not these properties were bought with these funds.

Second, it appears that the criminal investigations against those who siphoned the billions of ringgit are proceeding vigorously.

Third, these investigations are targeted to lead to the criminal prosecution of any “relevant individuals” found to be involved.

Fourth, the 14 cases stayed will then proceed after these persons are charged with the crimes.

The forfeiture cases are expected to be hard fought. The US government (DOJ) will be represented by a bevy of some five lawyers. Jho Low and family, Park Lane Properties, and EMI are challenging the forfeitures.

According to news reports, Red Granite and the DOJ have reached a settlement in principle although terms of the settlement have not been disclosed.

Gurdial, a former law professor at Universiti Malaya, is presently practising as a legal consultant at a law firm. Comments:
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