Ever wonder if third world leaders were still lining their pockets? The US DOJ finally caught the Prime Minister of Malaysia in a gigantic money laundering scandal involving numerous governments and companies and dozens of individuals in at least 7 countries involving the nation’s 1Malaysia Development Bhd. (1MDB).
Important players in the scandal and investigation:
• Malaysian Prime Minister Najib Razak (enriched by nearly $700 million)
• Goldman Sachs
• United Malays National Organization
• US Justice Department and FBI (looking into Razak’s assets)
• Cayman Islands
1MDB is a sovereign wealth fund, founded in 2009 for the benefit of the state of Terengganu. The fund is under investigation in more than five countries, and is believed to have transferred an estimated $700 million to the PM’s bank account. 1MDB has agreed to cooperate with investigators, including the US DOJ, but Prime Minister Razak continues to deny any wrongdoing. He claims the massive sum of money in his bank account was a “donation” from Saudi royalty.
Razak, long-blamed for the corruption of Malaysian politics, is facing considerable backlash for his role in the 1MDB scandal. Nearly 25,000 people turned out to protest the prime minister’s actions in August 2015, about a month after government officials raided 1MDB offices in search of illegal activity and missing funds.
1MDB was controversial from its very start, with board members questioning dealings that led to a debt of over $1 million in less than three months. The fund signed a $1 billion joint venture with Saudi Arabian energy company PetroSaudi in September 2009. Soon after the deal, board members noticed that only $300 million had been sent to PetroSaudi. The other $700 million had been transferred to a mystery account not connected to the joint venture.
1MDB continued to work with PetroSaudi for a few years, firing an Ernst & Young auditor after he asked too many questions about profits in September 2010. The fund sold stake in PetroSaudi in 2012, dumping proceeds into an affiliated company that used the money to invest in a Cayman Islands fund. Other partners included Goldman Sachs, Malaysian conglomerate Genting Group, and Abu Dhabi’s IPIC.
PetroSaudi and 1MDB continue to maintain that all dealings were proper and legal.
Tim Leissner, the Goldman Sachs banker responsible for winning 1MDB business, left the bank without a word in February 2016.
The 1MDB scandal came to a head this week when the DOJ blasted it during a live telecast, calling the case the “largest single action ever brought under the Kleptocracy Asset Recovery Initiative.” The DOJ now seeks over $1 billion assets allegedly linked to 1MDB.
Prime Minister Razak continues to act the part: “We take the matter seriously on the statement by the United States’ Justice Department which was issued late last night,” he said. “I want to say categorically that we are serious about good governance so anything that is against the law, we want the process to take its course.”
This incident brings to mind something one-time-Putin-supporter Bill Browder once said about the Russian President: “During the first 8 or 10 years of Putin’s reign over Russia, it was about stealing as much money as he could. And some people, including myself, believe that he’s the richest man in the world, with hundreds of billions of dollars of wealth that was stolen from Russia.” Putin is estimated to be worth over $200 BILLION
Other notable “kleptocrats” include Ferdinand Marcos, a gold trader who became the President of the Philippines in 1965 was estimated to have stolen as much as $40 Billion. During his reign (1965-1986), Marcos’s wife Imelda amassed a giant collection of jewelry, art, and over 1,000 pairs of designer shoes. Her name has since become synonymous with greed.