Who could "Malaysian Official 1" be? [3rd up-date: 7:30 AM]

The WSJ report published 4 hours ago (as at 7:30 AM Malaysian time) claimed "Malaysia Official 1", which was referred to 32 times in the filing by the Prosecutor from the Justice Department to the US court last night, to be Prime Minister, Dato Najib.

However, they did qualify that his name was not mentioned in the filing:

Mr. Najib isn’t named in the filings, which were made public Wednesday, and he isn’t directly accused by U.S. prosecutors of any wrongdoing. But there are 32 references in the complaint to “Malaysian Official 1,” who allegedly received hundreds of millions of dollars in funds siphoned from 1Malaysia Development Bhd.

A person with direct knowledge of the investigation said “Malaysian Official 1” is Mr. Najib. Descriptions of the official in the filings include information about Mr. Najib’s position at 1MDB along with other identifying details.

Hmmm ... WSJ.

However, we are not taking their sort of reporting as confirmed yet. In fact, an earlier WSJ newsbreaker used convenient spinning phrases like "unknown what assets will be seized, "assets tied to 1MDB (but not specifically 1mdb's assets)", "according to people familiar with the matter" and "The people say the investigation is still continuing".

This blog's educated guess, which was stated in an April 2015 posting, remain on Taek Jho Loh and first CEO, Dato Shahrol Hilmi [see postings for April 2015 here and April 2016 here].

Our Whass App group has some 500 outstanding message to read and it will take sometime, but in one group of quite "knowledgeable and informative" members, one suspicion of the suspect is 1MDB's former Chief Investment Officer, Nik Faisal. 

Let's wait and see.

Justice Department Statement

Official statement from Justice Department reads below:

Attorney General Loretta E Lynch announced today the filing of civil forfeiture complaints seeking the forfeiture and recovery of more than US$1 billion in assets associated with an international conspiracy to launder funds misappropriated from a Malaysian sovereign wealth fund.

Today’s complaints represent the largest single action ever brought under the Kleptocracy Asset Recovery Initiative.

Attorney General Lynch was joined in the announcement by Assistant Attorney General Leslie R Caldwell of the Justice Department’s Criminal Division, US Attorney Eileen M Decker of the Central District of California, FBI Deputy Director Andrew G. McCabe and Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI).

According to the complaints, from 2009 through 2015, more than US$3.5 billion in funds belonging to 1MDB was allegedly misappropriated by high-level officials of 1MDB and their associates. With today’s complaints, the United States seeks to recover more than US$1 billion laundered through the United States and traceable to the conspiracy.

1MDB was created by the government of Malaysia to promote economic development in Malaysia through global partnerships and foreign direct investment, and its funds were intended to be used for improving the well-being of the Malaysian people.

Instead, as detailed in the complaints, 1MDB officials and their associates allegedly misappropriated more than US$3 billion.

“The Department of Justice will not allow the American financial system to be used as a conduit for corruption,” said Attorney General Lynch.

“With this action, we are seeking to forfeit and recover funds that were intended to grow the Malaysian economy and support the Malaysian people.

"Instead, they were stolen, laundered through American financial institutions and used to enrich a few officials and their associates.

"Corrupt officials around the world should make no mistake that we will be relentless in our efforts to deny them the proceeds of their crimes. ”

“According to the allegations in the complaints, this is a case where life imitated art,” said Assistant Attorney General Caldwell.

“The associates of these corrupt 1MDB officials are alleged to have used some of the illicit proceeds of their fraud scheme to fund the production of 'The Wolf of Wall Street', a movie about a corrupt stockbroker who tried to hide his own illicit profits in a perceived foreign safe haven.

"But whether corrupt officials try to hide stolen assets across international borders – or behind the silver screen – the Department of Justice is committed to ensuring that there is no safe haven."

“Stolen money that is subsequently used to purchase interests in music companies, artwork or high-end real estate is subject to forfeiture under US law,” said US Attorney Decker.

“Today’s actions are the result of the tremendous dedication of attorneys in my office and the Department of Justice, as well as law enforcement agents across the country.

"All of us are committed to sending a message that we will not allow the United States to become a playground for the corrupt, a platform for money laundering or a place to hide and invest stolen riches.”

“The United States will not be a safe haven for assets stolen by corrupt foreign officials,” said Deputy Director McCabe.

“Public corruption, no matter where it occurs, is a threat to a fair and competitive global economy.

"The FBI is committed to working with our foreign and domestic partners to identify and return these stolen assets to their legitimate owners, the Malaysian people. I want to thank the FBI and IRS investigative team who worked with the prosecutors and our international partners on this case.”

“Today’s announcement underscores the breadth of the alleged corruption and money laundering related to the 1MDB fund,” said Chief Weber. “We cannot allow the massive, brazen and blatant diversion of billions of dollars to be laundered through US financial institutions without consequences.”

As alleged in the complaints, the members of the conspiracy – which included officials at 1MDB, their relatives and other associates – allegedly diverted more than US$3.5 billion in 1MDB funds.

Using fraudulent documents and representations, the co-conspirators allegedly laundered the funds through a series of complex transactions and fraudulent shell companies with bank accounts located in the Singapore, Switzerland, Luxembourg and the United States.

These transactions were allegedly intended to conceal the origin, source and ownership of the funds, and were ultimately processed through U.S. financial institutions and were used to acquire and invest in assets located in the United States.

In seeking recovery of more than US$1 billion, the complaints detail the alleged misappropriation of 1MDB’s assets as it occurred over the course of at least three schemes.

In 2009, the complaints allege that 1MDB officials and their associates embezzled approximately US$1 billion that was intended to be invested to exploit energy concessions purportedly owned by a foreign partner.

Instead, the funds were transferred through shell companies and were used to acquire a number of assets, as set forth in the complaints.

The complaints also allege that the co-conspirators misappropriated more than $1.3 billion in funds raised through two bond offerings in 2012 and $1.2 billion following another bond offering in 2013.

As further detailed in the complaints, the stolen funds were laundered into the United States and used by the co-conspirators to acquire and invest in various assets.

These assets allegedly included high-end real estate and hotel properties in New York and Los Angeles, a US$35 million jet aircraft, works of art by Vincent Van Gogh and Claude Monet, an interest in the music publishing rights of EMI Music and the production of the 2013 film The Wolf of Wall Street.

The FBI’s International Corruption Unit and the IRS-CI investigated the case. Deputy Chief Woo S Lee and Trial Attorney Kyle R Freeny of the Criminal Division’s Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorneys John Kucera and Christen Sproule of the Central District of California prosecuted the case. The Criminal Division’s Office of International Affairs provided additional assistance.

The Kleptocracy Asset Recovery Initiative is led by a team of dedicated prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section, in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered asset to benefit the people harmed by these acts of corruption and abuse of office.

Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov

1MDB Statement

1MDB made an official announcement to deny they are under investigation and the US assets are 1MDB's:

Media statement by 1Malaysia Development Berhad

Issued on 21 July 2016 

For immediate publication

US Attorney General Press Conference 

1MDB notes a press conference led by the US Attorney General today relating to a civil court action filed by the government of the United States of America.

1MDB highlights that it is not a party to the civil suit, does not have any assets in the United States of America, nor has it benefited from the various transactions described in the civil suit.

Furthermore, 1MDB has not been contacted by the US Department of Justice or any other foreign agency in relation to their investigations. 

As previously stated, 1MDB will fully cooperate with any foreign lawful authority, subject to international protocols governing such matters and the advice of the relevant domestic lawful authorities.

PMO Statement

Till more information released to confirm Malaysian Official 1 is Najib, official statement by Swiss AOG, and Singapore enforcement confirmed that Najib was not investigated. He has denied also:

U.S. DEPARTMENT OF JUSTICE CIVIL LAWSUITS:

PRIME MINISTER’S PRESS SECRETARY STATEMENT

21 July 2016‎ 

Malaysian authorities have led the way in investigations into 1MDB. The company has been the subject of multiple investigations within Malaysia, including by the Malaysian Anti-Corruption Commission, Auditor General and bi-partisan Public Accounts Committee. After comprehensive review, the Attorney General found that that no crime was committed. 1MDB is still the subject of an investigation by the Royal Malaysia Police.

We note the United States Department of Justice’s civil lawsuits brought against various assets. As previously stated, the Malaysian Government will fully cooperate with any lawful investigation of Malaysian companies or citizens in accordance with international protocols.

As the Prime Minister has always maintained, if any wrongdoing is proven, the law will be enforced without exception.

DATUK SERI TENGKU SARIFFUDDIN

PRESS SECRETARY TO THE PRIME MINISTER

Names Involved

According to New York Times (published 16 hours ago), the named people are:

The Justice Department named three of those people in its filings. One, Riza Aziz, is the stepson of Mr. Najib and a Hollywood producer of films including “The Wolf of Wall Street.” Another, a financier named Jho Low, is a longtime friend of Mr. Aziz and his family. The third is Mohamed Badawy al-Husseiny, a former official at a government fund in Abu Dhabi, United Arab Emirates, that participated in deals with Malaysia’s fund.

*Missing in NYT report is Khadem El Qudaisi

The mention of Badawy and Khadem leads to the bogus and fraudulent Aabar Investment PJSC Ltd (Aabar BVI) in which some USD1 billion was paid to but IPIC denied as their company.

Sarawak Report have been quick to accuse but they were spinning [read April 17 posting here].

1MDB insist they had paid in accordance to the instruction by the official of the company, and there ample case law that argue decisions or instructions by top officials with outside parties are considered official, even though there are no Board Of Director approval.

This issue is undergoing arbitration in London. 1MDB have officially accepted on July 11th which means Malaysia is not bankrupt yet on that day.

The planned debt-for-asset swap between 1MDB and IPIC have been postphoned or likely cancelled and this part of the dispute. 1MDB insisted they have abide by the term in the binding sheet. IPIC will argue otherwise.

Still years to go.

The "members of the conspiracy – which included officials at 1MDB, their relatives and other associates – allegedly diverted more than US$3.5 billion in 1MDB funds" will be unfold as the process takes effect.

All Malaysians will look forward for further development on a scandal that have been hogging the nation for last 2 years.

Off course, the question of did Najib yang kebas dan lesapkan will hopefully be answered.

Bear in mind, FBI investigation is never the finality. See how they admitted negligence in their investigation on Hillary Clinton's email controversy.

The detractors allegation is made on the Prime Minister and surely the fate of the "institution of office of Prime Minister" has to be determined by proper due process.

Nevertheless, the filing to seize is not freezing asset. It is no laughing matter.

Maybe Lim Guan Eng would like to demand Najib to vacate his position ... :)

21/7 7:30 AM

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UP-DATE 11:30 AM

Q&A on the Justice Department filing

The USA Govt's Department of Justice (DOJ) have filed civil cases to seize the assets they believe is linked to 1MDB, from three individuals under the USA's Kleptocracy Asset Recovery Initiative.

Q1. Who are the three individuals?

They are Riza Aziz, stepson of Prime Minister Najib Razak; Jho Low, a Malaysian financier; and Khadem Al Qubaisi, the former managing director of Abu Dhabi's sovereign-wealth fund IPIC and the former Chairman of Aabar Investments PJS responsible for dealing with 1MDB at that time.

Q2. What is the USA's Kleptocracy Asset Recovery Initiative?

It is an initiative started in the year 2010 by the USA Govt under the US Department of Justice (DOJ) with the aim to seize and recover assets within the USA which the DOJ suspects is linked to corruption from a foreign country and return them to the originating country.

Q3. Why is the DOJ investigating this case?

In March 2015, the DOJ received a complaint from Sarawak Report. Further complaints appears to also have been made by Tun Mahathir loyalist, Khairuddin Abu Hassan.

Q4. What is the DOJ actually filing against the 3 individuals and what will happen next?

The DOJ is filing civil cases against the 3 individuals to ask the courts to seize their assets. The courts will then check if the identified assets are being claimed by anyone else. If no one else is claiming these assets then the courts will ask the DOJ to prove that these assets have indeed been stolen or received illegally.

Q5. Is Prime Minister Najib Razak also charged?

No. He is not charged and not named in this case despite Tun Mahathir previously saying in September 2015 that Najib is afraid to go overseas as he will be caught by the FBI. This is untrue as not only is this a civil case but Najib is not even named in the suits.

Q5. Will anyone go to jail if the assets are seized?

No. These is a civil suit and not a criminal case. If the courts find in favour of the DOJ, only the assets are seized. There is no jail terms or criminal conviction.

Q6. If the court allows the assets to be seized, what happens to the seized assets?

The assets are eventually returned back to the whomever the DOJ believes it is stolen from - in this case, 1MDB.

Q7. Are the assets purchased with money stolen from 1MDB?

1MDB has consistently maintained that no money was stolen and can account for where its money has gone to. However, 1MDB is currently in dispute with IPIC where 1MDB maintains that it has paid or deposited or guaranteed up to USD6 billion by a company called Aabar Investments PJS BVI upon the instructions of Aabar's the then Chairman, Khadem Al Qubaisi and the then Managing Director. IPIC disputes that it owns Aabar Investments PJS Ltd (BVI) and thus denies it has received these funds from 1MDB.

This dispute is now in arbitration at the London Arbitration Center and will take many months. However, 1MDB is confident that they will win this case and stand a good chance to recover their money - which is why 1MDB had earlier refused to pay the interest on a USD3.5 billion bonds despite comfortably able to, which triggered the bond guarantee by IPIC thus leading to the arbitration process.

Q8. If the money is not stolen then why is the USA DOJ acting on the complaint?

It is possible that some of the money that was paid by 1MDB into the Aabar Investments PJS Ltd (BVI) controlled by Khadem - which IPIC denies is owned by them, may have been used to fund various investments in the USA including real estate, investment in films, artwork and companies.

Q9. How much worth in asset is impacted by the USA DOJ?

No specific amounts have been confirmed yet but reports by NYT and WSJ is quoting up to USD 1 billion.

Q10. Why is the PM's step-son Riza Aziz involved.

WSJ had previously reported that investigators believe that Red Granite, Riza Aziz’s film company received USD$155 million in loans from the Aabar Investments PJS Ltd (BVI) much of which went to finance the 2013 movie “The Wolf of Wall Street. and to purchase properties.

WSJ said documents show three transfers to Red Granite Capital in 2012 - US$60 million, US$45 million, and US$50 million.

Of this, US$105 million was booked by Red Granite Capital as a loan, while the other US$50 million was moved to the company through intermediaries.

“Among the intermediaries, according to people familiar with investigations and the person familiar with 1MDB: Telina Holdings Inc, a company that had been set up in the British Virgin Islands by Mr Al-Husseiny and his boss, Khadem Al Qubaisi.”

According to WSJ , the US$50 million loan from Telina Holdings has been repaid, citing people familiar to the investigations.

A Red Granite spokesperson told WSJ that the company “has been repaying and will continue to repay all its loans. “Red Granite had no reason to believe at the time that the source of Aabar’s funds was in any way irregular and still believes the loan to be legitimate,”

“What Red Granite have done and will continue to do is develop and produce successful and acclaimed movies that have generated more than US$825 million in worldwide box-office revenues.”

Q11. So, if it was a loan or investment into Red Granite and is already part repaid or being repaid from a successful film company, why is Riza Aziz still the target of a civil suit?

In the USA, if you make profits based on funding which the DOJ suspects was from an illegal source then this is called "profiteering" and hence your profits are also considered illegal and can be seized - essentially making money out of illegal funding.

This is different from stealing money. The DOJ will then have to prove that Red Granite is aware that the funding or loan that they received is deemed illegal.

Q12. What about Jho Low's investments?

Not much has been revealed what assets or the amounts of investments are owned by Jho Low, who is a fund manager, in the USA but Jho Low had confirmed before that he has real estate holdings in the USA and may have co-invested in some US-based companies.

Q13. How long will this civil cases take before a judgement is reached?

Similar cases have taken years as both sides present their arguments to the US courts for the judge to make a final decision.

Q14. Is there anything unusual about this case?

Yes. Typically, the supposed victim of any stolen money has to make a complain to the USA DOJ to request the DOJ to seize any assets they deem was purchased using the stolen money. In this case, 1MDB has consistently maintained that there is no money stolen and they can account for all their investments or transfers but the DOJ seems to be still going ahead with filing civil suits to recover stolen money even though the "victim" said no money has been stolen.

UP-DATE 5:30 PM

Statement from Attorney General of Malaysia

PRESS RELEASE

US DEPARTMENT OF JUSTICE FILING OF CIVIL ACTION

The Attorney General notes that a civil action in rem has been filed by the United States Department of Justice (US DOJ) for the forfeiture of relevant assets and that it is presently a matter within the civil court in the United States.

The Attorney General further notes that the basis of the civil action in rem to forfeit assets undertaken by the US DOJ relates to the alleged laundering of money misappropriated from 1MDB. However, the Attorney General emphasized that to date –

(i) there has been no evidence from any investigation conducted by any law enforcement agencies in various jurisdictions which shows that money has been misappropriated from 1MDB; and

(ii) there have been no criminal charges preferred against any individuals for the offence of misappropriation of funds from 1MDB.

The Attorney General also expressed his strong concerns at the insinuations and allegations that have been made against the Prime Minister of alleged criminal wrong doing in relation to the civil action in rem filed by the US DOJ.

The Attorney General intends to clarify that at no point in the civil claim filed by the US DOJ is the Prime Minister named as a defendant or have been alleged to have committed any criminal wrong doing.

Presently there is an ongoing investigation conducted by the Royal Malaysia Police concerning matters related to 1MDB.

Given that the investigation is underway, it would not be appropriate to divulge details that may compromise the investigation.

The Attorney General must emphasize that it is crucial to preserve the integrity of the investigation as the public must not doubt the outcome of the investigation.

To date the Attorney General’s Chambers has yet to receive any request from the US DOJ to obtain any information or evidence. However, we would welcome such a request in line with our commitment in international cooperation and collaboration in our fight against money laundering and corrupt practices.

As the Public Prosecutor, the Attorney General will not hesitate to initiate proceedings against the perpetrators of criminal acts provided there is sufficient evidence to do so.

Any wrongdoing must and will be punished. Malaysia will always uphold the rule of law.

TAN SRI DATO’ SRI HAJI MOHAMED APANDI BIN HAJI ALI
ATTORNEY GENERAL MALAYSIA
21 JULY 2016 

 UP-DATE 7:30 AM 22/7

Statement by the Foreign Minister