Najib arrested and charged in stunning fall from grace

Anti-corruption officers arrested Malaysia’s former premier Najib Razak at his residence on Tuesday, a stunning reversal of fortunes and the latest in a string of dramatic political developments that have unfolded since May 9 polls toppled the long-dominant Barisan Nasional (BN) coalition for the first time in the nation’s history.

Since returning to office, Prime Minister Mahathir Mohamad reopened investigations into an international corruption scandal at the 1Malaysia Development Berhad (1MDB) state development fund, which accumulated billions in debts following its 2009 launch with Najib as its advisory board chairman.

Money laundering probes into 1MDB dealings are ongoing in at least six countries. Graft investigators at the US Department of Justice (DoJ) believe Najib’s associates embezzled and laundered US$4.5 billion from the fund from 2009 to 2014, some of which landed in the ex-premier’s bank account. Najib staunchly denies any wrongdoing.

Najib’s arrest yesterday was in relation to dealings at SRC International, a former unit of 1MDB which pursued overseas investments in energy resources. Investigators questioned the former premier in May over US$10.6 million from SRC International that was discovered to have been channeled into Najib’s personal bank account.

That figure represents a small fraction of the billions of dollars allegedly siphoned from 1MDB, which were laundered through international banking systems via an intricate web of transactions and shell companies. SRC International funds were funneled through local banking institutions which were comparatively easier for Malaysian investigators to track.

Najib appeared in the Sessions Court in Kuala Lumpur this morning and was charged with three charges of criminal breach of trust under section 409 of penal code, with one count of using his position for gratification as part of a probe into missing money from 1MDB. Penalties for the offenses include a maximum 20 year prison sentence.

Malaysia’s newly appointed Attorney General Tommy Thomas led the prosecution team. Najib reportedly remained expressionless and was seen nodding as the charges were read out to him in the packed courtroom.

The former premier pled not guilty to all four charges. If convicted, Najib faces not only a jail term but also a substantial fine. Caning would also apply to those below 50, though Najib, 64, would be disqualified from undergoing the penalty. Bail was reportedly been set at 1 million ringgit (US$247,000) for each charge.

Najib’s lead counsel, Muhammad Shafee Abdullah, argued his client had been subjected to a “trial by media” before even entering the court, prompting High Court Judge Justice Sophian Abdul Razak to grant an interim gag order that applies to media coverage relating to the charges. The High Court set dates for the trial, which will begin next February.

Supporters of the ex-premier gathered outside the court and held up “#FreeNajib” placards. Najib, who spent the night in lockup, left the court around 3.20pm after his family posted bail. He has been barred from foreign travel since Mahathir took office, but was ordered by the court to surrender his passports before returning to his residence.

The downfall of Malaysia’s former premier was unthinkable only months ago. Najib’s tenure was cast into disarray when reports implicating him with embezzlement initially surfaced in 2015. The ex-premier obstructed a domestic probe of the state fund by removing the attorney general and sacking critics within his own party, including his deputy.

Mohn Shukri Abdull, who led the thwarted investigations into 1MDB in 2015, now claims he was threatened and even received a bullet in the mail as a warning. Having derailed domestic probes, most observers believed Najib had confidently ridden out the storm ahead of May’s general election and would likely secure a slim victory for the ruling coalition.

That never came to pass. The shock victory of Mahathir’s Pakatan Harapan coalition stoked euphoria and turned the country’s political landscape on its head. For the many who regard the long-time opposition’s capture of federal power as the beginning of a “New Malaysia,” the arrest of Najib 56 days after the general election is a welcome sign of the changing times.

There are others with sympathies for the ex-premier that likely view his arrest as political persecution. A small pro-Najib solidarity rally was held outside the headquarters of the Malaysian Anti-Corruption Commission (MACC) on Tuesday evening, organized by activist supporters of the once-dominant United Malays National Organization (UMNO) party.

Najib’s spokesperson issued a statement last night calling the investigations “politically motivated and the result of political vengeance by the Harapan leadership under Dr Mahathir Mohamad,” which clearly amounts to a clarion call for increased opposition activism and political resistance by UMNO’s rank and file.

Prior to his arrest, Najib gave interviews to local and international media during which he blamed his advisers, management and board of 1MDB, alleging they had wrongly kept the embezzlement of funds a secret from him. He also likened a police valuation of assets seized at his residences as “political vengeance” against his family.

Police seized cash, designer handbags, luxury watches and jewelry worth US$274 million during raids into properties linked to Najib, the single largest haul in Malaysian history. The former premier disputes that figure and says that the belongings were gifts from foreign dignitaries and royals rather than the spoils of pilfered 1MDB funds.

His claims follow a familiar pattern of denials stemming from his initial explanation of US$681 million in funds discovered in his bank account as a “gift” from a Saudi royal. That transfer was also explained as a “political donation” from the late Saudi monarch Abdullah bin Abdulaziz Al Saud, with whom the ex-premier was known to have close ties.

In a recent interview with news portal Malaysiakini before his arrest, the ex-premier said he was “not a thief” and characterized his eventual trial as “a test for the system” rather than a test for himself, which hints that he plans to accuse the judiciary of being politically compromised if he is found guilty.

Observers believe there are political machinations underway for UMNO’s leadership to paint the former premier as a martyr facing persecution by those intent on undermining the position of Malays and Islam. UMNO’s internal election this past weekend suggests Najib is still a leading political force in his former party.

The contest for party leadership presented distinct choices for the party’s next direction. Former deputy premier Ahmad Zahid Hamidi – regarded by many as a Najib proxy – campaigned on the Malay agenda and appealed to conservative religious and racial forces. His challengers, Tengku Razaleigh Hamzah and Khairy Jamaluddin, campaigned on reformist platforms.

Zahid emerged victorious, although the two reformist candidates, who called for curbing graft and the perennial problem of “money politics,” accumulatively received a higher share of the popular vote, suggesting a major spilt in the former ruling party now at its lowest ebb since its formation more than half a century ago.

Analysts expect Zahid’s leadership to uphold the status quo of the Najib-era: a combative focus on communal issues, the use of divisive race and religious rhetoric, a culture of unquestioned loyalty to the party leadership and a policy of denial and defensiveness when corruption inevitably surfaces.

Shortly after the news of Zahid’s victory broke, Najib published a statement on Facebook referring to a statement he made three years ago that ethnic Malays would be “bastardised in their own country” if UMNO ever lost power. He alleged that the Harapan government relied on non-Malay support and that Islam lacked a “central place” in their administration.

These remarks suggest that Najib is actively shaping the strategy for UMNO’s revival as an opposition party. Zahid, who brings his own scandals and baggage, has been busy this week defending himself. He was questioned at MACC headquarters for more than 8.5 hours on July 2 regarding a purported meeting he had with a 1MDB-linked Saudi royal.

The newly-elected UMNO president and de-facto opposition leader was also questioned for seven hours on July 3 over funds from Yayasan Akal Budi, a family-owned welfare foundation, which were used to clear his credit card debts. Zahid claimed one of his officers mistakenly used the foundation’s funds to settle his outstanding personal debts.

Riza Aziz, Najib’s stepson and co-founder of Red Granite Pictures Inc, was also questioned by investigators on July 3. In March, the company paid US$60 million to the US DoJ in a civil forfeiture suit covering rights and interests claims to “The Wolf of Wall Street” and “Dumb and Dumber 2,” which were financed with money siphoned from 1MDB.

Najib’s wife Rosmah Mansor, who is seen by many in Malaysia as a symbol of greed for her opulence and luxury handbags, was questioned last month at MACC headquarters. An article in the Wall Street Journal last week characterized her as a “political force and central actor” in the 1MDB scandal, linking her to fugitive Malaysian financier Low Taek Jho.

According to the article, Rosmah helped to orchestrate Low’s alleged involvement with the state fund after learning of his business connections to Middle East royalty and prominent Persian Gulf families. DoJ investigators believe Low exercised “significant control” over dealings at 1MDB despite lacking a formal position at the fund.

“It was clear [Low] had special relationships with the leadership under [Saudi Arabia’s] King Abdullah and his family and also the monarchies of certain countries especially in the UAE,” Najib told Malaysiakini in an interview. “It was with this context that Jho Low represented the Middle East partners and their dealings and partnerships with 1MDB.”

1MDB entered into a joint venture with a private Saudi oil company, PetroSaudi International, in 2009, only for billions in debts to be accumulated soon after.

Jho Low is believed by prosecutors to have diverted at least US$1.3 billion in fraudulent remittances to Good Star Limited, a Seychelles-incorporated company of which Low was the sole shareholder. Malaysia has a warrant outstanding for Low’s arrest. His whereabouts are unknown, though he is believed to be in China.

Without doubt, Najib’s arrest and criminal prosecution marks a new era in Malaysian politics. As the Harapan government continues its anti-corruption pursuit, it may be only a matter of time before other key political figures are caught in Mahathir’s dragnet.