Malaysian fugitive financier Jho Low in a file photo. Photo: Facebook

On November 1, the United States Department of Justice (DoJ) announced it had lodged criminal charges against three suspects in the 1Malaysia Development Berhad (1MDB) fraud case, considered by observers among the largest financial scams in modern history.

The three accused include fugitive Malaysian financier Low Taek Jho, former Goldman Sachs banker Ng Chong Hwa, and the same investment bank’s ex-managing director Tim Leissner, who headed the financial institution’s Southeast Asia operations.

A three-count indictment was unsealed against Low and Ng in the Eastern District of New York’s federal court on charges of conspiring to launder about US$6 billion embezzled from 1MDB and violate the Foreign Corrupt Practices Act by paying bribes to both Malaysian and Emirati officials.

Leissner had already pleaded guilty in August this year to a separate two-count indictment filed in June for similar charges, reports said. As the trial unfolds, many other suspects and potential institutions involved, but not yet identified, in the scam could soon emerge in court testimony.

The DoJ’s investigation for the indictments involved dozens of individuals, institutions and corporate entities spanning Malaysia, Singapore, Hong Kong, the Seychelles, France, Switzerland, Luxembourg, the United Kingdom, United Arab Emirates and US.

The three named defendants are the first to face criminal charges lodged by the DoJ for their roles as architects, enablers and organizers of the multi-billion dollar scam. Low, also known as Jho Low, is believed to be laying low in China, according to reports.

Malaysia’s former Prime Minister Najib Razak. Photo: Reuters / Olivia Harris

Several Malaysian government officials, including ex-premier Najib Razak, allegedly collaborated with two executives at the UAE’s state-owned International Petroleum Investment Company (IPAC) to syphon as much as US$6 billion from 1MDB.

Reports first broke in 2015 that Najib had received US$618 million allegedly from the fund into his personal bank accounts. He has consistently denied any wrongdoing, saying at the time the money was a donation from a Saudi prince and that new Malaysian government probes implicating him in fraud are politicized.

The scandal enraged many Malaysian voters, who in a surprise result elected Najib’s rival and former premier Mahathir Mohamad at polls in May, ending the United Malays National Organization’s decades-old hold on power. Mahathir promised on the hustings to achieve justice in the scam and recover pilfered funds.

In July 2016 and June 2017, the DoJ filed civil forfeiture complaints against Najib, named in the complaint as “Malaysian Official #1”, along with more than a dozen individuals and entities that aimed mostly to freeze and seize assets and accounts traced to stolen 1MDB funds.

However, in September 2017, the DoJ put a stay on these investigations over concerns that they would undermine its ongoing criminal investigation, the first targets of which were revealed in the November 1 indictments.

Recent reports suggest that Low has attempted to make contact with the chair of Mahathir’s appointed Council of Eminent Persons, ex-finance minister Daim Zainuddin. According to Daim, Low requested a meeting with Mahathir to negotiate his possible immunity in exchange for information in Malaysia’s ongoing investigations into 1MDB losses.

Malaysian businessman Jho Low with US actor Leonardo DiCaprio. Photo: Twitter

Before being charged with embezzling US$1.7 billion from 1MDB, the 37-year-old Low made a name for himself as a globetrotting playboy posing with stars like Paris Hilton, Miranda Kerr, Elva Hsiao and Leonardo DiCaprio.

Low has been at large since 2016 after Singapore requested that Interpol issue an international arrest warrant, known as a red notice, based on evidence that pilfered 1MDB funds allegedly tied to Low had moved through its jurisdiction.

In 2017, with authorities reportedly closing in on him, Low escaped on his super-yacht, purchased with US$250 million in stolen 1MDB funds and known as Equanimity. He reportedly made stops in various Indonesian islands before authorities caught up to him in Bali.

On February 8, Indonesian authorities seized the yacht and surrendered it to Malaysian authorities, who then put it up for auction earlier this month. Low, however, escaped arrest and has apparently been able to find safe-haven in China, with witnesses and reports recently sighting him in Macau and Hong Kong.

In mid-August, the Wall Street Journal reported that Low has managed to stay one step ahead of supposedly pursuing Chinese police and has bragged to associates cited in the story about receiving protection from Chinese intelligence services. Asia Times could not independently corroborate the claims in the report.

Some have speculated that China is protecting Low as a reciprocal snub after Mahathir moved to cancel US$22 billion in Chinese infrastructure contracts initiated by Najib. The projects, including a proposed railway down peninsular Malaysia’s east coast, have tremendous strategic importance for China.

Malaysian Prime Minister Mahathir Mohamed (L) and Chinese Premier Li Keqiang (R) at the Great Hall of the People in Beijing, August 20, 2018. Photo: AFP/Pool/How Hwee Young

Designed to bypass the Strait of Malacca chokepoint, the planned East Coast Rail Link would have connected the South China Sea with strategic Chinese shipping routes on Malaysia’s west coast. The other main cancelled project was a Chinese-backed natural gas pipeline in Sabah, a Malaysian state on the island of Borneo.

The DoJ’s criminal complaint claims that Low, Ng and Leissner were all key in bringing together and forming relationships with other individuals allegedly involved in massive financial fraud.

According to the DoJ complaint, Low arranged the meetings with the officials of “Foreign Agency A” (IPAC according to Malaysian sources assisting the DoJ) and “Foreign Investment Firm A” (Aabar Investments PJS according to Malaysian sources assisting the DoJ).

Some of these officials, among others, “would be paid bribes by Low, or at his direction, to influence the approval of the guarantee,” the DoJ complaint says.

The complaint also says that “As part of the scheme, Low, Ng, Co-Conspirator #1 (Leissner) and others used Low’s close personal relationships with government officials in Abu Dhabi and Malaysia, including Low’s relationship with Malaysian Official #1 (Najib), to obtain and retain 1MDB business for US Financial Institution #1 (Goldman Sachs) through the promise and payment of bribes to these government officials.”

The complaint states that “During this same time, in an effort to win and retain the bond deal to finance the purchase of Malaysian Energy Company A (unclear which company), the defendant Low also enlisted the assistance of various 1MDB officials with the promise of remuneration.”

Goldman Sach’s former Southeast Asia director Tim Leissner in a file photo. Photo: Facebook

The indictment shines light on Low’s alleged work in ensuring that Najib, who presided over 1MDB as its founder and chairperson, allowed funds to be diverted into offshore accounts and not into underlying investment projects.

The DoJ claims that it was Low who courted – and allegedly bribed – key executives at IPIC, namely Khadem al-Qubaisi and Mohamed Badawy Al Husseiny. Because IPIC agreed to entrust the security of the bonds, Qubaisi and Husseiny on multiple occasions signed off on “investments” that they allegedly knew were actually embezzlements, the DoJ complaint claims.

Qubaisi and Husseiny haven’t been seen or heard from since they were detained in the UAE shortly after the DoJ filed its forfeiture complaint in July 2016. It is thus still unclear if they maintain their innocence or accept guilt of the charges.

Ng allegedly played a similar role in deceiving his employer Goldman Sachs to hide fraudulent transactions.

According to the complaint: “In order to get the deals, the defendant Ng also conspired with other employees and agents of US Financial Institution #1 (Goldman Sachs), including Co-Conspirator #1 (Leissner), to knowingly and willfully circumvent the internal accounting controls of US Financial Institution #1 in connection with the three 1MDB bond transactions and other 1MDB business.”

Khadem al-Qubaisi in a file photo. Photo: Facebook

In that connection, Ng allegedly worked to bypass Goldman’s internal compliance standards, including investigators in the bank’s legal department who worked to review transactions such as the 1MDB bond deal, the DoJ complaint claims.

Backed by Emirati oil dollars, the assumed credibility of the Malaysian government and the prestige of Goldman Sachs, Leissner then presided over a fire sale of 1MDB bonds to investors, stoked with stories of how their money would go toward the good cause of developing Malaysia’s poor Sarawak state.

Referred to in the DoJ complaint as “Co-Conspirator #1”, Leissner also worked with Ng and Low to “launder funds embezzled from 1MDB, some of which were used to pay bribes to government officials in Malaysia and Abu Dhabi, through financial systems in the United States and elsewhere,” the DoJ complaint says.

The sheer scope and scale of the DoJ’s trenchant investigation was illuminated by its statement acknowledging the cooperation of dozens of investigative bodies, both in the US and around the world.

The list included the US Securities and Exchange Commission, the Board of Governors of the Federal Reserve System of the Federal Reserve Bank of New York, the Office of the Attorney General and the Federal Office of Justice of Switzerland, and the judicial investigating authority of the Grand Duchy of Luxembourg, among others.

A construction worker in front of a 1MDB billboard at the Tun Razak Exchange development in Kuala Lumpur. Photo: Reuters/Olivia Harris

The presumed culpability of high profile figures like Low and Najib has already been established in media reports ever since indications of the scam first surfaced in 2015. That was not the case for Ng, Leissner and Goldman Sachs, suggesting that the DoJ may have other aces up its sleeve as the trial unfolds.

At the same time, the DoJ’s decision not to charge Qubaisi and Husseiny, the latter a US citizen, has raised eyebrows given that they were clearly implicated in the complaint of receiving bribes and possessing stolen funds. Those charges were also made in the first round of civil cases.

The DoJ’s decision to highlight instead Low, Ng, and Leissner’s alleged roles as the key architects of the fraud and depict Husseiny and Qubaisi as mere targets of bribery could undermine Malaysian Attorney General Tommy Thomas’s efforts to recoup funds through a motion pending at the London Court of Arbitration.

Malaysia’s recent move to challenge a May 2017 “consent agreement” requiring the two to repay US$5.78 billion rests on establishing that there was a high-level IPIC conspiracy to embezzle from 1MDB and that it went far beyond Qubaisi and Husseiny.

The DoJ complaint’s naming of names could thus only be the beginning of those eventually implicated and potentially prosecuted for the multi-billion dollar fraud.

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