Picassos, a glass piano and missing billions: scandal of 1MDB reaches court

On Tuesday the former Malaysian prime minister Najib Razak will go on trial for his alleged role in the 1MDB saga

It is known as the “largest klep­toc­ra­cy case in the world”, a tan­gled tale of Hollywood celebri­ties, Malaysian politi­cians, lux­u­ry yachts, Picasso paint­ings, pow­er and mind-bog­gling amounts of stolen money.

On Tuesday the lat­est chap­ter begins in a cor­rup­tion scan­dal that not only saw bil­lions of dol­lars of Malaysian state mon­ey dis­ap­pear, but also entan­gled Leonardo Di Caprio, Paris Hilton and Miranda Kerr; illic­it­ly fund­ed two Hollywood films and prime Manhattan real estate and dragged the rep­u­ta­tion of one of the world’s biggest invest­ment banks into the mud. In a Kuala Lumpur court, the for­mer Malaysian prime min­is­ter Najib Razak will stand tri­al for his alleged role in the 1MDB saga and what pros­e­cu­tors will say were elab­o­rate attempts to cov­er it up.

Najib, who has con­sis­tent­ly denied all charges, is the first ex-prime min­is­ter of Malaysia to face charges of cor­rup­tion while in office. The antic­i­pat­ed air­ing of dirty polit­i­cal laun­dry in court over the next few months – in par­tic­u­lar how Najib and his wife alleged­ly spent the mil­lions of embez­zled mon­ey – already has the coun­try on tenterhooks.

This tri­al is huge­ly impor­tant for Malaysia,” said Bridget Welsh, asso­ciate pro­fes­sor of polit­i­cal sci­ence at John Cabot University, who is an expert on Malaysian pol­i­tics. “This is not just an issue of account­abil­i­ty, this is a huge inter­na­tion­al scan­dal which has real­ly shamed Malaysia.”

A global scandal

The ram­i­fi­ca­tions of the tri­al will be felt not just in Malaysia but glob­al­ly; it was US attor­ney gen­er­al Loretta Lynch who described 1MDB as “the largest klep­toc­ra­cy case” in the world, and 1MDB inves­ti­ga­tions ongo­ing in 12 countries.

In the US, the jus­tice depart­ment charged two for­mer Goldman Sachs bankers with con­spir­ing to laun­der bil­lions of dol­lars embez­zled from Malaysia’s state devel­op­ment fund.

This tri­al involves not just Malaysia and Najib, this involves the whole glob­al finan­cial sys­tem and the peo­ple who gamed the sys­tem to their advan­tage,” added Welsh.

The 1MDB scan­dal began in 2009, when a new­ly sworn-in Najib set up and over­saw a gov­ern­ment fund, titled 1Malaysia Development Berhad or 1MDB, whose intend­ed pur­pose was help­ing attract for­eign invest­ment in Malaysia. Instead over the next five years, bil­lions of dol­lars were either embez­zled out of the coun­try or laun­dered through sub­sidiary com­pa­nies by those who ran it.

Malaysian police con­fis­cate hun­dreds of design­er hand­bags and dozens of suit­cas­es con­tain­ing cash and jew­ellery as part of an inves­ti­ga­tion into Najib Razak. Photograph: AP

It is alleged about a quar­ter of the stolen funds end­ed up in Najib’s per­son­al bank account, fund­ing lav­ish cred­it card spend­ing sprees by him and his wife, Rosmah Mansour. Even more extrav­a­gant was the spend­ing by financier Jho Low, a friend of Najib’s step­son, Riza Aziz, who was an infor­mal con­sul­tant on 1MDB. He alleged­ly siphoned bil­lions from the fund, using it to buy vast amounts of prime Manhattan real estate, $8.1m worth of jew­ellery and a glass piano for Australian mod­el Miranda Kerr, a Picasso paint­ing and Oscar stat­uette for Leonardo Di Caprio, supery­achts, and to throw osten­ta­tious par­ties attend­ed by the likes of Paris Hilton, Lindsay Lohan and Jamie Foxx. He even bankrolled Hollywood movie The Wolf of Wall Street.

A num­ber of cor­rupt 1MDB offi­cials treat­ed this pub­lic trust as a per­son­al bank account,” Lynch said in 2016. International inves­ti­ga­tors now say at least $4.5bn was even­tu­al­ly stolen from 1MDB. An arrest war­rant is out for Low – who went into hid­ing after Najib lost the elec­tion, many believe in China – and he has yet to be found by the Malaysian authorities.

How it unravelled

It was British jour­nal­ist Clare Rewcastle-Brown who first exposed the scan­dal in ear­ly 2015 on her web­site The Sarawak Report. Najib lat­er organ­ised an arrest war­rant for Rewcastle-Brown, fired the attor­ney gen­er­al who was inves­ti­gat­ing 1MDB, placed the damn­ing report under the Official Secrets Act and removed all anti-cor­rup­tion offi­cers who were part of the inves­ti­ga­tion. A sub­se­quent 1MDB probe, car­ried out under Najib’s watch and wide­ly con­sid­ered to be a farce, then cleared the prime min­is­ter of all charges.

For Rewcastle-Brown, the prospect of see­ing Najib – who was in pow­er for nine years before he was top­pled in the elec­tion in May last year – on tri­al after so many years of being per­se­cut­ed by his admin­is­tra­tion in her bid to expose 1MDB was “sur­re­al”.

It is quite some­thing to see that it is he now in the dock, although I take no plea­sure in his down­fall,” she said. “It is a trib­ute to the pow­er of pub­lic opin­ion, which Najib failed to judge.”

Even before it had reached the Malaysian high court, the revived 1MDB inves­ti­ga­tion, insti­gat­ed by the new gov­ern­ment as soon as they took pow­er in May last year, already had the coun­try gripped. Raids on Najib’s prop­er­ties saw the police seize a cache of lux­u­ry goods worth up to $273m — includ­ing 1,400 neck­laces, 567 design­er hand­bags, 423 watch­es, 2,200 rings, 1,600 brooches and 14 tiaras — the biggest seizure of its kind in Malaysian history.

Subsequently, Najib was arrest­ed on four sep­a­rate occa­sions – the lat­est on Friday as he sat hav­ing an anniver­sary din­ner with his wife. He faces a total of 42 charges relat­ing to 1MDB, rang­ing from cor­rup­tion and mon­ey laun­der­ing to abuse of pow­er, tak­ing ille­gal bribes and crim­i­nal breach of trust. His wife is fac­ing 16 crim­i­nal charges. Both have plead­ed not guilty to all counts and speak­ing after being arrest­ed a sec­ond time in September last year, Najib told reporters: “I am not a thief … but I am hap­py because now I have the oppor­tu­ni­ty to clear my name on this issue once and for all.” If found guilty and giv­en con­sec­u­tive sen­tences, 65-year-old Najib could be fac­ing years, if not a life­time, behind bars.

Najib Razak and his wife Rosmah Mansor show their ink-stained fin­gers after vot­ing in Malaysia’s gen­er­al elec­tion in 2018 Photograph: Athit Perawongmetha/Reuters

Tuesday’s tri­al is the first of the three 1MDB-relat­ed tri­als that he is due to face and focus­es on three charges of mon­ey laun­der­ing, three of crim­i­nal breach of trust and one of abuse of pow­er relat­ing to a sum of 42m Malaysian ring­git ($10m) which was trans­ferred from a 1MDB sub­sidiary com­pa­ny, SRC International, into Najib’s per­son­al bank accounts.

At a lat­er date, he is due to face two more 1MDB tri­als, first relat­ing to a sum of $681m, which Najib has main­tained was a gift from a Saudi prince, and anoth­er on mul­ti­ple charges of abuse of pow­er. Separately from 1MDB, Najib is also due to face tri­al for charges relat­ing to mis­ap­pro­pri­at­ed funds from his par­ty UMNO. He has plead­ed not guilty to all charges.

Najib mean­while has sought to recast him­self as a vic­tim of a politi­cised vendet­ta and paint the tri­al as a polit­i­cal hit job, embark­ing on a full-blown social media cam­paign, which recent­ly saw him record a viral video of him singing 1970s hit Kiss and Say Goodbye, but with the lyrics altered to crit­i­cise the new gov­ern­ment and protest his innocence.

Yet, Welsh was scep­ti­cal about how effec­tive this charm offen­sive, which has also attempt­ed to polarise the coun­try along volatile eth­nic lines, would be in shift­ing the court of pub­lic opin­ion in the for­mer prime minister’s favour. “I think final­ly peo­ple will under­stand how much dam­age Najib has done to Malaysia.”

By Hannah Ellis-Petersen

Picassos, a glass piano and miss­ing bil­lions: scan­dal of 1MDB reach­es court