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

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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

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