Najib Played Key Role at Troubled 1MDB – WSJ

Malaysia’s Najib Razak Played Key Role at Troubled 1MDB Investment Fund

Prime minister ordered removal of auditors, authorized controversial investment, Malaysian investigation shows

In early 2013 at the glitzy World Economic Forum in Davos, Switzerland, Malaysia’s prime minister approached the country’s longtime financial adviser Goldman Sachs with an urgent assignment.

A government investment fund the prime minister oversaw wanted Goldman to help it raise $3 billion quickly and quietly, according to people close to the bank.

The fund, 1Malaysia Development Bhd., or 1MDB, was Prime Minister Najib Razak’s signature initiative, envisioned as helping transform Malaysia into a modern Muslim democracy fueled by new industries. It burnished his credentials as a new type of liberal, Western-friendly leader, embraced by the U.S. as a counterbalance to China.

Its projects also stood to polish Mr. Najib’s standing with Malaysians who would soon be voting in an election. Goldman was told the fund wanted the money quickly so it could hold a public unveiling of a major investment in a planned high-profile financial center in Kuala Lumpur.

That development stalled, though the money was raised. Today, 1MDB has come to represent a different side of Malaysia—and of Mr. Najib. Even as he was courting Goldman officials in the Alps, opposition politicians were raising questions about 1MDB and how the billions it was raising were being used.

This year, the fund has become the center of a political scandal that has engulfed Malaysia’s government. The fund is mired in debts of over $11 billion. It is a subject of a raft of local and international investigations, including, in Malaysia, by the central bank, auditor general, anticorruption agency and a parliament committee. It has faced accusations that billions of dollars are missing and that money was misused for political purposes or siphoned off in corruption by individuals.

Center of storm

At the center of the storm stands Mr. Najib, a dapper 62-year-old Anglophile, the founder and chairman of 1MDB’s board of advisers.

Mr. Najib declined multiple interview requests. He has denied any wrongdoing. Supporters say the accusations are a political plot to unseat him. They also have said that though head of the fund’s advisory board, Mr. Najib wasn’t intimately involved in its operations or management.

Investigative documents reviewed by The Wall Street Journal show Mr. Najib playing an important role at 1MDB at key moments over several years. Among other things, he authorized several of its investments, according to documents that form part of Malaysia’s official investigation of the fund.

He played a leading role in raising billions of dollars in financing for the fund, people familiar with the matter said, and Mr. Najib’s cabinet approved the $3 billion bond deal he enlisted Goldman to arrange in early 2013. That deal included a fee to the bank of nearly $300 million, said people close to the bank, far above the $1 million to several million typical if a bank doesn’t have to take on the risk involved in getting it done fast.

Mr. Najib personally ordered the removal of the 1MDB fund’s auditors when they wouldn’t sign off on its books, the government investigation found. He authorized the fund to make investments of millions of dollars although some board members had raised concerns about them, documents in the auditor general report show.

Malaysian investigators, the Journal reported in July, have traced deposits of almost $700 million into the prime minister’s alleged personal accounts via agencies, banks and companies linked to 1MDB. The original source of the funds was unclear, and the government investigation didn’t detail what happened to the money that allegedly went into Mr. Najib’s accounts.

Malaysia’s anticorruption agency has said the money was a donation from the Middle East but hasn’t named the donor. Investigations continue. Mr. Najib has denied taking any money for personal gain.

The Journal reported earlier this year on how 1MDB appeared to overpay for certain assets, with the seller later donating to a Najib-led charity that disbursed money on projects, such as schools, Mr. Najib could cite as he campaigned. The fund has said its decisions are driven by what is best for business and not political considerations.

The scandal is taking a toll on Malaysia and dividing Mr. Najib’s party, the United Malays National Organization, which has ruled Malaysia since its independence from Britain in 1957. Malaysia’s ringgit currency is one of the worst performers this year.

The affair also is proving an embarrassment to Goldman Sachs. As part of a broad probe into allegations of money laundering and corruption, investigators at the Federal Bureau of Investigation and the Justice Department have begun examining Goldman’s role in transactions involving 1MDB, the Journal reported this week. The inquiries are at the information-gathering stage, and there is no suggestion of wrongdoing by the bank, people familiar with the matter said.

Malaysian investigators have also been looking at the financial affairs of Mr. Najib’s wife, Rosmah Mansor, according to government investigation documents. Ordinary Malaysians have criticized her public displays of wealth, including appearances with Birkin bags that can cost tens of thousands of dollars.

Around half a million dollars was deposited into the private account of Ms. Rosmah between February and April by a personal assistant in the prime minister’s office, according to documents recently reviewed by the Journal that are part of a Malaysian government investigation.

Malaysia’s Najib Razak Played Key Role at Troubled 1MDB Investment Fund
By Tom Wright And Bradley Hope
Oct. 15, 2015 – WSJ


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