22
Jul
16

1MDB Fraud Trail From Kuala Lumpur to Hollywood — Bloomberg

U.S. Maps 1MDB Fraud Trail From Kuala Lumpur to Hollywood

More than $3.5 billion traveled a trail of fraud from Malaysia through a web of shell companies, with some fueling a spending binge on Monet paintings and luxury real estate and at least $700 million flowing back into accounts controlled by Malaysia’s prime minister.

Some of the money was handled by international banks including Goldman Sachs Group Inc., JPMorgan Chase & Co., Standard Chartered Plc and Deutsche Bank AG. A chunk of it funded a Hollywood blockbuster, “The Wolf of Wall Street.” More than $13 million of it was wired to an account at a Las Vegas casino by a stepson of Malaysia’s prime minister who gambled with an unidentified actor whose description matches that of Leonardo DiCaprio.

It’s all laid out in a dozen filings Wednesday by U.S. prosecutors who detailed an alleged scheme of international money laundering and misappropriation stretching from 2009 to 2015. The Justice Department is seeking to seize more than $1 billion worth of assets it says went through U.S. banks from Malaysian development fund 1Malaysia Development Berhad, known as 1MDB, and was ultimately used to illegally acquire assets.

The U.S. complaints lays the groundwork for tension with Malaysia, a longtime ally on issues including counterterrorism and trade. Prosecutors refer to a top Malaysian official who controlled accounts that received hundreds of millions of dollars. The official isn’t accused of wrongdoing.

The anonymous description lines up with that of Prime Minister Najib Razak, who until a few months ago served as the chairman of 1MDB’s advisory board.

It’s unclear how local law enforcement will respond in Malaysia, where officials have taken pains to keep criticisms from surfacing, have cleared Najib of any wrongdoing and closed its own investigations. U.S. prosecutors sought to recover assets they linked to Najib’s stepson, Riza Aziz, and other associates.

The prime minister didn’t immediately respond to a request for comment. He has consistently denied wrongdoing.

“Unfortunately and tragically, a number of corrupt officials treated this public trust as a personal bank account,” Attorney General Loretta Lynch said at a news conference in Washington. The civil action and asset seizures represent the “largest single action ever brought” by the Justice Department’s six-year-old Kleptocracy Asset Recovery Initiative, she said.

Lynch declined to comment on the identity of the unnamed top Malaysian official.

1MDB said in a statement that it will fully cooperate with investigators and had not been contacted by the Justice Department. It said it “is not a party to the civil suit, does not have any assets in the United States of America, nor has it benefited from the various transactions described in the civil suit.”

Also on Wednesday, Swiss authorities said U.S. prosecutors had sent them a request in May for information about bank accounts that might have been used to move money from the fund.

Web of Companies

The U.S. complaints also lay out how a handful of global banks, while not accused of wrongdoing, were ensnared as hundreds of millions bounced between a web of shell companies. Money was pilfered from the government fund based on false representations made by 1MDB officials and representatives of the shell companies, prosecutors said. Even when bank officials raised questions about the beneficiaries of various accounts, compliance departments were unable to detect or halt the alleged fraud.

The diverted cash was used to purchase a breathtaking catalog of loot that prosecutors moved on Wednesday to seize. There’s a stake in the Viceroy L’Ermitage Beverly Hills Hotel as well as homes, condos and penthouses from Los Angeles and Beverly Hills to Manhattan’s Central Park South to London’s Belgravia. There’s a $35 million Bombardier jet, as well as more than $200 million worth of art — a pen-and-ink drawing by Vincent Van Gogh (“La Maison de Vincent a Arles”) and two Claude Monet paintings, including a pastel study of water lilies, “Nympheas Avec Reflets de Hautes Herbes.”

Hollywood Link

And in a twist worthy of Hollywood, the U.S. is also laying claim to profits and royalties from a movie about wealthy abandon: It says that more than $100 million in funds from 1MDB went to finance 2013’s “The Wolf of Wall Street,” by Red Granite Pictures Inc. — a production company co-founded by Najib’s stepson, Riza.

1MDB in April said it had “never invested in nor transferred funds to Red Granite Pictures, whether directly or via intermediaries,” and has denied wrongdoing more broadly over its finances. Red Granite said in May that all money it received had been proper and from a variety of sources including top-tier U.S. commercial and investment banks.

Jho Low Coterie

At the heart of the scheme, the U.S. alleges, was a small coterie of Malaysians led by a Malaysian financier named Low Taek Jho. They diverted money from 1MDB into personal accounts disguised to look like legitimate businesses, the U.S. said, and kicked back some of those funds to officials. Low, who has been linked socially with Paris Hilton and is a close friend of Riza, has said he provided consulting to 1MDB that didn’t break any laws.

In one of the complaints filed in federal court in California, running 136 pages, federal prosecutors alleged the unnamed top official whose description matches Najib’s received payments of $20 million in 2011, $30 million in late 2012 and then $681 million in March 2013. In August 2013, prosecutors said, some $620 million was transferred out of the top official’s account and back into an account controlled by one of the defendants in the U.S. actions.

Najib stepped down from his role as chairman of 1MDB’s advisory board when it was dissolved in May. He is also the country’s finance minister. The Ministry of Finance is the sole shareholder of 1MDB.

The Malaysian attorney general said this year that the $681 million that appeared in Najib’s accounts before the 2013 election was a personal contribution from the Saudi royal family and that most was later returned. He cleared Najib of wrongdoing. Saudi Foreign Minister Adel Al-Jubeir said in April that the large donation to Najib was “genuine,” and Saudi authorities were aware of the gift which came without strings.

The Justice Department account contradicts that statement. The $681 million came from Tanore, an entity controlled by a friend and associate of Low’s. Najib paid the money back to Tanore, according to the complaint.

…more
U.S. Maps 1MDB Fraud Trail From Kuala Lumpur to Hollywood
Greg Farrell, Andrew M Harris, Keri Geiger, David McLaughlin
July 20, 2016 — Bloomberg

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