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Reuters

U.S. prosecutors sued on Wednesday to seize more than $1 billion in assets they said were tied to an international scheme to launder money stolen from the Malaysian state fund 1MDB, which was overseen by Prime Minister Najib Razak, and used to finance the Hollywood film “Wolf of Wall Street” and to buy property and famous works of art.

Civil lawsuits filed in federal court did not name Najib, referring instead to “Malaysian Official 1.” Some of the allegations against this official are the same as those in a Malaysian investigation over a $681 million transfer to his personal bank account.  

The sovereign wealth fund 1MDB and the Malaysian prime minister’s office had no immediate comment. Najib has consistently denied any wrongdoing.

The U.S. Department of Justice said $681 million from a 2013 bond sale by 1MDB was transferred to the account of “Malaysian Official 1”, who is described in court papers as “a high-ranking official in the Malaysian government who also held a position of authority with 1MDB.”

Asked at a news briefing about the absence of Najib’s name from the complaint, U.S. Attorney General Loretta Lynch said: “We are essentially describing the tracing of the assets, the use of the funds and who was involved in the transactions there. So we’re not commenting on anyone else who may or may not be named in the matter at this time.”

Money was stolen from the fund, moved through shell companies and hidden in the United States in purchases of high-end property and luxury items, prosecutors said. The people and institutions named in the complaint have not been charged with crimes, but the government wants to seize assets, among them luxury properties in New York and California, Monet and Van Gogh paintings and a Bombardier jet.

The Justice Department said it will seek to return recovered funds to Malaysia. “The Malaysian people were defrauded on an enormous scale …” FBI Deputy Director Andrew McCabe said at the briefing in Washington.

It is the largest set of cases brought by the Justice Department’s Kleptocracy Asset Recovery Initiative, which seeks the forfeiture of the proceeds of foreign corruption. The previous largest case in February sought to seize $850 million.

Malaysia’s attorney general said in January that the prime minister had not committed any crime and that the money in his bank account was a political donation from the Saudi royal family. Saudi Foreign Minister Adel Al-Jubeir said in April funds wired into Najib’s personal bank account were a “genuine” donation originating from Saudi Arabia.

A spokesman for the Saudi embassy in Washington declined to comment on Wednesday.

The U.S. lawsuits seek to seize assets “involved in and traceable to an international conspiracy to launder money misappropriated from 1MDB” over a four-year period.

GOLDMAN SACHS ARRANGED TRANSACTION

One transaction targeted by prosecutors was a $3-billion bond offering in early 2013 that was “arranged by Goldman Sachs International,” said U.S. Attorney Eileen Decker at the briefing. She is the chief prosecutor in central California.

More than a third of that money was misappropriated by corrupt officials, she said.

“Approximately $137 million of the pilfered money was spent to purchase works of art, including a $35 million work by Claude Monet,” Decker said. She said funds diverted from one bond offering were also traced to the purchase of an interest in the Park Lane Hotel in New York. Prosecutors want forfeiture of about $250,000 invested in the hotel.

Goldman Sachs has not been accused of any wrongdoing.

“We helped raise money for a sovereign wealth fund that was designed to invest in Malaysia. We had no visibility into whether some of those funds may have been subsequently diverted to other purposes,” a Goldman Sachs spokesman said.

1MDB, which Najib founded in 2009 shortly after he came to office, is being investigated for money laundering in at least six countries, including the United States, Singapore and Switzerland.

The lawsuits name Najib’s stepson Riza Aziz as a “relevant individual.” Riza is the founder of Red Granite Pictures, which produced the Oscar-nominated 2013 movie “The Wolf of Wall Street” directed by Martin Scorsese. Tens of millions of dollars diverted from 1MDB were used to produce it, prosecutors said.

The movie made $400 million at the box office worldwide.

Red Granite said on Wednesday that none of the funding it received four years ago was illegitimate and nothing the company or Riza did was wrong.

Paramount Pictures, actor and producer Leonardo DiCaprio and Scorsese could not immediately be reached for comment.

Leslie Caldwell, assistant U.S. attorney general, said money was diverted from 1MDB bond offerings through a Swiss bank account and shell companies around the world to Red Granite.

“Of course, neither 1MDB nor the Malaysian people ever saw a penny of profit from that film,” Caldwell told the briefing.

The lawsuits also named Malaysian financier Low Taek Jho, better known as “Jho Low”, and Abu Dhabi government officials Khadem Abdulla Al-Qubaisi and Mohammed Ahmed Badawy Al-Husseiny.

Al Qubaisi and Al-Husseiny are former officials at a sovereign fund in Abu Dhabi that participated in deals with 1MDB.

Jho Low did not respond to requests for comment sent to his Hong Kong-based company, Jynwel Capital. Al Qubaisi and Al-Husseiny could not be reached for comment.

Some of the misappropriated 1MDB funds “are directly traceable to a $700 million wire transfer and $330 million wire transfer unlawfully diverted from 1MDB to the Good Star Account,” owned by Jho Low, one of the lawsuits said.

Other misappropriated funds from 1MDB were transferred to the co-founder of PetroSaudi, a company that had a joint venture deal with 1MDB, and thereafter to the high-ranking official in the Malaysian government it identified only as “Malaysian Official 1”.

“That misappropriation occurred in multiple phases over the course of several years,” the lawsuits said.

Diplomatic and trade relations between the United States and Malaysia have grown closer during the administration of President Barack Obama, who has visited the southeast Asia country twice in the last two years.

Asked for a response to the allegations, a top White House official distanced Obama from the Justice Department’s litigation.

“The simple answer is we do not have any control over Justice Department actions,” Ben Rhodes, deputy national security adviser, told Reuters in Yangon where he was visiting. “We’ve made that clear to Malaysia and every other country.”

In Malaysia, however, the inquiries have put Najib under political pressure with critics led by former Prime Minister Mahathir Mohammed calling for him to step down.

Najib has sacked critics of the scandal within his ruling United Malays National Organization (UMNO) and consolidated his position in the party.

He also secured big electoral victories in state and parliamentary by-elections this year, as local issues took prominence over the 1MDB scandal.

(Additional reporting by Praveen Menon, A. Ananthalakshmi, Joseph Sipalan; Doina Chiacu, David Alexander and Joel Schectman in Washington, Jonathan Stempel and Olivia Oran in New York; Editing by Kevin Drawbaugh and Grant McCool)

http://www.reuters.com/article/us-malaysia-scandal-usa-idUSKCN10009X