1MDB – The Biggest Financial Scandal in History
1MDB was a Malaysian sovereign wealth fund that was set up to promote development through foreign investments and partnerships. Najib Razak, at the time, was both the finance minister and prime minister of Malaysia, as well as the chairman to 1MDB.
To improve 1MDB’s credibility to investors in enlarging the fund, American investment Bank, Goldman Sachs, through 2012-2013 recommended and sold financial products in the form of bonds worth $6.5 billion; alleging investments would be made in energy, real estate, and other industries. Instead of the money being spent on legitimate investments, the money was siphoned off to various offshore accounts, from where it was later wirelessly transferred to associates involved in the financial fraud. The U.S. Department of Justice (DoJ) estimated some $4.5 billion to have been stolen.
The Denial of Charges
More than 227,000 leaked documents later revealed that 1MDB was the epicentre of various fraudulent financial schemes since the beginning. Vast sums of money were laundered into bank accounts in Switzerland, Singapore, and the U.S. Before the 2013 Malaysian elections, some $731 million was found in Najib Razak’s bank account. It was reported that this money was being used to pay off political opponents, bury evidence, and “buy-out” law enforcement agencies investigating the charges against Najib.
The former PM, however, continued to deny the charges, with his lawyers arguing that he was being framed by the opposition and that the money found in his bank accounts were donations from a Saudi prince. Charges were also pressed against Rosmah Mansor, Najib’s wife. In raids to various properties co-owned by the pair, some 500 top-range designer bags and more than 12,000 pieces of jewellery were recovered.
Who all were included in the Scandal?
Others linked to the scandal include Jho Low, a consultant who was brought in to oversee 1MDB. He reportedly bankrolled purchased properties worth billions of dollars, a private jet worth $35 million, a $260 million superyacht, a $3.2 million Picasso and Monet painting that was gifted to Leonardo DiCaprio, $8 million worth of diamonds gifted to Australian model Miranda Kerr and many other luxury purchases. Low is currently a fugitive. The stolen money also made way to Najib’s stepson, Riza Aziz, who financed the Hollywood film, “Wolf of Wall Street”. Riza, however, maintains his innocence, although he has agreed to testify against his stepfather over the allegations.
The Investigations which Revealed the Scandal
The entire scandal remained unnoticed till in 2015 when the Malaysian Anti-Corruption Agency (MACC) began investigations. MACC was about to issue an arrest warrant against the prime minister, however, in what is known as the “week of long knives”, fired several high-rank cabinet ministers, including the attorney general as well as the deputy prime minister as well as people working at MACC. Things took a turn against Najib in 2018 when former PM Mahathir Mohammad won the general elections and began a probe into the scandal once again.
In late 2019, Malaysian prosecutors filed five separate cases against Najib. These cases accounted for 42 charges of various violations of Malaysian and international law viz. financial fraud, abuse of office, and money laundering, etc. On 28th July 2020, the Kuala Lumpur High Court decided the first of the five grafting cases, with Najib’s role in diverting money into his account from SRC International, a unit of 1MDB.
Arguments Before the Court
The lead prosecution, V. Sithambaram, stating that “We ask for a fair and just sentence, reflective of the deterrence needed…” yet asserted that the sentence should be exemplary not to politicians alone, but all public officials. Justice Ghazali, while delivering His verdict, stated that “[t]he sentence is not only to punish offenders but to deter other people from repeating the offense.” In his judgment, Justice Ghazali has taken into account wider considerations, such as public interest and observing the key objectives of law enforcement, as well as the “[Najib Razak’s] contribution to the economic growth of the country”.
In Sithambaram’s closing statements, a body of case law was submitted, pushing for a heavier sentence. The prosecutor said that it was not “[his] own saying” but rather how courts had come to view corruption committed by people holding the highest office. Further, he stated that any leniency showed to him would be “displaced sympathy”. According to Sithambaram, the 1MDB case tarnished the image of Malaysia across the globe and that the Malaysian people did not deserve this.
Alternative Submissions Made Before the Court
Alternatively, Shafee Abdullah representing Najib Razak, argued that his client was already facing a series of punishments. He argued that [Najib] was already charged under four separate criminal cases, and hounded by the tax department for RM1.69 billion. This, he submitted, was “oppressive and [deliberately] undertaken”. Notably, co-counsel to defense, Harvinderjit Singh also stated that “[T]he higher a person is, the higher the falls and that in itself is punishment”, by which he pleaded for a lighter sentence.
Justice Ghazali, nevertheless, being unconvinced ruled “[H]aving considered all the evidence presented [before the] court… the defense has [failed] in rebutting the presumption on the balance of probabilities or raising reasonable doubt against the accused…”. With the other four 1MDB cases still pending, and various other law enforcement agencies investigating further into the scandal, the former PM’s political career appears to have come to a grand closing.
KL High Court’s Decision – The SRC International Verdict
Judge Nazlan Ghazali, sitting in the KL High Court, having heard a total of 57 prosecution witnesses and 19 defense witnesses, including Najib himself, and after 100 days of hearings, found him guilty on all 7 charges. Najib Razak was found guilty of 3 counts of criminal breach of trust, an offense under s.409 of the Malaysian Penal Code; 3 counts of money laundering, an offense under s.4(1)(b) of AMLATFPUAA 2001; and on 1 count of abuse of power, an offense under s.23(1) of MACC Act 2009. Judge Nazlan Ghazali sentenced Najib Razak, aged 67, to concurrently serve 12 years in prison and a total of RM210 million in default of five years in jail.
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