June 16, 2017 1:53 pm JST

Malaysia cries foul as US swoops in on 1MDB-linked bling

Najib aide says motive for $540m roundup 'goes beyond' seizing assets

CK TAN, Nikkei staff writer

A construction worker walks past a 1MDB billboard at the Tun Razak Exchange development in Kuala Lumpur. © Reuters

KUALA LUMPUR -- Malaysian authorities on Friday denounced a U.S. effort to recover another $540 million worth of assets allegedly obtained with money taken from 1Malaysia Development Berhad, a state investment fund.

The assets in question include a 91-meter yacht, the rights to the Hollywood comedy "Dumb and Dumber to," artwork by Pablo Picasso, high-end properties and jewelry. 

Prime Minister Najib Razak's press secretary said that while Malaysia will cooperate with any lawful investigation, in accordance with international protocols, it is concerned by the "gratuitous" naming of names and the potential for political manipulation.

"This suggests a motivation that goes beyond the objective of seizing assets," Sariffuddin Ahmad said in a statement.

Malaysia is scheduled to go to the polls by mid-2018, and the latest allegations will once again stir up the controversy surrounding 1MDB -- now reduced to a paper company after its assets were liquidated to pay debts and transferred to the Ministry of Finance.

In a multiagency effort led by the Justice Department, U.S. authorities filed civil forfeiture complaints in the District Court of California on Thursday, seeking to freeze the valuables linked to the fund. Combined with complaints filed last July, the authorities aim to recover more than $4.5 billion worth of assets bought with money they say was stolen from 1MDB and laundered through complex transactions involving offshore shell companies.

That makes this the largest attempt to recover stolen assets in the U.S.

"We are unwavering in our commitment to ensure the U.S is not a safe haven for corrupt individuals and kleptocrats to hide their ill-gotten wealth or money," the Justice Department said in a statement, adding that efforts would be made to return the recovered funds to victims. 

The filing also named several individuals and referenced a "Malaysian Official 1," or MO1, described as a high-ranking public servant who held a position of authority at 1MDB. This is purportedly Najib.

In response to last year's filing, a Malaysian cabinet minister had admitted that MO1 was indeed the prime minister, whom he claimed was not part of the U.S. investigations.

Riza Aziz, Najib's stepson, and Low Taek Jho, a family friend, have also been fingered as key alleged perpetrators.

Malaysia maintains that numerous domestic investigations of 1MDB have found no evidence of a crime.

"Insinuations"

Najib was the brains behind the creation of 1MDB in 2009. He chaired the advisory board at the fund, which was set up to invest in strategic assets such as prime land and energy in partnership with foreign investors.

This follows the norm in Malaysia, where sovereign funds including Khazanah Nasional, the Employees Provident Fund and Permodalan Nasional Berhad hold a tight grip on assets deemed important to the country. The funds own controlling stakes in companies like Malayan Banking, CIMB Group Holdings, Sime Darby, Axiata Group and IHH Healthcare. Such state-linked businesses account for seven of the country's top 10 companies by market capitalization.

After the latest U.S. filing, Malaysia's attorney general expressed alarm over the "insinuations" of criminal wrongdoing made against Najib, although the prime minister has not been named as a defendant or suspect.

Apart from the U.S., 1MDB is also the subject of investigations by authorities in Switzerland and Singapore, as money from the fund was allegedly laundered through the countries' financial systems.

Credit Suisse and United Overseas Bank are the latest among lenders fined by Singapore's monetary authority for breaches of anti-money laundering requirements and control lapses.

Asia300

Malayan Banking Bhd.

Malaysia

Market(Ticker): KLS(1155)
Sector:
Industry:
Finance
Regional Banks
Market cap(USD): 23,784.75M
Shares: 10,553.87M
Asia300

CIMB Group Holdings Bhd.

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Market(Ticker): KLS(1023)
Sector:
Industry:
Finance
Regional Banks
Market cap(USD): 13,945.85M
Shares: 9,052.11M
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Sime Darby Bhd.

Malaysia

Market(Ticker): KLS(4197)
Sector:
Industry:
Distribution Services
Wholesale Distributors
Market cap(USD): 15,167.73M
Shares: 6,800.83M
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Axiata Group Bhd.

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Market(Ticker): KLS(6888)
Sector:
Industry:
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Wireless Telecommunications
Market cap(USD): 9,865.84M
Shares: 8,998.11M
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IHH Healthcare Bhd.

Malaysia

Market(Ticker): KLS(5225)
Sector:
Industry:
Health Services
Hospital/Nursing Management
Market cap(USD): 11,460.50M
Shares: 8,239.04M
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United Overseas Bank Ltd. (Singapore)

Singapore

Market(Ticker): SES(U11)
Sector:
Industry:
Finance
Regional Banks
Market cap(USD): 30,236.68M
Shares: 1,669.41M

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