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Malaysia in transition

1MDB scandal snares Najib's closest lieutenants as Mahathir vows more

Malaysia's former prime minister again charged with pocketing state funds

Malaysia's former treasurer-general Irwan Serigar, in left photo, and former Prime Minister Najib Razak, in right photo, each arrives at Kuala Lumpur High Court in Kuala Lumpur on Oct. 25.   © AP

KUALA LUMPUR -- A Malaysian court has jointly charged former Prime Minister Najib Razak and a top bureaucrat with criminal breach of trust, widening the scope of the corruption scandal at state fund 1Malaysian Development Berhad.

Najib and former Finance Ministry Secretary General Irwan Serigar Abdullah -- who was once the head of the three-man board at 1MDB -- were indicted Thursday on six counts of criminal breach of trust in pocketing about 6.6 billion ringgit ($1.6 billion) in government funds, some of which was money meant for the poor.

Each of the charges carries a maximum jail term of 20 years, caning and a fine, according to the charge sheet released by the prosecutor at the Kuala Lumpur Sessions Court. Both pleaded not guilty.

At the time of the alleged offenses, which occurred in 2016 and 2017, Najib also held the finance minister portfolio.

Local news reported that the graft was linked to payments made by 1MDB to its bond guarantor, International Petroleum Investment Co., an Abu Dhabi sovereign wealth fund. These payments were made under a settlement reached in 2017 by both state funds in a dispute over $3.5 billion.

The Malaysian government tapped IPIC's financial standing to raise $3.5 billion worth of bonds in 2012 meant for acquisition of two power plants by 1MDB. It later borrowed $1.2 billion from IPIC in 2015 to repay loans that included interest payments on the bonds.

From 2012 to 2014, the government said it transferred $3.5 billion to a subsidiary of IPIC as part of a security deposit for guaranteeing the bonds. But IPIC denied the existence of the subsidiary, an offshore company with a name similar to one of its subsidiaries, although it was headed by two of its directors who have since been fired.

Investigators believe these transactions were part of a scheme, masterminded by Low Taek Jho, a Malaysian fugitive, to siphon funds from 1MDB.

Under the 2017 dispute settlement, Malaysia agreed to repay IPIC the $1.2 billion loan and assumed responsibility for future interest payments on the $3.5 billion worth of bonds.

Irwan became head of the three-man board of 1MDB after the Finance Ministry took full ownership of the state fund.

An elite bureaucrat with one of the most powerful portfolios in the government, Irwan joined the civil service in 1984 and worked his way up to become secretary-general of the treasury in 2012.

He also sat on the boards of more than 20 companies controlled by the treasury, including 1MDB, earning about 1 million ringgit a year on average, Finance Minister Lim Guan Eng said on Wednesday in the parliament. Such remuneration is considered high in Malaysia, where the minimum wage is 1,000 ringgit per month.

Irwan's post at the treasury, as well as at other companies, was cut short when Prime Minister Mahathir Mohamad came to power in May.

Separately, Hasanah Abdul Hamid, a former chief of the intelligence agency, was charged with corruption for allegedly pocketing $12.1 million in state funds just 10 days before the May 9 election. Her agency, the Malaysian External Intelligence Organisation, reported directly to Najib.

From the previous Najib government, former Deputy Prime Minister Ahmad Zahid Hamidi was also charged with 45 criminal offenses, including money laundering and graft, earlier this month.

She was embroiled in controversy after leaked information revealed that she had written to the U.S. Central Intelligence Agency prior to the election, appealing for Washington's support of Najib in case of a slim win. Mahathir and the ruling Alliance of Hope defeated the Najib-led National Front by a comfortable margin, and Hasanah's post was immediately suspended.

Thursday's indictments of Najib's inner circle are unlikely to be the last. The Malaysian government has reiterated its determination to weed out the corruption that it says the previous administration cultivated.

"What you're seeing today is, of course, being taken against several people but there are many more," Mahathir was quoted as saying on Thursday by news portal Malaymail. The 93-year-old leader, who is on a two-day visit to Bangkok, added that the Malaysian government in the past nine years under Najib "committed a lot of wrong things."

Najib's wife Rosmah Mansor, who is facing 17 charges of money laundering and tax evasion, is expected to be questioned on Friday in relation to the $273 million worth of jewelry and luxury goods seized by authorities in June.

Najib himself has been slapped with more than 30 charges of corruption and money laundering related to 1MDB.

Rosmah Mansor's son from an earlier marriage Riza Aziz is expected to be questioned the same day. Riza is named in a civil forfeiture suit filed by the U.S. Department of Justice in relation to money laundering with funds believed to be from 1MDB.

Researcher Ying Xian Wong contributed to this article.

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