1MDB: Malaysia's massive corruption scandal

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A police search at the home of former Malaysian Prime Minister Najib Razak in the early hours of Thursday marked a new low point for a man who last week was contemplating several more years in power, but who could now end up facing charges in the massive 1MDB corruption scandal.

So what is the scandal about? How did Najib become involved and what does this have to do with the new government?

What is 1MDB?

Leonardo DiCaprio, Miranda Kerr, “The Wolf of Wall Street” movie and prized paintings by Van Gogh and Picasso: there has been no shortage of big names linked to the 1MDB scandal, which has consumed Malaysia since 2015 and prompted investigations even by Swiss authorities and the US Department of Justice (DOJ).

Australian supermodel Miranda Kerr poses for the cameras during a promotion event in Tokyo, Japan, July 11, 2017. /VCG Photo

1MDB stands for 1Malaysia Development Berhad, a state investment fund set up by Najib in 2009, shortly after he came to office. The aim was to raise money to fund development projects.

In 2015 however, reports started emerging that billions of US dollars had disappeared from it.

According to the DOJ, upwards of 4.5 billion US dollars were siphoned off from the fund. A Wall Street Journal report that some 680 million US dollars had made it into Najib’s personal bank accounts added to the furor.

Both Najib and 1MDB have denied any wrongdoing.

'Malaysian Official 1'

The scandal – worthy of a Hollywood drama – stretched far beyond Malaysia’s borders, involving a colorful cast of characters.

- "Malaysian Official 1" was named in DOJ papers as having received large amounts of funds from 1MDB. It was widely believed this referred to Najib.

Najib Razak, Malaysia's prime minister, speaks during the Invest Malaysia conference in Kuala Lumpur, Malaysia, January 23, 2018. /VCG Photo

- Low Taek Jho, or "Jho Low”, a Malaysian financier with close ties to Najib who was also seen partying with the likes of Paris Hilton, is believed to have been a key figure in setting up 1MDB and later in making financial decisions despite having no official role. He reportedly used over 250 million US dollars looted from the fund to buy a luxury yacht and put millions more at friends’ disposal to gamble in Las Vegas casinos.

- Riza Aziz, Najib’s stepson, is alleged to have used millions more stolen from 1MDB to finance Hollywood movies like “The Wolf of Wall Street.” He and Low even got a special mention in Leonardo DiCaprio’s acceptance speech at the 2014 Golden Globe Awards.

Diamonds and Picasso

Riza and Low also reportedly purchased luxury properties in Beverly Hills and New York, artwork by Monet and Van Gogh, and a 35-million-dollar Bombardier jet, using money misappropriated from 1MDB.

A man stands next to Pablo Picasso's 'Femme au chat assise dans un fauteuil' during a media preview of Christie's Hong Kong Spring Sales in Hong Kong, March 30, 2018. /VCG Photo

More looted funds helped buy jewelry for model Miranda Kerr and a Picasso painting for DiCaprio. Both have since handed the gifts over to US investigators.

In 2016 and 2017, the DOJ filed several civil forfeiture claims related to 1MDB, seeking to recover close to 1.7 billion US dollars.

This was done "to protect the security, safety, and integrity of the American financial system from all manner of abuse, including by kleptocrats seeking to hide their ill-gotten or stolen wealth," acting Assistant Attorney General Kenneth Blanco said in a statement at the time.

In all, investigators in at least six countries – including Switzerland and Singapore – have delved into 1MDB’s murky dealings.

At home however, Najib reportedly sought to shut down probes into the fund and sacked the attorney general who was investigating him. The new attorney general then cleared Najib, saying the 680 million US dollars in his accounts were a donation from the Saudi royal family.

US actor Leonardo DiCaprio attends a premiere in Paris, France, October 17, 2016. /VCG Photo

As voters went to the polls last week, corruption proved a key issue and in a shock result, Najib and his Barisan Nasional coalition were ousted from office, paving the way for the first change in government in Malaysia in over 60 years.

Mahathir takes action

Ahead of the vote, the opposition coalition, with veteran politician Mahathir Mohamad at its head, had vowed to investigate wrongdoing at 1MDB within 100 days of being elected to power.

Now in office, Mahathir has wasted no time and has promised to launch new investigations into the fund.

Mahathir Mohamad, Malaysia's incoming prime minister, right, speaks during a news conference in Kuala Lumpur, Malaysia, May 10, 2018. /VCG Photo

Najib has been banned from leaving the country and Attorney General Mohamed Apandi Ali, who cleared the former premier, has been put on leave.

Thursday’s search of Najib’s home and four other locations are now the latest moves by an incoming government eager to show it will stand by its campaign pledges and be tough on corruption.

Najib’s lawyer said the police action was being conducted under Malaysia’s Money Laundering Act but that nothing incriminating had been found.

Next steps

Mahathir has insisted the new government is not looking for revenge against Najib, and no arrests have yet been made.

But observers say Najib could soon face charges and even imprisonment for corruption.

A man walks towards the residence of former Prime Minister Najib Razak in Kuala Lumpur, Malaysia, May 14, 2018. /VCG Photo

On Wednesday, Mahathir said Malaysia would pay back any debt owed by the government in relation to 1MDB and added he was confident of getting money back that had been funneled to other countries.

“We need to get back money which is still in Switzerland, America, Singapore and maybe Luxembourg. For this we will contact the governments of the countries to recover the money there," he told a news conference.

Sources have also told Reuters that Mahathir plans to appoint a finance ministry adviser to oversee the recovery of funds.

(Top picture: The 1Malaysia Development Berhad (1MDB) logo is seen on a billboard in Kuala Lumpur, Malaysia, July 3, 2015. /VCG Photo)

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