Tuesday, June 20, 2017

What's in DOJ's third and latest bombshell?

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KINIGUIDE | With the latest batch of court filings, the US Department of Justice has raised the amount it seeks to recover from 1MDB-related misconduct to nearly US$1.7 billion (RM7.3 billion).

It claimed that the sum represents a portion of the over US$4.5 billion (RM19.3 billion) that were allegedly misappropriated from 1MDB, and then routed through the US financial system.

While Malaysians are still reeling from the shock of the DOJ bombshell, this instalment of KiniGuide will take a step back and see what the US law enforcement agency has in store in its third batch of 1MDB-related civil forfeiture suits.

Third batch of lawsuits? What did I miss?

The first batch of lawsuits was filed at the California Central District Court on July 20 last year.
There were 17 separate filings in total, with each seeking the civil forfeiture of a different asset. Each document - about 136 pages long - is nearly identical to one another, but is aimed at seizing a different asset.

In total, the aim was to seize about 20 assets including funds held in banks, shares, intellectual property, and a private jet, with a combined value of over US$1 billion.

At the time, the DOJ claimed that the amount embezzled from 1MDB was about US$3.5 billion, siphoned from the state investment fund in three phases from 2009 to 2013.

The second batch was a single complaint seeking to seize about US$100 million worth of real estate in London’s upmarket Mayfair district. It was filed on June 7 at the California Central District Court.
This time, the document is 144 pages long, but little had changed compared to the documents filed last year.

The document has an additional section describing how the properties were supposedly purchased using funds that were traceable to a misappropriation from 1MDB.

In addition, it dropped all mentions of the unnamed Saudi prince who supposedly remitted funds to a certain “Malaysian Official 1”, and all mentions of the prince was replaced with “Saudi Associate 1” and “Saudi Associate 2” (or collectively, the “Saudi Account”).

In an apparent move to correct a mix-up that led DOJ to identify the wrong painting for seizure, the new filing also named a different painting by the artist Claude Monet for seizure, and only the proceeds of the painting’s sale rather than the painting itself.

Alright, so what’s new this time?

The latest filing was lodged at the California Central District Court on June 15, comprising a total of 12 lawsuits seeking the forfeiture of an additional US$540 million in money and assets. They were about 251 pages long.

This time, the DOJ claimed that US$4.5 billion had been misappropriated from 1MDB, and detailed how about US$850 million was siphoned out of a loan meant for 1MDB in a so-called “Option Buyback” phase between July and November 2014.

This is in addition to the three phases that DOJ has already described in previous filings.

Among others, the DOJ claimed that the money from the “Option Buyback” was used to buy high-end jewellery for various people, and to partially pay for the tycoon Low Taek Jho’s superyacht Equanimity.

It also claimed that the donations that Malaysian Official 1 supposedly returned to a Saudi prince (now “Saudi Account”) had been used to purchase jewellery for Malaysian Official 1’s wife, including a necklace featuring a 22-carat pink diamond pendant.

Why is the US doing this?

The civil forfeiture suits are part of the DOJ’s Kleptocracy Asset Recovery Initiative (Kari), and the sheer size of the 1MDB-related lawsuits represent the largest action under the initiative.

Through various public statements, the DOJ claimed that the initiative seeks to combat foreign official corruption by seizing the alleged proceeds of such misconduct and return it to its supposed victim.

It also seeks to deter the use of the US financial system for money laundering activities by seizing the suspected proceeds of foreign corruption.

You can read more about Kari and the July 20 lawsuits in the previous KiniGuide: “A spicy 'Kari' and a US$1 billion suit”.

As the investigation is on-going, expect the DOJ to release further information as and when it has found additional evidence of wrongdoing.

What has been the response to the latest suit?

Low, better known by his moniker Jho Low, reportedly dismissed DOJ’s actions as "a further example of global overreach in pursuit of a deeply flawed case".

“The US Department of Justice's latest move continues its inappropriate efforts to seize assets despite not having proven that any improprieties have occurred,” Reuters quoted him as saying.

1MDB pointed out (correctly) that DOJ’s lawsuits did not contain any documentary proof or witness statements to support its allegations.

Attorney-general Mohd Apandi Ali maintained that Malaysian authorities found no wrongdoing related to 1MDB as alleged by the DOJ.

"We also note that there has been no evidence from any investigation conducted by any law enforcement agency in various jurisdictions that show that money has been misappropriated from 1MDB; and that there have been no criminal charges against any individual for misappropriation of funds from 1MDB,” he added.

Prime Minister Najib Abdul Razak’s aide Tengku Sariffuddin Tengku Ahmad rued DOJ’s “unnecessary and gratuitous naming of certain matters and individuals”, which he said is only relevant for “domestic political manipulation and interference”.

“This suggests a motivation that goes beyond the objective of seizing assets,” he said, adding that the US did not seek any cooperation from the Malaysian government or 1MDB for investigation.

Najib’s wife Rosmah Mansor urged Malaysians not to believe in slander that was deliberately spread to engineer “the downfall of a leader, organisation, or a country”.

Her lawyers said they had been instructed to “closely monitoring all postings appearing on any social media platforms and other forms of publications in relation to false and malicious attacks” against Rosmah, and warned that those who had done so would face legal action.
This is in response to insinuations that Najib is the Malaysian Official 1 mentioned in the DOJ documents. Najib and Rosmah had consistently denied wrongdoing.
Despite the outcry, the US Embassy in Kuala Lumpur said it has yet to receive any correspondence from Putrajaya on the matter. Malaysiakini understands that the Foreign Ministry has no immediate plans to lodge a formal protest over DOJ’s actions.

Meanwhile, DAP parliamentary leader Lim Kit Siang called for the findings of the disbanded task force on 1MDB to be made public.

The electoral reform group Bersih called for Najib’s resignation.

Yesterday, Najib said there will be no more statements in relation to the DOJ's latest filing.

This instalment of KiniGuide is compiled by Koh Jun Lin.

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