As you have undoubtedly heard by now, the US Department of Justice has filed several lawsuits seeking to seize more than $1 billion worth of assets said to have been bought with funds stolen from the scandal-ridden 1MDB
The filing of the civil forfeiture complaints was announced by US Attorney General Loretta E. Lynch on Wednesday, 20 July, during a press conference held at the Department of Justice in Washington.
Lynch was joined in the briefing by Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, FBI Deputy Director Andrew G. McCabe and Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI).
All five authority figures delivered remarks at the 35-minute press conference, each describing particular aspects of the complaints. Here are the key takeaways:
Loretta E. Lynch, US Attorney General:
1. The $1 billion in assets that the Department of Justice seeks to forfeit and recover are only a portion of funds stolen from 1MDB, which total to more than $3 billion
On why the Department of Justice is only seeking to seize a portion of the misappropriated funds, Lynch explained, "We've been able to trace approximately $1 billion having gone through the US financial systems. That money laundering essentially gives us the jurisdiction over those assets. We've also been able to locate specific assets in the US and overseas.
"However, as common in corruption cases, a lot of the funds were dissipated - paying gambling expenses, lifestyle expenses, and things of that nature. But as we've noted, this investigation is ongoing, and to the extent that we can clearly locate other assets and trace them, we would continue the actions here."
2. This case is the "largest single action ever brought by the department's Kleptocracy Asset Recovery Initiative"
The initiative was established by Attorney General Eric Holder in 2010 "to forfeit the proceeds of foreign official corruption and, where possible, to use the recovered assets to benefit the people harmed."
"This case, and the Kleptocracy Initiative as a whole, should serve as a sign of our firm commitment to fighting international corruption. It should make clear to corrupt officials around the world that we will be relentless in our efforts to deny them the proceeds of their crimes," Lynch stressed during the press conference.
3. "It is our hope and goal at the conclusion of this forfeiture process to return the funds to Malaysia."
"Whether those initial projects are still gonna be used or not, we don't know. But certainly, they could be used by the government for the benefit of the people there," she added.
4. Multiple government bodies were and are still involved in specialised investigations pertaining to the case, including the Federal Bureau of Investigators (FBI) and Internal Revenue Service (IRS)
“I want to thank the team of prosecutors and paralegals from the Criminal Division’s Asset Forfeiture and Money Laundering Section and the U.S. Attorney’s Office for the Central District of California, who have worked tirelessly on this matter. I also want to thank the agents from the FBI’s International Corruption Unit and the IRS’s Criminal Investigations Division, who assisted them in this case. And I am grateful to the Criminal Division’s Office of International Affairs for their vital contributions," Lynch said.
Leslie Caldwell, Assistant Attorney General for the Criminal Division:
1. In 2012, proceeds from two 1MDB bond offerings were siphoned off and consequently laundered through several shell companies and bank accounts before ending up in accounts of "a close relative of a senior 1MDB official"
"The stated purpose of the 2012 bond offerings was to allow 1MDB to invest, for the benefit of the Malaysian government, in certain energy assets. But almost immediately after receiving the proceeds of these two bond issues, roughly 40 percent of the funds raised - approximately $1.37 billion - was transferred out of 1MDB’s accounts," Caldwell said.
The money was then transferred via a "complex series of transactions" involving shell companies and bank accounts all over the world, all of which were controlled by corrupt 1MDB officials and their associates.
More than $230 million eventually found their way into account controlled by shell companies owned by "a close relative of a senior 1MDB official", some of which were used to buy luxury property in the US and other assets, including setting up and funding California-based film production company Red Granite Pictures.
2. The aforementioned individual - identified in court documents as Riza Aziz, who is also PM Najib Razak's stepson - used the money to set up a film production company and finance the 2013 film 'The Wolf of Wall Street'
According to Caldwell, more than $100 million from the stolen funds were used to finance the award-winning movie starring Leonardo Dicaprio. As the money used to produce the film are alleged to be laundered funds, future rights to the film are now subject to the forfeiture complaint filed on 20 July.
"According to the allegations in the complaint, this is a case where life imitated art," Caldwell said.
"The associates of these corrupt 1MDB officials are alleged to have used illicit proceeds of their fraud scheme to fund the production of The Wolf of Wall Street, a movie about a corrupt stockbroker who tried to hide his own illicit profits in a perceived foreign safe haven. But whether corrupt officials try to hide stolen assets across international borders - or behind the silver screen - the Department of Justice is committed to ensuring that there is no safe haven."
3. Caldwell called for stronger laws and more effective frameworks for international cooperation to close legal gaps across the globe, some of which allowed criminals to hide behind shell companies and shadow bank accounts
"Gaps in the legal regimes across the globe - including in the United States - allowed these criminals to avoid disclosing the ultimate beneficial owners of the accounts to which 1MDB funds were diverted. Stronger laws and more effective frameworks for international cooperation are needed to close these gaps and overcome the challenges faced by law enforcement when we investigate international corruption, money laundering and other cross-border crimes," she said.
She added, "The significant assistance we received from our international partners was critical in identifying and restraining assets. That cooperation and the action we are taking today should send a message to kleptocrats and other criminals that the United States is not a safe haven for their stolen money, and that they cannot evade law enforcement authorities simply by laundering money through multiple jurisdictions and through a web of nominees, shell corporations and other legal structures designed to frustrate justice."
Eileen Decker, US Attorney of the Central District of California:
1. Another major phase of the money laundering scheme occurred in early 2013, involving a third bond offering arranged by Goldman Sachs International which raised approximately $3 billion
Proceeds from the bond offering were supposed to fund a joint venture with an entity controlled by the government of Abu Dhabi to promote growth and development in both Malaysia and Abu Dhabi.
"Once more, instead of using the money raised in the offering for its intended purposes, the corrupt individuals involved with 1MDB and their associates misappropriated a significant portion of the funds raised," Decker said.
2. Of the $1.26 billion that was diverted to the co-conspirators, some were used to purchase million-dollar works of art as well as interests for a luxury hotel in New York and a major music publishing company
As outlined by Decker, "Funds diverted from the third bond offering were traced to the purchase of an interest in the Parklane Hotel in New York. Approximately $137 million of the pilfered money was spent to purchase works of art, including a $35 million work by Claude Monet."
"But these works of art were not put in museums in Malaysia for the benefit of the population. Rather, they were obtained to further enhance the luxury and lavish lifestyles of those stealing money from 1MDB."
She also added, "The laundering of the proceeds continue throughout 2013 with an additional $106 million dollars used to purchase an interest in EMI Music Publishing. Since the conspirators purchased the interests in EMI, it was they, and not the citizens of Malaysia who earned money every time those songs were performed publicly, recorded, or downloaded."
Andrew McCabe, FBI Deputy Director:
1. Within two years of 1MDB's existence, corrupt officials had already pilfered more than $1 billion to bank accounts belonging to shell companies controlled by their associates in the pretense of "investments"
"The funds were stolen under the pretense of having 1MDB invest in an oil exploration joint venture with a foreign partner. On paper, the $1 billion was to be 1MDB’s investment in what was purported to be natural resource rights. But this wasn’t a legitimate investment for 1MDB or for the Malaysian people," McCabe said.
Far from its intended purpose, the funds were used for "the personal enrichment of the corrupt officials and their associates", including to pay gambling debts in Las Vegas casinos, renting luxury yachts, as well as buying luxury properties and a Bombardier jet which was said to have cost about $35 million.
2. "Why does a corruption case halfway around the world matter so much to the United States?"
"First, because some of the profits of these schemes were invested in the United States, and when corrupt officials bring their ill-gotten gains to the United States they also bring with them their corrupt practices and disregard for the rule of law. That presents a threat to our economy, it impacts trade and investments, it fuels the growth of criminal enterprises, and undermines our fair democratic processes.
"Second, because the stable, healthy democracies around the world are the cornerstone of global security. The more we can do to help our international partners establish and maintain stable governments, accountable to the rule of law, the more we do to ensure US national security.
"And finally, we do it because the FBI, the Department of Justice, and our colleagues in federal law enforcement are uniquely positioned to provide this sort of assistance. This case is beyond any single agency’s ability to effectively investigate. We have investigators and prosecutors with deep experience working matters like this, so our involvement is a natural fit," McCabe explained.
3. "The Malaysian people were defrauded on an enormous scale."
Three dedicated international corruption squads were established last year for the purpose of this investigation. These squads - based in New York, Los Angeles, and Washington - are made up of agents, analysts, and accountants who are experts in complex financial schemes.
"This is the largest kleptocracy seizure in US history. We hope this investigation will send a message to corrupt officials around the world that no person, no company, no organisation is too big, too powerful, or too prominent. No one is above or beyond the law," McCabe stressed.
Chief Richard Weber of Criminal Investigation at the Internal Revenue Service:
1. The IRS-CI joined in the investigations in October 2015, with a specific focus on Riza Aziz and Red Granite Pictures
"Appoximately $238 million was wired to Red Granite Capital in Singapore, an entity controlled by Aziz. This further alleged that wire transfers totalling approximately $64 million were sent from the Red Granite Capital account to an account at City National Bank in the US maintained by Red Granite Pictures, a production company also owned by Aziz," said Weber.
"Additionally, the misappropriation of funds were used to acquire nearly $100 million in real estate in the United States, the United Kingdom, and elsewhere for the benefit of Aziz."
2. "Corruption threatens good governance, sustainable development, and the democratic process and fair business practices."
"Corruption erodes trust in government and private institutions alike, it undermines confidence in the fairness of free and open markets, and it breeds contempt for the rule of law," Weber added.
"We will not allow the massive, brazen and blatant diversion of billions of dollars from 1MDB and the alleged laundering of those funds through US financial institutions to continue."
Check out some of the luxury items that were said to have been purchased with funds stolen from 1MDB:
Following the US Department of Justice's allegations of corruption within 1MDB, Malaysian politicians had a lot to say: