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Explained: Why is Malaysia’s ex-PM Najib Razak being prosecuted for the 1MDB scandal?

The 67-year-old Razak’s prosecution, where a former head of government has been charged over graft charges, is seen as a rare occurrence. This is the first in a series of trials involving Razak, who has so far denied any wrongdoing.

Malaysia’s former prime minister Najib Razak. (File Photo)

Malaysia’s former prime minister Najib Razak was Tuesday found guilty by a Malaysian court on seven charges in a criminal trial involving billions of dollars stolen from 1Malaysia Development Berhad (1MDB), a sovereign wealth fund Razak co-founded in 2009.

The 67-year-old Razak’s prosecution, where a former head of government has been charged over graft charges, is seen as a rare occurrence. His wife Rosmah Mansor, known for her penchant for luxury goods, is also charged with money laundering and tax evasion.

This is the first in a series of trials involving Razak, who has so far denied any wrongdoing. Razak now faces multiple charges of money laundering, abuse of power, and criminal breach of trust.

What is the 1MDB scandal?

Razak founded the 1Malaysia Development Berhad (1MDB) as a platform to bring foreign investment to the country. In 2012, American banking giant Goldman Sachs was roped in to raise investments, and over $6.5 billion was raised in the following year. The firm charged $600 million in fees for its services, and billions were allegedly pocketed by Razak and members of his inner circle. Last year, Malaysian authorities charged Goldman Sachs with making false and misleading statements, with penalties to the tune of $3 billion.

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Malaysian financier Jho Low has been accused of masterminding the money laundering of the fund.

The US Justice Department, which began investigating the alleged scam, also found that over $730 million had reached accounts held by Razak himself. The money was used to buy properties in the US and the UK, luxury real estate in Paris, artworks by Claude Monet, Pablo Picasso and Andy Warhol, large amounts of expensive jewelry and for financing films including the ‘Wolf of Wall Street’ and ‘Daddy’s Home’. The assets also included accounts maintained at financial institutions in Luxembourg and Switzerland. Razak has insisted that the money was given as a donation by a Saudi royal.

On July 1, the US Justice Department announced the filing of civil forfeiture complaints that sought the forfeiture and recovery of approximately $96 million in assets associated with the scandal. These complaints allege the involvement of officials at 1MDB, their relatives and other associates in the scandal who diverted over $4.5 billion in 1MDB funds using fraudulent documents and representations. Furthermore, the complaints mention that the funds were laundered through a series of “complex transactions” and shell companies with bank accounts in the US and abroad that were eventually used to acquire and invest in assets located in the US and elsewhere.

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Also read | Goldman Sachs agrees $3.9 billion 1MDB settlement with Malaysia

What does Tuesday’s verdict mean for Razak?

The verdict is related to over $10 million, which were transferred from the 1MDB fund to Razak’s private accounts. Razak has repeatedly denied any wrongdoing and maintains that he was misled by his financial advisers.

Razak faces 21 counts of money-laundering and four counts of abuse of power and could face 15-20 years in prison for each of these counts if found guilty. In August 2019, a separate trial was started against him that involved laundered money to the tune of $550 million. Tuesday’s proceedings relate to the first trial among many others related to 1MDB.

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Even so, Razak has maintained that he will appeal if found guilty. According to a report in The New York Times, “…Mr. Najib remains a member of Parliament, and his party, popularly known as UMNO, returned to power in February, improving the chances that he will never spend a day behind bars.”

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Najib Razak,  Najib Razak 1MDB scandal, Malaysian former PM Najib Razak, Najib Razak prosecution Goldman Sachs has reached a .9B settlement with Malaysia, Friday, July 24, 2020, over the 1MDB sovereign wealth fund that was used to launder money. (AP Photo/Richard Drew, File)

Razak as leader

Razak hails from one of Malaysia’s most influential families, with both his father and uncle having served as Prime Ministers in the past. He assumed the role himself in 2009.

As Prime Minister, Razak was accused of controlling the country’s courts, undermining media freedoms, jailing political opponents, and halting investigations targeting him. He has also been accused of murder. After his election defeat in 2018, Razak and his wife made a failed attempt to escape to Indonesia and the first trial is being seen by many as a test for Malaysia’s current ruling government, to see if they will uphold the rule of law during the proceedings.

Previously, while Razak was still in office, Malaysian authorities had cleared him of all charges, which were brought back again by the new government after his 2018 election defeat.

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Razak also maintained close ties with US President Donald Trump, and was one of the few world leaders to have golfed with him. Trump called Razak his “favourite Prime Minister”. Razak’s daughter is married to the nephew of former Kazakh strongman Nursultan Nazarbayev.

The UMNO party, which represents ethnic Malays, worked to appease Islamic hardliners under his rule. Instances include a blanket ban on non-Muslims using the word ‘Allah’, and the investigation of a youngster for ‘liking’ a post related to Israel on Facebook. He even considered including Indian Muslims under the long-standing and controversial Bumiputera policy, which places Malaysia’s large ethnic Chinese and Indian minorities at a disadvantage against ethnic Malays.

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Razak has also been criticized for his shoddy handling of the crisis in the aftermath of the two crashed Malaysian Airlines planes. North Korean dictator Kim Jong-un’s half-brother and rival was murdered at a Malaysian airport on Razak’s watch.

First published on: 28-07-2020 at 04:38:25 pm
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