(Bloomberg) -- Former Malaysian Prime Minister Najib Razak was imprisoned in 2022 for his role in a multi-billion dollar graft scandal known as 1MDB. Several cases against him are still grinding through the courts. How they play out will be a test for Malaysia’s current premier, Anwar Ibrahim. While Anwar has vowed to combat corruption, he is in a delicate spot as his party lacks a majority in parliament and relies on support from the Barisan Nasional coalition that Najib once helmed to remain in power.
1. Who is Najib?
Najib was prime minister from 2009 and chairman of the political movement that controlled the government for 60 years until his defeat in 2018. His father and his uncle had both served as Malaysian premier in the 1970s. The British-educated Najib rose to power at a time when the Barisan Nasional coalition’s grip on the nation was beginning to slip. Despite doling out billions of ringgit in handouts to the needy and overseeing the world’s longest bull market at the time, Najib was unable to reverse Barisan Nasional’s decline. His final years in office were tainted by the 1Malaysia Development Berhad (1MDB) scandal, which contributed to the alliance’s first-ever general election loss.
2. What happened with 1MDB?
1MDB was a national strategic development company that took shape in 2009 under Najib, who led its advisory board as prime minister and finance minister. Its early initiatives included buying privately owned power plants and planning a new financial district in Malaysia’s capital, Kuala Lumpur. It raised more than $8 billion via bond sales to do so, partly with the help of investment bank Goldman Sachs Group Inc. In 2015, news broke that about $700 million may have moved through government agencies and state-linked companies to accounts bearing Najib’s name. Najib denied the allegations, fired several critics and pushed back against his detractors. That didn’t stop the groundswell of anger. After he lost the 2018 election, the finance ministry took over 1MDB’s assets.
3. How much money was involved?
The money trail is complicated as much of the cash went through international banks before finding its way to Najib. Prosecutors said about $4.5 billion was allegedly siphoned from 1MDB, while Swiss investigators have said about $7 billion of 1MDB funds passed into the global financial system from 2009 to 2015. A total of 2.28 billion ringgit, rerouted through various countries, eventually flowed to Najib’s accounts between 2011-2014, prosecution witness Adam Ariff Mohd Roslan of Bank Negara Malaysia (BNM) said in testimony. Malaysian police seized about 1.1 billion ringgit worth of items in raids linked to Najib amid investigations into the troubled state fund. During the court hearings, revelations emerged of lavish spending by Najib and his wife.
4. What’s the status of Najib’s cases?
- SRC International (Case 1):
- Najib was charged with three counts of criminal breach of trust and one count of abuse of power over the transfer of 42 million ringgit from 1MDB subsidiary SRC International Sdn to his personal account between 2014 and 2015. Najib began serving a 12-year prison sentence after the Federal Court upheld his conviction in 2022, but that sentence was later halved due to royal intervention. A Malaysian court separately dismissed his petition to serve the rest of his jail term at home.
- SRC International (Case 2):
- Najib was charged with three counts of money laundering breaches related to former 1MDB unit SRC International Sdn. The case has been postponed several times since 2019, and Najib has filed a letter of representation to the attorney general’s chambers to review the case.
- 1MDB Audit Report:
- Najib was charged in 2018 with abusing his position to order amendments to the government’s audit report of 1MDB to protect himself from legal or regulatory action. He was acquitted in March 2023, and the prosecution missed a deadline to file an appeal.
- 1MDB-Tanore:
- Najib was hit with 21 counts of money laundering and four counts of corruption involving about 2 billion ringgit that appeared in his personal bank accounts. The charges were linked to his alleged role in 1MDB deals including a $2 billion joint venture with PetroSaudi International Ltd. and a 10.6-billion ringgit bid for Tanjong Energy Holdings Sdn. Malaysia’s High Court ordered Najib to defend himself against the charges after ruling the prosecution had established a case against him.
- International Petroleum Investment Company:
- Najib was charged with six counts of criminal breach of trust involving 6.6 billion ringgit in funds linked to payments to the company, an Abu Dhabi sovereign wealth fund. The trial is set to begin in November 2024.
5. If Najib is already in jail, why does it matter?
After Najib left office, he turned to social media to rehabilitate his image while fighting the court cases, and gained traction among followers by poking fun at the new government. That helped him to remain influential even after his imprisonment in 2022. His Facebook page is still active, while Barisan Nasional — now part of the government once again — pushes for him to be pardoned by Malaysia’s king.
Najib’s court cases present a dilemma for current premier Anwar, who decided to welcome Barisan Nasional as an ally while its leaders were still facing graft charges. The move gave him the parliamentary backing he needed to govern effectively. But any suspicion that the government is meddling in the judicial process to help Najib would go down badly with many of Anwar’s longtime supporters. Anwar has repeatedly denied intervening in the courts and the work of the attorney general, and said the king has sole discretion to issue a pardon.
6. Where’s the 1MDB money now?
Some has been recovered, but much remains scattered around the world. Under a July 2020 settlement, Malaysia dropped all criminal charges against Goldman over its role in the scandal in exchange for a $2.5 billion cash payment and for the bank to guarantee the return of $1.4 billion of seized 1MDB assets. (Goldman made $593 million working on three bond sales that raised $6.5 billion for 1MDB in 2012 and 2013 — far more than what banks typically make from such deals.) The Malaysian government is still seeking further compensation from Goldman. In 2020, the US Justice Department — which has been at the forefront of the investigation — struck a deal with Jho Low, a fugitive businessman who’s wanted in the 1MDB scandal, to recoup almost $1 billion worth of assets, including a Beverly Hills hotel and real estate in New York and London.
©2024 Bloomberg L.P.