JHO Low, the Malaysian financer at the centre of the country’s corruption scandal, and two other high-flying Goldman Sachs bankers were slapped with formal charges in the US on Thursday for embezzling billions from the 1Malaysia Development Berhad (1MDB) state fund.
The US Justice Department alleges a total of US$4.5 billion was laundered from 1MDB in a scandal that rocked the Southeast Asian nation and which was a key factor in former Prime Minister Najib Razak’s removal from office earlier this year.
The 36-year-old Low, whose real name is Low Taek Jho, was indicted in the federal court in the Eastern District of New York on Thursday, the same day the department arrested former Goldman Sachs banker, Ng Chong Hwa (Roger Ng), was arrested in Malaysia.
The department also unsealed charges against Tim Leissner, another ex-Goldman banker who earlier pleaded guilty and agreed to pay US$43.7 million in restitution of ill-gotten gains.
The two bankers were charged with conspiracy to commit bribery and conspiracy to commit money laundering. The charges are the first in the US in the case which had prompted investigations in at least six countries.
The scandal has raised fresh questions about corporate culture at the prestigious investment bank. Here are some of the key takeaways from the case based on the full statement released by the DOJ:
Bribes and conspiracy
Apart from charges on conspiring to launder billions of dollars embezzled from 1MDB, Ng is accused of conspiring to violate the Foreign Corrupt Practices Act (FCPA) by paying millions bribes to various Malaysian and Abu Dhabi officials.
As part of the three-count indictment, the department said Ng is also charged with conspiring to violate the FCPA by circumventing the internal accounting controls of a major New York-headquartered financial institution, which underwrote more than US$6 billion in bonds issued by 1MDB in three separate bond offerings in 2012 and 2013, while he was working at Goldman as a managing director.
The DOJ said Low remains at large.
Criminal scheme, Hollywood films and exquisite artwork.
Created to pursue investment and development projects for Malaysia’s economic benefit, 1MDB is a Malaysian state-owned and controlled fund. But the department pointed out that billions of dollars was misappropriated and “fraudulently diverted from 1MDB” between 2009 and 2014. This included funds raised by 1MDB in 2012 and 2013 through three bond transactions executed with Goldman.
As part of the scheme, the department said Low, Ng, Leissner, and others conspired to bribe government officials in Malaysia, including at 1MDB, and Abu Dhabi to obtain and retain lucrative business.
“They also allegedly conspired to launder the proceeds of their criminal conduct through the US financial system by purchasing, among other things, luxury residential real estate in New York City and elsewhere, and artwork from a New York-based auction house, and by funding major Hollywood films.”
Malaysian official #1
The department said Low’s close relationships with high-ranking government officials in Malaysia and Abu Dhabi were central to the scheme, including his relationship with a high-ranking Malaysian government official who had authority to approve 1MDB business decisions, named by the DOJ as ‘Malaysian Official #1’, or MO1.
Between 2009 and 2014, Leissner and Ng reportedly leveraged on Low’s closeness with the officials through the promise and payment of hundreds of millions of dollars in bribes.
The bribes led to three bond transactions known to Goldman sas “Project Magnolia,” “Project Maximus,” and “Project Catalyse”, all of which generated approximately US$600 million in fees and revenues along with increased reputational prestige for Goldman.
At the same time, Ng, Leissner and others allegedly received large bonuses and enhanced their own reputations at Goldman, the department said. In total, more than US$2.7 billion was misappropriated from 1MDB.
More than US$500 million of the bond proceeds were allegedly misappropriated and diverted from 1MDB after Project Magnolia closed on or about May 21, 2012.
The money was deposited in shell companies beneficially owned and controlled by Low, Leissner, Ng, and other co-conspirators, including a high-level official at the Abu Dhabi entity that guaranteed the Project Magnolia bonds and a close relative of Malaysian Official #1, the depatment said.
The DOJ alleged the bond proceeds were transferred to MO1 close relative were later used by the relative’s US motion picture company to assist in the production of the film “The Wolf of Wall Street.”
Former prime minister Najib’s stepson, Riza Aziz, is a Malaysian film producer and the co-founder of Red Granite Pictures, the Los Angeles-based film company that produced the movie starring Leonardo Dicaprio.
Cakes and Jewellery
In an online chat between Low and Leissner in June 2014, Low and Leissner discussed the need to “suck up to” a 1MDB official and to send “cakes” to a person believed to be the wife of MO, the department said.
“A few months after this chat, a bank account owned and controlled by Leissner and his relative was used to transfer approximately US$4.1 million to a high-end New York jeweller, in part, to pay for gold jewellery for the wife of Malaysian Official #1.”
‘Innocent until proven guilty’
The charges in the indictment as to Low and Ng, according to the department, are merely allegations, and those defendants are presumed innocent until proven guilty beyond a reasonable doubt in court.
A spokesman Low, through his legal team, issued the following statement maintaining his innocence.
“As noted in the indictment today, Mr. Low held no formal position at 1MDB, nor was he ever employed by Goldman Sachs, or the Governments of Malaysia or Abu Dhabi,” the statement posted on Low’s personal website said.
“Furthermore, the bond offerings detailed in the indictment were undertaken openly and lawfully between experienced, well-regulated financial institutions and government entities.”
The statement added the DOJ specifically stated the charges in the indictment are allegations, and that Low is presumed innocent unless and until proven guilty.
“Mr. Low simply asks that the public keep an open mind regarding this case until all of the evidence comes to light, which he believes will vindicate him.”