Wall Street Journal
OPINION REVIEW & OUTLOOK
July 21, 2016
Losses of billions of dollars will catch up with Najib Razak.
U.S. prosecutors on Wednesday linked Malaysian Prime Minister Najib Razak to hundreds of millions of dollars they believe were stolen from the Malaysian state-owned investment fund 1MDB. The Justice Department filed a lawsuit to freeze more than $1 billion in assets from people connected to Mr. Najib, including his stepson Riza Aziz. The individuals named in the complaint allegedly used the money to buy real estate, artworks and other baubles of the jet set.
Mr. Najib denies all wrongdoing and spokesmen have dismissed critics as part of a conspiracy to overthrow an elected leader. Mr. Najib has previously said that $681 million that ended up in his personal accounts was a legal political donation from Saudi Arabia that was later mostly returned.
But Mr. Najib can’t escape responsibility if it is proved that national wealth held by 1MDB disappeared on his watch. He launched 1MDB in 2009, served as chairman of the advisory board, and oversaw it as Prime Minister and, concurrently, Finance Minister. The evidence of fraud connected to 1MDB from investigations in the U.S., Singapore, Switzerland and at least four other countries is damning. The U.S. Justice Department put the losses at $3.5 billion on Wednesday. The Swiss Attorney General’s office said earlier this year it suspects $4 billion was misappropriated.
Justice describes one of the people mentioned in the lawsuitas “Malaysian Official 1,” who allegedly received hundreds of millions of dollars from 1MDB. Details about him match Mr. Najib, and a person with direct knowledge of the investigation confirmed to the Journal that it refers to the Malaysian Prime Minister.
On Thursday Singapore’s central bank, police and Attorney General’s office announced the seizure of $178 million in assets from 1MDB, half of which was in the hands of Malaysian financier Jho Low and his family. Mr. Low helped set up 1MDB, has sold properties to Mr. Aziz and is named in the U.S. government’s lawsuit.
The Monetary Authority of Singapore and the Swiss Attorney General are investigating financial institutions that helped transfer 1MDB’s money into private shell companies. On Thursday the MAS cited three banks—DBS Bank, Standard Chartered and UBS—for serious lapses in following antimoney laundering regulations. Swiss private bank BSI was earlier fined in both countries and faces criminal charges in Switzerland.
Mr. Najib promised an independent probe into 1MDB in March 2015. But so far Malaysian authorities haven’t charged anybody for crimes related to 1MDB or penalized any financial institutions.
Instead, officials who tried to investigate 1MDB were sidelined. Attorney General Abdul Gani Patail was on the verge of bringing charges against Mr. Najib last summer when he was forced to resign for “health reasons.” Mohamed Apandi Ali replaced him and cleared Mr. Najib of wrongdoing in January. Abu Kassim Mohamed, chief commissioner of the Malaysian Anti-Corruption Commission, had advised prosecutors to charge Mr. Najib and was investigating 1MDB until last month, when the government announced he would move to a lower post.
The stonewalling reflects Mr. Najib’s strong political position at home. He has played the nationalism card to portray himself as a victim of foreign forces, used repressive laws to silence critics in the press and opposition, and expelled dissidents from his party. The opposition is fragmented.
Mr. Najib is riding high after his ruling United Malays National Organization coalition won two by-elections last month and a state election in Sarawak in May. Although a general election isn’t due until the middle of 2018, he is rumored to be considering a snap election to force the party to back him. Mr. Najib has also been helped at home by the appearance of close ties to U.S. President Obama, who invited him for a golf outing and ostentatious photo-op in Hawaii in December 2014.
But UMNO politicians should be having second thoughts. Mr. Obama is a short-timer, and the U.S. lawsuit makes clear that Mr. Najib’s position as a moderate Muslim ally won’t shield him or Malaysia from legal actions. The 1MDB losses will eventually catch up with him and his allies.
The longer UMNO waits to disavow Mr. Najib, the more likely the opposition is to regroup by the time the 1MDB fallout hits. Former Deputy Prime Minister Muhyiddin Yassin is publicly mulling the formation of a new, cleaner version of UMNO. That could be the chance for reform-minded members of the ruling party to step off Mr. Najib’s sinking ship.