Malaysia Probe Says It Has Found Documents Tied to Alleged Transfers to Premier

Wall Street Journal
July 4, 2015

KUALA LUMPUR, Malaysia—Malaysia’s attorney general said an official investigation into a troubled state investment fund has uncovered documents related to allegations that money was transferred into the personal bank accounts of Prime Minister Najib Razak.

A task force comprising the central bank, the national police and the nation’s anticorruption agency uncovered the documents during a probe of 1Malaysia Development Bhd., or 1MDB, Abdul Gani Patail, the attorney general, said Saturday.

Mr. Abdul Gani said that on Friday the task force had raided the offices of three Malaysian companies linked to 1MDB that allegedly were involved in the transfer of funds to Mr. Najib’s accounts.

“I confirm that I have received documents from the special task force related to 1MDB, including documents related to the allegations of channeling of funds to accounts owned by Prime Minister Najib Tun Razak,” Mr. Abdul Gani said.

The Wall Street Journal reported on Friday that Malaysian government investigators looking into 1MDB’s activities had traced almost $700 million in deposits into what they believe are Mr. Najib’s personal accounts. The investigation documents, reviewed by the Journal, didn’t provide the original source of the money or what happened to the cash after it allegedly entered Mr. Najib’s accounts.

Mr. Najib on Friday said the allegations were an attempt by his political adversaries to smear his name. His office declined to comment on specific allegations referring to the alleged money transfers.

The government investigation, reported first by the Journal, marks the first time Mr. Najib has been directly connected to probes into 1MDB, which owes over $11 billion to banks and bondholders. A person familiar with the government investigation said the documents had been given to the attorney general several weeks ago.

In response to the Journal report, Deputy Prime Minister Muhyiddin Yassin said on Saturday that authorities must investigate the allegations made against Mr. Najib, in a statement given to local media.

“These allegations are serious because they can affect the credibility and integrity of Najib as PM and the leader of the government,” said Mr. Muhyiddin, who is from Mr. Najib’s ruling party.

The raids of the three companies netted documents which will be examined as the investigations continue, Mr. Abdul Gani said.

The Journal reported how government investigators had traced the movement of a total $11.1 million from a unit of the country’s finance ministry through a subsidiary of the unit to a third company, which carries out corporate social responsibility work, exclusively for 1MDB. According to the government investigators, the money then went into Mr. Najib’s accounts.

SRC International is the unit of the Finance Ministry, which also is headed by Mr. Najib. The company originally was part of 1MDB but was transferred to the Finance Ministry in 2012.

1MDB has denied any involvement in transferring money to Mr. Najib’s accounts. The corporate social responsibility company, Ihsan Perdana, said to local media Friday that the firm didn’t send any money to the prime minister’s accounts. Attempts to reach the three companies weren’t successful.

By far, the largest alleged transfers into Mr. Najib’s accounts were two deposits of $620 million and $61 million in March 2013, during a heated election campaign in Malaysia, the government investigation documents show. The cash came from a company registered in the British Virgin Islands via a Swiss bank owned by an Abu Dhabi state fund according to documents obtained by investigators.

The fund, International Petroleum Investment Co., or IPIC, has guaranteed billions of dollars of 1MDB’s bonds and in May injected $1 billion in capital into the fund to help meet looming debt repayments. A spokeswoman for IPIC couldn’t be reached for comment. The British Virgin Islands company, Tanore Finance Corp., couldn’t be reached.

Mr. Najib set up 1MDB in 2009 to develop new industries. But the fund’s overseas energy ventures have failed to take off and it has been forced to reschedule debt repayments. Critics, including opposition politicians and some members of the ruling party, are worried about its heavy borrowings and lack of transparency.

The Journal last month reported how 1MDB indirectly had supported Mr. Najib’s election campaign in 2013. The fund appeared to pay an inflated price for a power asset from a Malaysian company, according to financial statements. That firm then contributed millions of dollars to a Najib-led charity that spent on schools and other projects that Mr. Najib was able to tout as he campaigned.

“We only acquire assets when we are convinced that they represent long-term value, and to suggest that any of our acquisitions were driven by political considerations is simply false,” 1MDB said last month.

A number of agencies are probing 1MDB. They include the national police, the auditor general, a parliamentary committee and the central bank. The attorney general didn’t say whether his office would launch its own investigation. The auditor general last week completed its probe into 1MDB’s finances, and plans to hand its report to Parliament on Thursday.