1MDB Scandal: U.S. Charges Jho Low, Ex-Goldman Sachs Bankers

1MDB Scandal: U.S. Charges Jho Low, Ex-Goldman Sachs Bankers

USA prosecutors unveiled criminal charges on Thursday against two former Goldman Sachs Inc bankers and Malaysian financier Low Taek Jho tied to the Malaysia 1MDB sovereign wealth fund scandal.

The three-count indictment on Thursday charges Low Taek Jho of misappropriating money from the state-owned fund and using it to bribe foreign officials and to pay for luxury real estate, art and jewelry in the U.S. and to fund Hollywood film, including "The Wolf of Wall Street".

These are the first criminal charges brought in the case, and the indictment accuses the men of laundering dirty money through the USA financial system by purchasing luxury New York City real estate, artwork from an unnamed New York-based auction houses, and by funding unspecified major Hollywood productions.

Goldman has not yet responded to the indictments. The banker, Andrea Vella, was put on leave in October, according to a person familiar with the matter.

Prosecutors in the United States and elsewhere believe that a group of people with close ties to former Malaysian prime minister Najib Razak stole from the fund to buy paintings, yachts, real estate and even investment stakes in movies such as The Wolf of Wall Street.

An estimated US$4.5 billion was misappropriated from 1MDB by high-level officials of the fund and their associates, the US Justice Department has alleged. Some of the laundered funds were then allegedly used to pay bribes to obtain business for Goldman.

It was also announced Thursday that Tim Leissner, a former Goldman partner in Asia, has pleaded guilty to violating the Foreign Corrupt Practices Act, prosecutors said.

The funds were intended "for the benefit of the Malaysian people" but more than US$2.7 billion went to kickbacks and bribes, according to the charges. Federal prosecutors in Los Angeles have filed multiple civil lawsuits to recoup assets bought with some of that money. The new Prime Minister, Mahathir Mohamad, has moved quickly to investigate the alleged theft of billions of dollars from the investment fund, which was created under Mr. Najib.

An attorney for Najib, Shafee Abdullah, dismissed the latest charges as "foolish".

Goldman, the $86 billion Wall Street investment bank, underwrote $6 billion of bonds issued by 1MDB during the time of the alleged fraud, earning about $600 million in fees, the US Department of Justice said yesterday. It has seized 240 million Singapore dollars ($180 million) of property and cash and says about half of that belonged to Low and his immediate family. Low did not have an immediate comment. Mr. Ng reported to Mr. Leissner at Goldman.

Ng and Leissner's efforts in the scheme dated to 2009, when they began cultivating a relationship with Low, who allegedly "worked as an intermediary in relation to 1MDB and other foreign government officials" but did not hold a formal position at 1MDB and was never employed by the government. Such payments were "known to Ng, Leissner and other employees" of the bank, according to prosecutors.

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