Federal prosecutors are poised to launch one of the largest
asset seizures in U.S. history as they step up their investigation
into billions of dollars siphoned away from a Malaysian government
investment fund, according to people familiar with the matter.
Authorities are expected to file civil lawsuits as soon as
Wednesday morning seeking to seize assets, which are expected to
include properties and other assets purchased with money allegedly
misappropriated from the Malaysian fund, according to people
familiar with the matter.
The Wall Street Journal has reported that people linked to the
fund have invested millions of dollars in real estate and
businesses in the U.S.
Agents from the Federal Bureau of Investigation's international
corruption unit have also been conducting a wide-ranging criminal
investigation into people and institutions connected with 1Malaysia
Development Bhd., known as 1MDB, a sovereign-wealth fund set up by
Prime Minister Najib Razak in 2009 to drive the country's
economy.
The expected asset seizures would be the U.S. government's first
action tied to the 1MDB investigation. It is unknown what assets
will be seized, but the action is expected to surpass civil suits
filed since 2015 seeking to seize $850 million in assets involving
three telecom companies in an unrelated case, according to people
familiar with the matter. The people say the investigation is
continuing.
The move by U.S. authorities to seize assets tied to an
investment fund run by a foreign government would be a major
escalation in Washington's global efforts to fight corruption and
block allegedly illegally obtained funds from moving through the
world's financial system.
The expected actions by U.S. authorities also threaten to upend
the country's relationship with Malaysia, a moderate Muslim nation
that has long been an important U.S. ally in Southeast Asia.
Malaysia has deep ties to the Middle East and has been seen as a
bulwark against China, which has increasingly asserted its power
across Asia. President Barack Obama cultivated a relationship with
Mr. Najib, including playing golf together in Hawaii over the
Christmas holidays in 2014.
The asset seizure is being led by the Justice Department's
Kleptocracy Asset Recovery Initiative, which was set up in 2010 to
target the spoils of overseas corruption cases. Its biggest
attempted seizure so far was $850 million of assets related to
alleged corruption by three global telecom companies and
intermediaries close to the elder daughter of Uzbekistan's
president. VimpelCom Ltd., a telecommunications company based in
Amsterdam, and its wholly owned subsidiary, Unitel LLC, agreed in
February to pay $795 million to settle a corruption case with U.S.
and Dutch regulators. VimpelCom admitted wrongdoing and Unitel
pleaded guilty. The Uzbek president's daughter couldn't be reached
for comment at the time. The asset forfeiture case is still in
litigation.
The Journal has reported over the past year about many aspects
of the alleged money laundering and siphoning of cash away from
1MDB. Funds that originated with 1MDB made their way into real
estate in New York City and Los Angeles worth tens of millions of
dollars and the funding of the 2013 film "The Wolf of Wall Street,"
starring Leonardo DiCaprio and directed by Martin Scorsese,
according to people familiar with probes in two countries.
At the center of those U.S. inquiries are several characters in
the long-running 1MDB drama: Riza Aziz, stepson of Mr. Najib and
son of Malaysia's first lady, Rosmah Mansor; Jho Low, a young
Malaysian financier who helped set up 1MDB and played an important
role in nearly all of its dealings, and Khadem Al Qubaisi, a former
Abu Dhabi managing director of a sovereign-wealth fund with
extensive dealings with 1MDB, according to people familiar with the
U.S. investigation.
Investigators believe at least $50 million of luxury real estate
in New York City and Los Angeles was bought by Mr. Aziz using funds
originating with 1MDB, according to people familiar with the
matter. Mr. Aziz, who runs Hollywood production company Red Granite
Pictures, bought the two properties from Mr. Low, who has even
broader investments and dealings in the U.S.
The Journal reported in May how Mr. Low had started liquidating
an art collection worth at least $300 million, including the sale
of a prized Basquiat painting at a loss. He also owns stakes in
hotels, a music publishing business and several other companies
abroad.
A spokesman for Red Granite Pictures, which produced "The Wolf
of Wall Street," said earlier this year that there was nothing
improper about Mr. Aziz's business dealings and that the company
was cooperating with inquiries. Lawyers for Mr. Low and Mr. Al
Qubaisi have previously declined multiple requests for comment on
the investigations.
Asset seizures in the U.S. would be a culminating moment for the
at least six global investigations into allegations of fraud and
money-laundering related to 1MDB. After Mr. Najib set it up, 1MDB
raised more than $13 billion of debt, some of it with the help of
Goldman Sachs Group Inc.
But as much as $6 billion of the money went missing, according
to a person familiar with one country's investigation. Hundreds of
millions of dollars of it was diverted into Mr. Najib's own bank
accounts in Malaysia ahead of important elections, according to
bank transfer documents reviewed by the Journal and people familiar
with investigations in two countries.
Mr. Najib was at the helm of 1MDB throughout all of the
transactions that are under investigation. The Journal has reported
that money from the fund was used to help him win a tight
re-election campaign in 2013 and that he and his wife spent $15
million of money that originated with 1MDB and ended up in their
bank accounts.
Mr. Najib and Malaysia's attorney general have said the money in
his bank accounts was a gift from the Saudi royal family. The
attorney general cleared Mr. Najib of wrongdoing and said most of
the money was returned. Saudi Arabia's foreign ministry
acknowledged a donation to Malaysia but declined to comment
further. The 1MDB fund denies wrongdoing and says it is ready to
cooperate with any investigation. It said on several occasions it
hasn't been contacted by a foreign investigative agency.
The properties U.S. investigators are probing were bought with a
portion of money diverted to what appeared to be an Abu Dhabi
business partner of 1MDB, according to the people familiar with the
probes and documents reviewed by the Journal.
The business partner allegedly moved the money through a British
Virgin Islands company, which then sent it to a company owned and
controlled by Mr. Najib's stepson, Mr. Aziz. He used some of the
money transferred to his company to buy a 7,700-square-foot, $33.5
million duplex in the Park Laurel condominium tower overlooking New
York's Central Park and an 11,000-square-foot walled mansion in
Beverly Hills with a 120-foot-long pool for more than $17.5
million, according to documents reviewed by the Journal and people
familiar with probes in two countries.
Mr. Aziz is also a major collector of movie paraphernalia,
including a rare $1 million movie poster for the 1927 Fritz Lang
science-fiction film "Metropolis."
Regulators in Switzerland and Singapore have brought actions
this year related to 1MDB investigations. In coordinated
announcements, they targeted Swiss private bank BSI SA that they
say played a pivotal role in some of 1MDB's biggest
transactions.
Switzerland's financial regulator, Finma, accused BSI of
committing serious breaches of money-laundering regulations in its
dealings with 1MDB "despite clearly suspicious indications." BSI
was ordered to pay 95 million Swiss francs ($99 million).
BSI said at the time that its CEO was stepping down immediately
and that it cooperated fully with investigations by regulators in
Switzerland and Singapore. The company said later it was appealing
the penalties brought by Switzerland.
Aruna Viswanatha contributed to this article.
Write to Bradley Hope at bradley.hope@wsj.com
(END) Dow Jones Newswires
July 20, 2016 00:55 ET (04:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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