Malaysian authorities have charged former leader Najib Razak with corruption and criminal breach of trust in connection with a multibillion-dollar scandal surrounding state fund 1MDB.
Najib faces three counts of criminal breach of trust, which carry a punishment of up to 20 years in jail and whipping, along with a possible fine. He also faces one charge under the anti-corruption act, which calls for a prison sentence of up to 20 years and a fine of no less than five times the value of funds siphoned. The charges were read out by a court official on Wednesday.
In a video posted on Najib’s official Twitter account on Tuesday night, he apologized to the nation while saying not all of the accusations against him are true and that he’d defend himself. Invoking the afterlife, the caption said: “I accept that today is the day my family and I face the world’s tribulation.”
Prime Minister Mahathir Mohamad, whose coalition ousted Najib in May, has sought to recoup US$4.5 billion potentially siphoned from 1MDB. A parliamentary committee in 2016 identified at least US$4.2 billion in irregular transactions by the fund, with the United States (US) Department of Justice saying some cash was used to purchase a 300-foot yacht, luxury homes, artwork, and stakes in several Hollywood films, including “The Wolf of Wall Street.”
Najib was arrested on Tuesday, less than two months after a surprise election loss that toppled his party’s six-decade rule. His former government had previously cleared him of wrongdoing.
The scandal had cast a cloud over doing business in Malaysia and unnerved investors. Markets were spooked by the 23 May disclosure that government debt and liabilities had jumped to 1.087 trillion ringgit (US$268.4 billion), inflated by state guarantees for borrowing at 1MDB. The ringgit slid to a six-month low and overseas ownership of the nation’s bonds dropped to the lowest since August. The challenge now for Mahathir is to make good on his promises to root out the corruption he said is rife in many government departments.
Malaysia’s police last week said they had seized about US$273 million worth of items in raids linked to Najib. They included stacks of cash, Hermes International handbags, Rolex watches, a diamond necklace and more than 200 pairs of designer sunglasses.
The arrest on Tuesday was made in connection with SRC International Sdn. Bhd. (SRC), according to a statement from the task force. SRC was a former unit of 1Malaysia Development Bhd. It was reported in May that investigators had asked Najib about an unspecified amount of funds he had received from the company.
In January 2016, former Attorney-General Mohamed Apandi Ali had cleared Najib of wrongdoing in connection with SRC, saying there was no evidence he knew that money from the company was transferred into his personal accounts. Meanwhile, Swiss investigators said in October 2016 that some US$800 million in natural-resource investments from SRC appeared to have been misappropriated, hidden in part through the creation of a Ponzi scheme. – Bloomberg