The 1MDB corruption scandal embroiling Malaysia today reached a new chapter as former Malaysian Prime Minister Najib Razak was found guilty of corruption in connection with the disappearance of some US$4.5 billion from a government investment fund during his tenure as prime minister.
Najib’s guilty verdict is the latest development in a story that has dominated Malaysian politics over the last several years, with significant implications for the country’s economic development and the long list of individuals and entities connected to the scandal.
Najib Razak served as the prime minister of Malaysia from 2009 until his electoral defeat in 2018. Prior to Najib’s arrest by the Malaysian Anti-Corruption Commission in July 2018, controversy had already begun to surround the 1Malaysia Development Berhad, a government investment fund established to promote economic development and foreign investment in the country.
1MDB was fully established in 2009, soon after Najib was elected prime minister. At this time, Najib also became the chairman of the company and was thus responsible for its finances and their use.
The Wall Street Journal first alleged in 2015 that some US$700 million had been shifted from the state-owned investment firm into the prime minister’s personal bank accounts. Documents were also released substantiating these claims.
Though little came as a consequence of these initial allegations, with the Malaysian Anti-Corruption Commission claiming the money deposited into Najib’s bank came from “donors” and not the state-owned investment fund, the scrutiny of Prime Minister Najib continued, especially from foreign regulators and interests.
In July 2016, the United States Department of Justice filed a lawsuit intended to seize some US$1 billion in assets from the Malaysian prime minister, which prosecutors claimed had been used to purchase luxury real estate in both the US and the United Kingdom, fine art and a private jet. The intended purpose of the government investment fund had instead been Malaysia’s economic development.
Reports also suggested that some US$100 million had been directed from the Malaysian state fund into the production budget of Martin Scorcese’s 2013 film “The Wolf of Wall Street” and that state funds had also been used to fund the extravagant Hollywood parties of Jho Low, one of the individuals connected with 1MDB’s operations.
The reach of this scandal was evidently not confined to Malaysia alone. Around the same time as investigations into the fund began in 2015 and 2016, US investigators were scrutinizing the role of the US-based investment bank Goldman Sachs, which was intimately connected to raising money for the 1MDB state investment fund.
In July 2018, Najib was arrested by the Malaysian Anti-Corruption Commission and the High Court in Kuala Lumpur began proceedings for a criminal trial of the former prime minister.
Raids by Malaysian police on properties linked to Najib and his wife, Rosmah Mansor, following the arrest of the former prime minister also revealed the scale of the misuse of public funds. In total, over 12,000 pieces of valuable jewelry were seized by the police, the most expensive single item consisting of a US$1.6 million necklace.
Alongside Najib, the former Goldman Sachs chairman of Southeast Asia, Tim Leissner, also pled guilty to bribery, conspiracy and money laundering charges, a move which saw Goldman Sachs stocks tumble and punctuated the degree to which various international institutions were involved in the corruption scandal.
Najib’s defense sought to demonstrate that the former prime minister was not misusing the state’s investment funds, instead placing the blame on characters such as Jho Low for abusing their positions and responsibilities within 1MDB and pulling Prime Minister Najib Razak into a “nefarious web of deceit.” As Najib’s recent guilty ruling shows, however, this was unsuccessful.
The rising controversy over the corruption and misuse of 1MDB funds sent shock waves throughout Malaysia, especially in the wake of US-instigated suits in 2016, inspiring tens of thousands of Malaysians to take to the streets in protest of what they viewed as a clear sign of high corruption. The implications of the scandal, politically, would destroy Najib’s government.
Insistent of his innocence, then-Prime Minister Najib Razak responded with a crackdown on protesters, including the arrest of a leader of the pro-democracy group Bersih under anti-terrorism laws allowing detention of individuals for 28 days without trial.
Ultimately, Najib’s position became increasingly untenable as the public roundly turned against him for the perceived corruption of his government. In the aftermath of Najib’s former political mentor (and former prime minister in his own right) Dr. Mahathir Mohamad’s insistence that Najib was “corrupt” and that Mahatir “felt betrayed by him,” Mahatir was swept to power in 2018 on a wave of resentment, especially among young voters, at Najib’s ministry and his dogged refusal to accept responsibility following the yearslong corruption scandal. With Najib out of office, his arrest by anti-corruption investigators soon followed.
Tuesday’s guilty sentence has proved to end one chapter of a scandal that has long defined Malaysian politics.
The likely outcome
But this is by no means the end. As Richard Paddock writes for The New York Times, this is but the first of several charges brought against Najib, with his potential jail time rising into the decades. Yet experts remain unsure of whether these charges will even stick. The most recent verdict has been stayed pending appeal, which may yet allow Najib the chance for a lighter sentence.
Najib’s chances of receiving a lighter sentence, if he receives any sentence at all, have also been improved by the political transition in Malaysia. In February, Malaysia’s monarch named Muhyiddin Yassin, the former interior minister, as the new prime minister following the resignation of Prime Minister Mohamad.
Muhyiddin was the preferred choice of Najib’s party and Najib himself had been a part of Muhyiddin’s inner circle. All of this increases the likelihood that the corruption saga will likely continue.
With his allies in power and an appeal against his charges pending, Najib will, to quote professor of Asian studies James Chin, “probably win the appeal” and succeed in weathering one of the biggest corruption scandals in recent history, despite all signs pointing to his guilt.
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