The US justice jepartment has struck a deal with the fugitive Malaysian financier Jho Low to recoup close to $1bn of money taken from the investment fund 1MDB – the largest sum recovered by the Kleptocracy Asset Recovery Initiative established a decade ago to counter international corruption.
Low, who is believed to be living in China and remains subject to an Interpol red alert, is accused of orchestrating the theft of $4.4bn from 1MDB, a development fund connected to Malaysia’s then prime minister, Najib Razak.
The agreement, which must still be rubber-stamped by a federal judge on 11 November, does not include an admission of wrongdoing. Nor does it release Low from other criminal charges in connection with the 1MDB case.
In addition to $260m of assets seized from Low earlier this year, he will reportedly forfeit a luxury boutique hotel in Beverly Hills, California, and properties in New York and London valued at $700m.
Some of the funds from 1MDB, which was set up to bring economic development to benefit Malaysia’s poor, have already been returned, including $140m from the sale of a stake in New York’s Park Lane hotel.
The US attorney Nick Hanna said that the agreement, which was reported by the justice department on Wednesday, showed that US anti-money laundering controls were effective.
“The message in this case is simple: the United States is not a safe haven for pilfered funds,” Hanna said in a statement.
The settlement resolves one aspect of a complex case that reached into the highest levels of Malaysian political circles, Wall Street and Hollywood. Two years ago, federal prosecutors alleged that 1MDB funds were channeled to numerous associates of Najib, who was himself accused of receiving $681m from 1MDB – a claim he has denied.
One of the largest beneficiaries of the scheme was Low, who is alleged to have embarked on an eye-popping spending spree, including luxury apartments in Manhattan, mansions in Los Angeles, paintings by Monet and a corporate jet.
According to the justice department, the theft was divided in three separate phases: an initial $1bn was taken under the “pretence of investing in a joint venture between 1MDB and PetroSaudi”.
The participants then raised $1.4bn through a Goldman Sachs bond issue that was deposited with a Swiss offshore company. Finally, another Goldman Sachs bond issue produced $1.3bn that was diverted to an account in Singapore.
The scheme became headline news after more than $100m was used to fund the production budget of Martin Scorsese’s The Wolf of Wall Street via Riza Aziz, stepson of Najib.
At the center of it all was 34-year-old Low Taek Jho, known as Jho Low, who’d already made waves as the alleged purchaser of Picasso’s Women of Algiers for $179m. In pursuit of a lavish lifestyle, Low surrounded himself with celebrities, including the Wolf of Wall Street star Leonardo DiCaprio, Paris Hilton and Jamie Foxx.
It was reported that three months after shooting on The Wolf of Wall Street began, Aziz’s Red Granite, the production house that financed the film, spent $600,000 for the Oscar statuette given to Marlon Brando for best actor in On the Waterfront – a gift for DiCaprio.
In January, DiCaprio was reported to have given secret testimony to a Washington, DC, grand jury over his role in the scandal. A spokesperson for the actor said he was cooperating with the investigation and was “entirely supportive of all efforts to assure that justice is done in this matter”.
The 1MDB scheme came to light when the Sarawak Report, a UK-based site run by a former BBC journalist, published a series of what it claimed were internal emails between 1MDB and the Saudi energy company PetroSaudi.
That focused the attention of US, UK and France prosecutors on Low, while regulators looked to the involvement of Wall Street banks, including Goldman Sach’s south-east Asia chairman, Tim Leissner.
Leissner pleaded guilty to federal fraud charges last year and agreed to forfeit $43.7m.
Goldman has consistently denied wrongdoing in connection with the bond offerings and maintains Leissner was not sanctioned.
In a statement Low said the settlement was a “a successful and satisfactory result”.
But with Low’s settlement, prosecutors’ attention will now probably turn to Goldman, which is cooperating with the investigation. The bank has already set aside $516m to cover potential legal penalties but has said it expects to pay as much as $2bn in penalties.
“For Leissner’s role in that fraud, we apologize to the Malaysian people,” chief executive David Solomon said earlier this year before stalled settlement negotiations restarted.
One of those set to benefit from the settlement is former New Jersey governor Chris Christie whose law firm represents Low. The agreement allows for $15m to be paid to Low’s advisors, including Christie, from funds recovered Low’s stake in EMI Music Publishing, estimated to be worth $415m.
“It is one of the largest civil forfeiture settlements in US history and represents a voluntary return of each and every asset claimed by DOJ,” Christie said in a statement.
