International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Monday, July 6, 2020

U.S. Seeks to Recover Approximately $96 Million Traceable to Funds Allegedly Misappropriated from Malaysian Sovereign Wealth Fund

The Justice Department announced the filing of civil forfeiture complaints seeking the forfeiture and recovery of approximately $96 million in assets allegedly associated with an international conspiracy to launder funds misappropriated from 1Malaysia Development Berhad (1MDB), a Malaysian sovereign wealth fund.  Combined with earlier civil forfeiture complaints filed beginning in July 2016, the United States has sought the forfeiture of more than $1.8 billion in assets traceable to funds embezzled from 1MDB.  To date, as a result of these actions, the United States has recovered or assisted Malaysia in recovering nearly $1.1 billion in assets associated with the 1MDB international money laundering and bribery scheme.  This case represents the largest action brought under the department’s Kleptocracy Asset Recovery Initiative as well as the largest civil forfeiture action in the Justice Department’s history.

The complaints filed today in the Central District of California identify additional assets traceable to the 2012 and 2013 bond offerings.  These assets include luxury real estate in Paris, artwork by Claude Monet and Andy Warhol, and accounts maintained at financial institutions in Luxembourg and Switzerland.    

According to the complaints, from 2009 through 2015, more than $4.5 billion in funds belonging to 1MDB were allegedly misappropriated by high-level officials of 1MDB and their associates.  1MDB was created by the government of Malaysia to promote economic development in Malaysia through global partnerships and foreign direct investment, and its funds were intended to be used for improving the well-being of the Malaysian people. 

“The complaint filed today seeks to forfeit a range of luxury items — including real estate in Paris, artwork by Monet, Warhol, and Basquiat, and international bank accounts — all of which were allegedly acquired with funds stolen from Malaysia’s sovereign wealth fund,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “Today’s action is just the latest demonstration of the Criminal Division’s longstanding commitment to tracing, seizing, and forfeiting assets acquired through grand corruption and, wherever possible, returning those assets to the people from whom they were stolen.”  

“The FBI will relentlessly pursue international corruption investigations,” said FBI Assistant Director Calvin Shivers of the Criminal Investigative Division.  “As efforts in this case have shown, our dedicated investigators will pursue corruption, uncover proceeds of illicit activity, and return ill-gotten gains to the rightful owners.  In this case, to the people of Malaysia.”

“These seemingly endless civil forfeiture complaints associated with the 1MDB scandal are representative of the seemingly endless schemes used to hide and launder money as part of the sophisticated efforts to steal from the Malaysian people,” said Don Fort, Chief, IRS Criminal Investigation.  “This latest civil forfeiture complaint would return an extraordinary sum of money to the people of Malaysia where it belongs and where it can finally be used for its original intended purpose - to improve the lives of everyday Malaysians.”

As alleged in the complaints, the members of the conspiracy – which included officials at 1MDB, their relatives and other associates – diverted more than $4.5 billion in 1MDB funds.  Using fraudulent documents and representations, the co-conspirators allegedly laundered the funds through a series of complex transactions and shell companies with bank accounts located in the United States and abroad.  These transactions allegedly served to conceal the origin, source and ownership of the funds, and ultimately passed through U.S. financial institutions to then be used to acquire and invest in assets located in the United States and overseas.

As alleged in the earlier complaints, in 2009, 1MDB officials and their associates embezzled approximately $1 billion that was supposed to be invested to exploit energy concessions purportedly owned by a foreign partner.  Instead, the funds were allegedly transferred through shell companies and were used to acquire a number of assets, as set forth in the complaints.  The complaints also allege that the co-conspirators misappropriated close to $1.4 billion in funds raised through bond offerings in 2012, and more than $1.2 billion following another bond offering in 2013.  The complaints also allege that in 2014, the co-conspirators misappropriated approximately $850 million in 1MDB funds under the guise of repurchasing certain options that had been given in connection with a guarantee of the 2012 bonds.

The FBI’s International Corruption Squads in New York City and Los Angeles and the IRS-CI are investigating the case.  Deputy Chief Woo S. Lee and Trial Attorneys Barbara Levy and Joshua L. Sohn of the Criminal Division’s Money Laundering and Asset Recovery Section are prosecuting the case.  Assistant U.S. Attorneys John Kucera and Michael Sew-Hoy of the U.S. Attorney’s Office for the Central District of California provided substantial assistance.  The trial team also expresses its gratitude and appreciation to the Criminal Division’s Office of International Affairs for their continued assistance in this matter.

The department also expresses its deep appreciation for the significant assistance provided by the Office of the Attorney General and the Federal Office of Justice of Switzerland, the judicial investigating authority of the Grand Duchy of Luxembourg and the Criminal Investigation Department of the Grand-Ducal Police of Luxembourg, the Attorney General’s Chambers of Singapore, the Singapore Police Force-Commercial Affairs Division, and the Attorney General’s Chambers of Malaysia, the Royal Malaysian Police, and the Malaysian Anti-Corruption Commission.

https://lawprofessors.typepad.com/intfinlaw/2020/07/us-seeks-to-recover-approximately-96-million-traceable-to-funds-allegedly-misappropriated-from-malaysian-sovereign-wealth.html

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