KUALA LUMPUR, Malaysia - Initially hailed as a game changer for Malaysia, the 1Malaysia Development Berhad (1MDB), state investment fund was set up to attract foreign direct investment, that would help in the long term strategic development of the country.
However, over the years, the state investment fund accumulated billions in debts.
Suspicions soon turned into full blown accusations of underlying corruption in the usage of the fund - with all fingers pointing at the man who had set up the now defunct state investment fund in 2009 - Malaysia’s former Prime Minister Najib Razak.
Razak’s decision to unveil the state fund during his second term in office and all his subsequent actions since 2009, not only resulted in the end of the six decade long unbroken rule of his coalition in May this year, but also unleashed the biggest financial scandals the world has ever seen.
Last month, as part of its probe in to what has become one of the most sensational case of elite corruption in Asia in the last three decades, Malaysia’s Chief of Commercial Crime Investigation Department (CCID) declared that it had raided 12 properties linked to the former Prime Minister.
Later, calling it “the biggest seizure in Malaysian history,” CCID boss Amor Singh revealed that as part of the raid, the department had seized a haul of items which amounted to at least $273 million.
Singh said that a huge amount of cash, 12,000 pieces of jewelry, 567 handbags, 423 watches, 234 sunglasses and two of the most expensive valuables - a diamond necklace worth $1.6 million and a Rolex Daytona watch worth $869,000 had been seized during the raid.
The Malaysian government officially accused Razak’s administration of conducted an “exercise of deception” over 1MDB and misrepresenting the country’s financial situation to the Parliament.
A few days after the raid, Razak was arrested by Malaysia’s anti-corruption authorities and was said to be facing serious allegations of money-laundering and misappropriation of funds.
Announcing charges against Razak in the multibillion-dollar scandal related to the state fund, the country’s Attorney General Tommy Thomas filed charges of corruption and criminal breach of trust against the former tainted leader.
Facing three charges over criminal breach of trust and one count of abuse of power, Razak vowed to legally fight against the charges that he denied and said that his lawyers have already applied for bail.
On Tuesday, a day before Razak’s pre-trial hearing for the earlier charges, the former Prime Minister was reportedly summoned to the office of the Malaysian Anti-Corruption Commission (MACC).
After being questioned for about 45 minutes, the anti-corruption agency issued a statement saying that Razak would be charged under the anti-money laundering act.
The anti-graft agency said in its statement, ”The charges are related to the SRC International case.”
The case involves a suspicious transaction between SRC International, a former subsidiary of 1MDB and Razak’s personal account.
However, the charges announced by the country relate to only to a fraction of the total amount allegedly misappropriated from 1MDB.
The world’s biggest financial scandal unfolds
Razak first faced allegations of corruption in the year 2016, when the Wall Street Journal reported that $700 million was diverted from the 1MDB fund into the personal bank account of the then-Malaysian Prime Minister.
A week later, the United States Department of Justice confirmed that over $3.5 billion was stolen from the 1MDB fund and some of the funds were diverted into accounts of ‘Malaysian Official 1.’
Both U.S. investigators and Malaysian officials identified that official as Razak, who denied wrongdoing and tried to sideline America’s probe by seeking investments from China.
Meanwhile, within the country, revelations about how the money stolen from the state fund was allegedly used by Razak and those close to him riled up the country.
Anger in the country, where the median income stands at less than $400 per month, hit a peak when months-long investigation into the misappropriation by the U.S. and six other countries revealed that funds meant for Malaysia’s economic development were looted for years and used to buy luxury apartments in Manhattan, mansions in Los Angeles, paintings by Monet, corporate jets and even for financing a major Hollywood movie.
Alleging that Razak’s associates stole and laundered $4.5 billion from the fund between 2009 and 2014, American investigators revealed that some of that money landed in Razak’s bank account.
Amid regulatory investigations around the world, and the discovery of hundreds of millions of dollars in Razak’s personal bank accounts - the then Prime Minister’s efforts to muzzle criticism within the country failed.
On May 9 this year, Razak’s long-ruling coalition was ousted by 93-year-old Mahathir Mohamad, who came out of retirement to challenge Razak over the corruption scandal.
Becoming the world’s oldest elected leader at 93, Mohamad, who was Malaysia’s prime minister for 22 years until 2003, ushered in Malaysia’s first change of power since independence from Britain in 1957.
Mohamad returned to Parliament for the first time in 15 years vowing to reopen investigations into 1MDB and ruled out the possibility of a deal for Razak - declaring that the former Prime Minister will face the consequences if found guilty of wrongdoing.