Feds Seek Assets in $1B Malaysian Fund Scheme

(CN) — The Justice Department said Wednesday that it has filed 16 complaints to recover more than $1 billion in assets laundered through a Malaysian government fund and used to buy Van Gogh and Monet paintings and a stake in the 2013 movie "The Wolf of Wall Street."

The Malaysian government created the fund, 1Malaysia Development Berhard, or 1MDB, in 2009 as a way to stimulate Malay economic growth. But according to U.S. Attorney General Loretta Lynch, the fund was instead used in an international conspiracy where over $1 billion was laundered through the United States and $3 billion was misappropriated overall.

The complaints filed in Los Angeles Federal Court are the largest single action brought under the Kleptocracy Asset Recovery Initiative, the U.S. Attorney's Office said in a statement.

The initiative enables the government to forfeit the ill-gotten gains of foreign officials and in some cases allows the government to channel recovered funds back to people touched by the corruption.

According to the U.S. Attorney's Office in LA, the 1MDB officials, their family members and associates funneled in excess of $3.5 billion from the funds and then falsified documentation to launder money through shell company bank accounts in Singapore, Switzerland, Luxembourg and America.

"These transactions were allegedly intended to conceal the origin, source and ownership of the funds, and were ultimately processed through U.S. financial institutions and were used to acquire and invest in assets located in the United States," the U.S. Attorney's spokesman in Los Angeles Thom Mrozek said in a statement.

According to the Justice Department, the funds were spent on lavish items such as a $35 million Bombardier jet, $137 million in artwork by Vincent Van Gogh and Claude Monet, and luxury real estate purchases all over the world including locales in the United States and the United Kingdom between 2009 and 2015.

Funds were also laundered through Red Granite Pictures, the company that produced the Oscar-nominated Martin Scorsese film "The Wolf of Wall Street." Riza Aziz, owner of Red Granite Pictures and stepson of Malaysian prime minister Najib Razak, faces the prospect of forfeiting real estate assets including his luxury condo at the Park Laurel in Manhattan, Lynch said.

Assistant Attorney General Leslie Caldwell said the case "imitated art" because Malaysian officials had chosen to invest their money in a movie that details the true-life rise and fall of Jordan Belfort, a shady stockbroker who founded a corrupt Wall Street brokerage, Stratton Oakmont.

"Whether corrupt officials try to hide stolen assets across international borders — or behind the silver screen — the Department of Justice is committed to ensuring that there is no safe haven," Caldwell said.

She added that $100 million was used to finance the film and "neither 1MDB nor the Malaysian people saw a penny of the profit from that film. Now the future rights to that film are subject to forfeiture," she said.

Caldwell also detailed the laundering of two bond offerings made in 2012.

"The stated purpose of the bond offerings was to allow 1MDB to raise money to invest in various energy assets of the Malaysian government and people," Caldwell said. "But almost immediately after receiving the proceeds of the two bond issues, roughly 40 percent of the money that was raised, or $1.37 billion, was transferred out of 1MDB's accounts and into a Swiss bank account that was in the name of a shell corporation incorporated in the British Virgin Islands."

Though no one faces any criminal charges at this point, Lynch said that the focus now was to "restrain the dissipation of assets" during the investigation.

"As with all cases, even with civil forfeiture, we bring the action when all of the facts come together and we feel we have a cause for judicial action," Lynch said.

Other "interested parties" to the items sought for forfeiture are financier Jho Low, Aziz's family friend, and Mohamed Badawy al-Husseiny, a former official for a government fund with headquarters in Abu Dhabi.

Chief Richard Weber of the Internal Revenue Service Criminal Investigation team said Wednesday that this particular case "represents a model for international cooperation, and sends the signal that criminals cannot evade law enforcement officials simply by laundering money through multiple jurisdictions."

According the New York Times, prosecutors also said in the complaint that illicit payoffs were routinely divvied up among high-level fund officials, possibly including fund overseer and Prime Minister Razak. Since 2015, Razak has unsuccessfully attempted to throw off accusations of corruption in his home country.

A member of Razak's political party filed a civil claim last year claiming that the prime minister had defrauded fellow party members by transferring some $650 million in funds which were earmarked for government use into his own personal bank account. Razak's son, Mohd Nazifuddin Najiib was also named in the Panama Papers earlier this year.

The investigation into 1MDB was initially spurred by reports published in both The New York Times and the Wall Street Journal. The New York Times conducted a more broad examination of shell companies which were being used as fronts for high-end real estate deals in major American cities.

The governments of Singapore, Switzerland and Malaysia have all investigated the fund as well.

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