In the affair of the Malaysian sovereign wealth fund 1MDB, the Office of the Attorney General of Switzerland (OAG) has charged two executives of the energy company PetroSaudi in the Federal Criminal Court.
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The two accused are alleged, with the aim of enriching themselves and others, to have misappropriated at least USD 1.8 billion transferred by the Malaysian sovereign wealth fund 1Malaysia Development Berhad (1MDB) in connection with a joint-venture with PetroSaudi, an operation subsequently converted into an Islamic loan, and then to have laundered the amounts involved.
The allegations cover a period at least from 2009 to 2015.
Acting in concert with Taek Jho LOW, a Malaysian businessman, confidant of the Malaysian Prime Minister at the time, Mohammad Najib bin Tun Najib Razak, and informal consultant who did not hold an official position within 1MDB, and with the support of two managers from 1MDB, the two accused proposed an investment scheme consisting of a purported ‘government-to-government' transaction between the Kingdom of Saudi Arabia and Malaysia through 1MDB, the Malaysian sovereign wealth fund. It comprised a joint venture between PetroSaudi and 1MDB that was intended to invest in economic opportunities in Malaysia and abroad.
In order to reinforce the appearance that the joint-venture would be a government-to-government operation, the accused and Taek Jho LOW manipulated a meeting that involved Najib Razak - who in addition to being the prime minister of Malaysia was also finance minister, president of the Board of Advisors of 1MDB, the Malaysian sovereign wealth fund, and the representative of the sole shareholder in 1MDB - and Prince Turki Bin Abdullah Bin Abulaziz Al Saud, son of the late king of Saudi Arabia, which was held near Cannes in August 2009 on the yacht ‘Alfa Nero'.
Furthermore, the two accused and Taek Jho LOW benefited from the support of two managers at 1MDB who spread a narrative throughout 1MDB which was intended to mislead the board of directors of the sovereign wealth fund.
This left the Board of Directors of 1MDB with an inaccurate understanding of the government-to-government operation: the Kingdom of Saudi Arabia was not in involved in the transaction, and the 1MDB Board was unaware of the debt amounting to USD 700 million due by the joint venture company to PetroSaudi, or indeed that PetroSaudi did not hold the rights it was said to have to the Turkmen assets that it claimed to be bringing into the joint venture.
As a result, the 1MDB Board of Directors eventually agreed to the transaction, albeit after attaching conditions to it, which ultimately were not respected by the two managers who were acting in concert with the accused and Taek Jho LOW.
The joint-venture contract between 1MDB and PetroSaudi was, as a consequence, concluded in September 2009. It required that in exchange for a shareholding in the joint venture company, 1MDB would provide USD 1 billion in cash and PetroSaudi would provide assets valued at USD 2.7 billion - which in reality it did not possess.
From the USD 1 billion paid in by 1MDB, and contrary to what had been authorised by the 1MDB Board of Directors, USD 700 million was transferred to an account opened at a bank in Switzerland in the name of a company whose beneficial owner was Taek Jho LOW.
From that USD 700 million, LOW transferred USD 85 million to one of the accused, who in turn, transferred USD 33 million of that sum to the other accused.
The remaining USD 300 million was transferred to the account of the joint venture company at a bank in Switzerland. In reality, only PetroSaudi derived any benefit from this USD 300 million.
In addition, the two accused, acting with Taek Jho LOW, and once again with the aim of enriching themselves and others, devised other plans to induce the Board of Directors of 1MDB to authorise transfers totalling a further USD 830 million between September 2010 and October 2011 as part of an Islamic loan that followed on from the joint venture; the funds transferred were also misappropriated.
The same arguments as those mentioned above were presented to the 1MDB Board of Directors. In addition, interest of more than USD 80 million was transferred to 1MDB. This amount was in fact taken from the funds that 1MDB had itself transferred.
Finally, and to sum up, the accused are alleged, from September 2009 to July 2015 at the very least, to have arranged for bank accounts to be opened in Switzerland and abroad to hold the funds, to have accepted these funds, to have given - and in the case of one accused, validated transfer orders for these funds and to have organised the transfers of funds in order to obstruct the identification of their origin and their forfeiture.
The two accused used money misappropriated from 1MDB to acquire, among other assets, real estate in Switzerland and in London, jewellery, private equity, to develop PetroSaudi activities from which they received substantial income, and to maintain a lavish lifestyle. ■