LOS ANGELES: Federal prosecutors in Los Angeles have been working for three years to recover assets around the world that were allegedly acquired with billions of dollars stolen from Malaysia’s 1MDB fund by people associated with former prime minister Datuk Seri Najib Razak.
But the question whether the civil forfeiture lawsuits for overseas assets, acquired by foreigners with Malaysian money, actually belong in a Southern California courtroom has yet to be resolved.
Tarek Obaid, a businessman with dual Saudi and Swiss citizenships, is going to court Wednesday to argue that a Los Angeles-based federal judge doesn’t have jurisdiction to order the seizure of his shares in Palantir Technologies Inc. allegedly bought with 1MDB-linked funds.
The outcome of Obaid’s challenge before the U.S. Court of Appeals in Pasadena, California, will be closely watched by Low Taek Jho, the Malaysian financier better known as Jho Low, and Riza Aziz, Najib’s stepson, who are fighting the Justice Department’s attempts to seize their properties in London.
The U.S. has brought 30 forfeiture lawsuits seeking real estate, investments, art and jewelry valued at $1.7 billion that Low, the alleged mastermind behind the looting of 1MDB, and his accomplices bought.
The lawsuits were put on hold in 2017 so they wouldn’t interfere with a separate criminal investigation, but Obaid was allowed to appeal a ruling that let the forfeiture case against him to go ahead in Los Angeles.
U.S. District Judge Dale Fischer said last year, when she denied Obaid’s request to dismiss the lawsuit, that there was "substantial ground for disagreement” whether Los Angeles was the proper venue.
Specifically, the judge expressed concern that the "branch” of the 1MDB money-laundering conspiracy the Justice Department linked to Southern California wasn’t the same as one in which Obaid allegedly received funds he used to buy the Palantir shares.
The U.S. claims the 1MDB money was laundered through shell companies with bank accounts in the U.S. and abroad. The money was used to invest in assets in the U.S. and overseas, according to the Justice Department.
Obaid’s role in the 1MDB scandal pertains to an early phase of the alleged conspiracy. Soon after 1Malaysia Development Berhad was created in 2009, as a government-owned development company, Low arranged a meeting aboard a yacht off the coast of Monaco between Najib, who is identified as "Malaysian Official 1” in court filings and Obaid, according to U.S. prosecutors. They were to discuss a joint venture between 1MDB and Obaid’s company PetroSaudi International.
Also present was Prince Turki bin Abdullah, a PetroSaudi co-founder who was swept up in an anti-corruption crackdown in Saudi Arabia two years ago, prosecutors said.
After the meeting Low emailed his parents, brother and sister: "Just closed the deal with petrosaudi. Looks like we may have hit a goldmine, ” according to court filings.
Of the $1 billion 1MDB initially invested in the joint venture with PetroSaudi in 2009, $700 million immediately disappeared in a bank account controlled by Low, according to the U.S. Obaid received $153 million of the diverted money in the following months, the U.S. claims.
Obaid’s $2 million investment in preferred stock of Palantir Technologies, a private data-mining company co-founded by Silicon Valley billionaire Peter Thiel, came from the funds he received from Low, according to federal prosecutors.
Obaid said in his appeal that he "vigorously disputes” the government’s vague attempts to tie him to the alleged conspiracy.
"Obaid’s alleged misconduct has nothing to do with California, ” according to his appeal. "There is no allegation that Obaid knew or had any reason to know that any acts in furtherance of the alleged conspiracy occurred in California, such as to make it foreseeable to Obaid that he could be hauled into court there.”
Lawyers representing Low’s London property argued that the outcome of Obaid’s appeal will have a profound impact on their ability to challenge Los Angeles as a proper venue. They say the Justice Department has failed to establish a connection between Southern California and the London acquisition.
"The government’s assertion of venue in these cases rests on an unprecedented legal theory: that acts in a district in furtherance of one conspiracy are sufficient to give rise to the forfeiture of, and thus to confer venue over, assets that are allegedly the proceeds of another, entirely separate and distinct conspiracy, ” Low’s lawyers said.- Bloomberg