The 1MDB global corruption scandal has toppled a government, ensnared a Wall Street powerhouse and set off investigations across the globe. The proposed settlement was filed Wednesday (Oct 30) in a California court.
It would be the most significant win for the Justice Department's Kleptocracy Asset Recovery Initiative since it was set up almost a decade ago to prevent the United States from becoming a safe haven for stolen money.
The deal, if approved by a federal judge, will help resolve forfeiture cases tied to Low, who is also known as Jho Low, whom prosecutors accuse of orchestrating the theft of more than US$4bil (RM16.7bil) from 1MDB. The money was used to pay for a private jet, a superyacht, mansions, diamonds and even Hollywood movie productions. The agreement doesn't include an admission of guilt or wrongdoing but doesn't release Low from other criminal charges.
"We were pleased to help negotiate this historic resolution in order to preserve the tremendous value of assets involved," Chris Christie, the former governor of New Jersey said in a statement. His law firm represents Low. "It is one of the largest civil forfeiture settlements in U.S. history and represents a voluntary return of each and every asset claimed by DOJ."
The assets involved in settlements of 13 forfeiture cases are estimated to be worth more than US$700mil (RM2.92bil) and include a luxury, boutique hotel in Beverly Hills, California, and high-end real estate in New York and London, the Justice Department said. That's in addition to US$260mil (RM1.08bil) of assets seized earlier, including a superyacht, the department said. The value of the recouped assets could be even higher based on estimates in the original lawsuits and the final sale price.
"The message in this case is simple: the United States is not a safe haven for pilfered funds," U.S. Attorney Nick Hanna in Los Angeles said in a statement. "Our strict anti-money laundering controls are effective, and we will seize assets used by criminals to conceal ill-gotten gains."
The flurry of forfeiture complaints filed initially by the Justice Department in 2016 connected big purchases in the United States to the proceeds of a crime. But even after assets are seized, the proceeds from them can end up in legal limbo until a court awards judgment in favour of the United States or, as in this case, reaches a settlement. The two sides negotiated a deal to avoid the legal costs and uncertainty of extended litigation.
The case laid out the ways in which money meant for economic development in Malaysia found its way past bank watchdogs and ended up paying for the lavish lifestyle of Jho Low and his associates.
Much of the money was raised by Goldman Sachs Group Inc. The 1MDB episode has turned into a major reputational problem for the New York-based bank, which has been in conversations with the United States and Malaysian governments over a monetary settlement for its involvement in the 1MDB scandal. A former senior executive at the firm has pleaded guilty to his role.
Several properties involved in the settlement have been sold, and proceeds are being held for restitution payments.
"I am very pleased" that a global settlement has been reached, Low said in a statement distributed by his representatives. The "agreement builds on a series of successful prior agreements negotiated with the U.S. Department of Justice and is a result of good faith discussions," he said.
Money taken from 1MDB was also funnelled into private-equity investments. The appreciation in the value of those stakes is likely to represent the largest chunk of the money to be recovered by the U.S. government.
The most noteworthy of them was Jho Low's stake in EMI Music Publishing, which is now fully controlled by Sony Corp. His original investment of just over US$100mil (RM417.68mil) grew to more than US$415mil (RM1.73bil). That stake has since been liquidated, and the proceeds are being held pending the outcome of the forfeiture lawsuits. – Bloomberg