PETALING JAYA: The US Department of Justice (DoJ) has served an arrest warrant on a law firm in London in an effort to recover RM1.34bil of 1Malaysia Development Berhad (1MDB) funds, reports the Guardian.
According to court records reviewed by the British news outlet, the UK’s National Crime Agency (NCA) served the warrant at the central London offices of the firm Clyde & Co on behalf of the DoJ.
The warrant, which was signed by a US federal judge, identified the “defendant” as the $330m (RM1.34bil) held by Clyde & Co in a bank account at a NatWest branch in the City.
The report said that the filings - an arrest warrant in rem, which is a type of order used to seize property or assets - were served on the law firm on October 29 last year.
Specialist DoJ anti-money-laundering prosecutors alleged that the money held by Clyde & Co is “about all that is left of the proceeds” of the first phase of the 1MDB fraud.
According to prosecutors, $700m(RM2.84bil) of the money was used for the “personal gratification of 1MDB conspirators” while $300m (RM1.22bil) was diverted to a joint venture between 1MDB and PetroSaudi, an oil company established by Saudi businessman Tarek Obaid with a member of the Saudi royal family.
The Guardian reported that Clyde & Co’s relationship with PetroSaudi appeared to have begun around 2015, when the law firm began representing PetroSaudi in a dispute over unpaid invoices with Venezuela’s state-owned oil company, PDVSA.
According to the DoJ, PetroSaudi had won a contract with PDVSA in 2010 for offshore drilling operations after using the 1MDB funds to purchase “two second-hand and ageing drill ships”.
The report said that when PDVSA refused to pay PetroSaudi’s invoices for the drilling in Venezuela, PetroSaudi sought payment through a standby letter of credit from a Portuguese bank and that in 2015, PDVSA challenged PetroSaudi’s entitlement to this bank guarantee at an arbitration tribunal.
PetroSaudi won the case and last year was awarded about $380m(RM1.54bil), the majority of which had been placed in Clyde & Co’s escrow account.
A spokesperson for Clyde & Co had said that the funds were the proceeds of the standby letters of credit and that the court of appeal had ruled that PetroSaudi was entitled to receive the money.
“Our involvement only arises because we held the funds to the order of and at the direction of an arbitration tribunal, ” said the spokesperson.
However, earlier this month the DoJ told a federal court in California the funds were the proceeds of the fraud on 1MDB.
PetroSaudi - which is contesting the DoJ’s forfeiture claim - maintains the money was generated through legitimate business.
The report added that in another twist, PetroSaudi sued Clyde & Co late last year after they refused to make payments from its escrow account.
Documents show the law firm said it feared criminal charges if it made any transfers from the account, said the report.
PetroSaudi has asked the high court to compel Clyde & Co to transfer funds.
Clyde & Co declined to answer questions about when it first learned of the allegations against PetroSaudi and refused to comment on the due diligence it had conducted to ensure the funds at the heart of the dispute with PDVSA were not the proceeds of crime.
Its spokesperson said the firm “holds itself to the highest professional and ethical standards” and “will continue to fully comply with our legal and regulatory obligations as the case warrants”.
A lawyer for PetroSaudi and Obaid did not respond to the Guardian’s request for comments.