United States Seeks to Recover More Than $1 Billion Obtained from Corruption Involving Malaysian Sovereign Wealth Fund

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Source: US Department of Justice, Office of Public Affairs

[For a transcript of the press conference, please click here]

FOR IMMEDIATE RELEASE
Wednesday, July 20, 2016

 

United States Seeks to Recover More Than $1 Billion Obtained from
Corruption Involving Malaysian Sovereign Wealth Fund

Attorney General Loretta E. Lynch announced today the filing of civil forfeiture complaints seeking the forfeiture and recovery of more than $1 billion in assets associated with an international conspiracy to launder funds misappropriated from a Malaysian sovereign wealth fund.  Today’s complaints represent the largest single action ever brought under the Kleptocracy Asset Recovery Initiative.

Attorney General Lynch was joined in the announcement by Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, FBI Deputy Director Andrew G. McCabe and Chief Richard Weber of the Internal Revenue Service-Criminal Investigation (IRS-CI).

According to the complaints, from 2009 through 2015, more than $3.5 billion in funds belonging to 1Malaysia Development Berhad (1MDB) was allegedly misappropriated by high-level officials of 1MDB and their associates.  With today’s complaints, the United States seeks to recover more than $1 billion laundered through the United States and traceable to the conspiracy.  1MDB was created by the government of Malaysia to promote economic development in Malaysia through global partnerships and foreign direct investment, and its funds were intended to be used for improving the well-being of the Malaysian people.  Instead, as detailed in the complaints, 1MDB officials and their associates allegedly misappropriated more than $3 billion.

“The Department of Justice will not allow the American financial system to be used as a conduit for corruption,” said Attorney General Lynch.  “With this action, we are seeking to forfeit and recover funds that were intended to grow the Malaysian economy and support the Malaysian people.  Instead, they were stolen, laundered through American financial institutions and used to enrich a few officials and their associates.  Corrupt officials around the world should make no mistake that we will be relentless in our efforts to deny them the proceeds of their crimes. ”

“According to the allegations in the complaints, this is a case where life imitated art,” said Assistant Attorney General Caldwell.  “The associates of these corrupt 1MDB officials are alleged to have used some of the illicit proceeds of their fraud scheme to fund the production of The Wolf of Wall Street, a movie about a corrupt stockbroker who tried to hide his own illicit profits in a perceived foreign safe haven.  But 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.”

“Stolen money that is subsequently used to purchase interests in music companies, artwork or high-end real estate is subject to forfeiture under U.S. law,” said U.S. Attorney Decker.  “Today’s actions are the result of the tremendous dedication of attorneys in my office and the Department of Justice, as well as law enforcement agents across the country.  All of us are committed to sending a message that we will not allow the United States to become a playground for the corrupt, a platform for money laundering or a place to hide and invest stolen riches.”

“The United States will not be a safe haven for assets stolen by corrupt foreign officials,” said Deputy Director McCabe.  “Public corruption, no matter where it occurs, is a threat to a fair and competitive global economy.  The FBI is committed to working with our foreign and domestic partners to identify and return these stolen assets to their legitimate owners, the Malaysian people.  I want to thank the FBI and IRS investigative team who worked with the prosecutors and our international partners on this case.”

“Today’s announcement underscores the breadth of the alleged corruption and money laundering related to the 1MDB fund,” said Chief Weber.  “We cannot allow the massive, brazen and blatant diversion of billions of dollars to be laundered through U.S. financial institutions without consequences.”

As alleged in the complaints, the members of the conspiracy – which included officials at 1MDB, their relatives and other associates – allegedly diverted more than $3.5 billion in 1MDB funds.  Using fraudulent documents and representations, the co-conspirators allegedly laundered the funds through a series of complex transactions and fraudulent shell companies with bank accounts located in the Singapore, Switzerland, Luxembourg and the United States.  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.

In seeking recovery of more than $1 billion, the complaints detail the alleged misappropriation of 1MDB’s assets as it occurred over the course of at least three schemes.  In 2009, the complaints allege that 1MDB officials and their associates embezzled approximately $1 billion that was intended to be invested to exploit energy concessions purportedly owned by a foreign partner.  Instead, the funds were transferred through shell companies and were used to acquire a number of assets, as set forth in the complaints.  The complaints also allege that the co-conspirators misappropriated more than $1.3 billion in funds raised through two bond offerings in 2012 and $1.2 billion following another bond offering in 2013.  As further detailed in the complaints, the stolen funds were laundered into the United States and used by the co-conspirators to acquire and invest in various assets.  These assets allegedly included high-end real estate and hotel properties in New York and Los Angeles, a $35 million jet aircraft, works of art by Vincent Van Gogh and Claude Monet, an interest in the music publishing rights of EMI Music and the production of the 2013 film The Wolf of Wall Street.

The FBI’s International Corruption Unit and the IRS-CI investigated the case.  Deputy Chief Woo S. Lee and Trial Attorney Kyle R. Freeny of the Criminal Division’s Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorneys John Kucera and Christen Sproule of the Central District of California prosecuted the case.  The Criminal Division’s Office of International Affairs provided additional assistance.

The Kleptocracy Asset Recovery Initiative is led by a team of dedicated prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section, in partnership with federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered asset to benefit the people harmed by these acts of corruption and abuse of office.  Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov orhttps://tips.fbi.gov/.

 

Versi Bahasa Malaysia: Kenyataan Pejabat Peguam Negara Amerika Syarikat berkenaan siasatan 1MDB

 


Source: US Department of Justice, Office of Public Affairs

Assistant Attorney General Leslie R. Caldwell Delivers Remarks at Press Conference
Announcing Significant Kleptocracy Enforcement Action to Recover More Than $1 Billion
Obtained from Corruption Involving Malaysian Sovereign Wealth Fund

United States ~ Wednesday, July 20, 2016

Remarks as prepared for delivery

Thank you, Attorney General [Loretta E.] Lynch.

This is the largest single action ever brought by the Kleptocracy Initiative, and a significant milestone in the department’s ongoing fight against global corruption.  The complaint filed today in federal court details the complex web of transactions these co-conspirators used to launder billions of dollars that they stole from the people of Malaysia.  We have several speakers today who will describe various aspects of this matter.

My remarks will focus on the allegations in the complaint involving two bond offerings in 2012 through which 1MDB (1Malaysia Development Berhad) raised money that was siphoned off by the corrupt officials and their associates.  The stated purpose of the 2012 bond offerings was to allow 1MDB to invest, for the benefit of the Malaysian government, in certain energy assets.  But almost immediately after receiving the proceeds of these two bond issues, roughly 40 percent of the funds raised—approximately $1.37 billion—was transferred out of 1MDB’s accounts.  The money went into the Swiss bank account of a shell company incorporated in the British Virgin Islands.  The complaint alleges that the name of this shell company was intended to suggest an affiliation with a legitimate company involved in the bond offering but, in fact, the Swiss bank account was controlled by corrupt officials.

From Switzerland, the corrupt officials and their associates transferred money using a complex series of transactions that involved still more shell companies and bank accounts across the globe.  Eventually, more than $230 million found its way into accounts controlled by shell companies whose beneficial owner was a close relative of a senior 1MDB official.  That individual used the stolen funds to buy luxury real estate in the United States and other assets, including funding a California-based motion picture company, Red Granite Pictures.

Red Granite Pictures, in turn, used more than $100 million involved in the theft from 1MDB to finance the award-winning 2013 film The Wolf of Wall Street.  Of course, neither 1MDB nor the people of Malaysia ever saw a penny of profit from the film, or from any other investments made with money diverted from 1MDB.  Instead, that money went to a relative and associates of the corrupt officials.  Because the assets used to finance the film were, as alleged, laundered money, future rights to that film are subject to the forfeiture complaint filed today.  According to the allegations in the complaint, this is a case where life imitated art.  The associates of these corrupt 1MDB officials are alleged to have used illicit proceeds of their fraud scheme to fund the production of The Wolf of Wall Street, a movie about a corrupt stockbroker who tried to hide his own illicit profits in a perceived foreign safe haven.  But 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.

This case is yet another example of what happens when individuals and criminal organizations are able to use shell companies to move, and ultimately conceal, the proceeds of crime and kleptocracy.  Gaps in the legal regimes across the globe—including in the United States—allowed these criminals to avoid disclosing the ultimate beneficial owners of the accounts to which 1MDB funds were diverted.  Stronger laws and more effective frameworks for international cooperation are needed to close these gaps and overcome the challenges faced by law enforcement when we investigate international corruption, money laundering and other cross-border crimes.

In this case, the significant assistance we received from our international partners was critical in identifying and restraining assets.  That cooperation and the action we are taking today should send a message to kleptocrats and other criminals that the United States is not a safe haven for their stolen money, and that they cannot evade law enforcement authorities simply by laundering money through multiple jurisdictions and through a web of nominees, shell corporations and other legal structures designed to frustrate justice.  The department will continue to work to track and seize U.S. and other assets of these corruption schemes wherever they arise, no matter how secretive, no matter how sophisticated and no matter how sprawling.