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Summary

1MDB and Najib Razak: case study

Prime minister of Malaysia's embezzlement of $731 million through a state-owned investment fund.

Najib Razak is the former prime minister of Malaysia, and this case concerns his connection with the 1Malaysia Development Berhad (1MDB) corruption scandal. 1MDB was a state-owned wealth fund set up in 2009 to finance infrastructure and foreign investment in Malaysia. The fund's purpose was to boost the country's economic development. The international exposure of 1MDB was raised in 2015 when Malaysian officials were involved in arranging bonds worth of billions of dollars, with Goldman Sachs playing a prominent role in the financial arrangements – the CEO was reporting directly to Razak – arranging three bonds worth $6.5 billion for 1MDB with fees totalling $593 million, much higher than the average fees for equivalent work.

Between 2009 and 2014, Razak's associates embezzled more than $4 billion from the 1MDB fund, out of which $750 million was paid into his personal bank accounts in Switzerland, Singapore and the US. Razak and his associates, including his wife, had expended millions of dollars for their personal use, which included purchasing a $260 million yacht and a $35 million private jet, and accruing $85 million in Las Vegas gambling debts. In 2015, 1MBD's activities came under scrutiny when it missed payments owed to banks and bondholders, and an investigation was initiated. In the same year, some 227,000 leaked documents led to allegations that Razak had personally received $731 million from 1MBD just before the 2013 election, which his United Malays National Organisation (UMNO) party had won. The documents were leaked by whistleblower Xavier Justo who took refuge in Thailand; however, he was arrested and imprisoned after a guilty plea extracted under duress.

In response to the allegations, the Malaysian anti-corruption agency (MACC) launched an investigation which was stopped by Razak, who fired the attorney general. He further sacked four ministers who had raised concerns about the scandal and ordered the arrest of four officials working for the MACC (Ellis-Petersen 2020). Similarly, any international cooperation for ongoing corruption investigations in the US, Switzerland and Singapore was also terminated. This resulted in the appointment of a new attorney general in 2016 who cleared the prime minister of the alleged wrongdoing and declared that the issue had “comprehensively been put to rest”.