The fall of a 100-year-old coalition: the world's biggest financial scandal

By SASHEENA MONERASINGHE

In July 2020, the ex-prime minister of Malaysia, Najib Razak, was sentenced to 12 years imprisonment and fined RM210 million for his involvement in the fraudulent activity of 1 Malaysia Development Berhad (1MDB). 1MDB, set up in 2009, was supposed to be a Malaysian state fund used to promote development for the country through foreign investment and partnerships. Through close ties with Middle Eastern investors and top banks such as Goldman Sachs, the fund was able to gain billions through government bonds for projects, such as the US$10 billion Tun Razak Exchange: A 70-acre development aimed at making Kuala Lumpur an international financial hub.


How then did a promising economic venture result in the fall of the 100 yr old coalition Barisan National (BN) to which Najib belonged to?


Although on the surface it appeared to be a promising economic venture, in actual fact the vast sums borrowed were being siphoned into bank accounts in Switzerland, Singapore, and the US. These sums were being used by Najib to pay off politicians and fund the life of his avaricious wife Rosmah. Rosmah is well known for her expensive shopping habits and in 2018, Malaysian police seized 567 designer handbags, 12,000 jewellery items, 234 sunglasses, and 423 watches from their home.


Other key players in these fraudulent activities include Riza Aziza, Najib’s son and Jho Low. Aziza was alleged to have received $248million from the fund which he then used to finance major Hollywood movies such as The Wolf of Wall Street, Dumb and Dumber 2, and Daddy’s Home. Jho Low, a fugitive who is believed to be living in China, used his share to fund his ostentatious life which included purchasing mansions in Los Angeles and Manhattan, paintings by Monet and Van Gogh, as well as expensive night outs with celebrities such as Paris Hilton and Miranda Kerr.


Between 2009 and 2012 the money-laundering and abuse of power went unchallenged. This was until 1MDB began failing to pay its debts, resulting in increasing investigations. 207,000 leaked documents were handed to a British journalist, Clare Rewcastle Brown, located in Sarawak. Under increasing pressure, the Malaysian anti-corruption agency was about to issue a warrant for Najib’s arrest when Najib quickly acted. He fired the Attorney General at the time and sacked the Deputy Prime Minister, Muhyiddin Yassin, who was also a 1MDB critic. The New Attorney General, appointed by Najib, cleared Najib’s name of any wrongdoing, claiming that any money received by Najib was simply a donation from the Saudi Prince himself. Najib’s government also refused to cooperate with investigations in the United States, Singapore and Switzerland. This was a huge loss to the people of Malaysia as it dampened any hope of freeing the country from the corruption created by the ruling government. Many people believed that Najib and his associates would never have to pay the price for their actions.


However, between 2015 and 2018, the extent of embezzlement and fraud within the country grew to absurd amounts. Accusations surfaced that Najib had even siphoned money from Tabung Haji. Tabung Haji is the Malaysian hajj pilgrims fund board and it facilitates savings for the pilgrimage to Mecca through investments. Najib’s political party’s largest support base was the Malay-Muslim population of Malaysia and accusations as such would definitely anger this support base and cause them to turn. All these built-up allegations and distrust resulted in the victory of a new political party: Pakatan Harapan, led by a former Prime Minister, Mahatir Mohamad.


Mere days after his loss in the elections, Najib’s properties were searched by police, and he and his wife were barred from leaving the country. In total, Najib faces 42 charges across five separate trials. Not only that, but companies involved like Goldman Sachs have been prosecuted. Goldman Sachs has reached a settlement of US$3.9 bn related to its underwriting of three bond-offerings which raised US$6.5 bn for 1MDB.


Image: Unsplash/Christopher Bill