Yes, Prime Minister

Mohamed Apandi, Malaysia’s attorney general, surprised few people when he announced in the last week of January that he was closing the inquiry into the transfer of hundreds of millions of dollars into the personal bank accounts of Prime Minister Najib Razak. Apandi, who was hand-picked by Najib, announced that “no laws were broken” by the Prime Minister and that he had ordered the country’s anti-corruption commission to close the investigations into the sources of the funds that the Prime Minister had received. He claimed that out of the more than $700 million found in the Prime Minister’s personal accounts, $681 million was a “personal donation” from the Saudi royal family.

“I am satisfied that there was no evidence to show that the donation was a form of gratification given corruptly,” a statement from the attorney general’s office said. It also claimed that the Prime Minister had returned $620 million to the Saudi royal family. The attorney general did not bother to explain where the rest of the money “donated” by the Saudi royal family was spent or to whom the money was returned. The statement also seemed to suggest that Najib was unaware of the fact that another $10 million was transferred into his account by the country’s debt-ridden 1Malaysia Development Berhad (1MDB) sovereign wealth fund. The Prime Minister, Apandi’s statement said, “was of the belief” that the money he had spent from his accounts had originated from the funds deposited by the Saudi royal family.

The Prime Minister’s supporters have been claiming that the Saudi gift was to help the ruling party win the tightly contested elections of 2013. Even if this claim is true, it would constitute a violation of the country’s electoral laws.

Apandi had replaced Abdul Gani Patail, who was forced out of office last year after he promised to carry out a thorough investigation into the allegations levelled against the Prime Minister. Muhyidin Yassin, the Deputy Prime Minister, too, was sacked for calling for an impartial inquiry into the charges against Najib. It was evident from the beginning that Najib was determined to brazen it out regardless of the political consequences. Ever since revelations of huge sums of money being diverted from 1MDB began tumbling out in June last year, the government has been on overdrive, arresting whistle-blowers and muzzling the media. One Malaysian newspaper was shut down for three months. Apandi’s investigations since then have come in for a lot of criticism from the opposition and from influential voices within the ruling United Malay National Organisation (UMNO).

In a statement, Najib claimed vindication and said that the allegations against him had been “comprehensively put to rest”. However, the clean chit given by the attorney general has further muddied the political situation. The opposition is up in arms and wants further investigations into the government’s diversion of billions of dollars of funds belonging to 1MDB. Najib is the chairman of the board of advisers of 1MDB.

Kleptocracy Initiative

Adding to the woes of the Prime Minister is an investigation by “Kleptocracy Initiative”, a unit of the United States Justice Department, into the allegations of corruption involving his close relatives and associates. It had previously seized properties belonging to the relatives of politicians from countries such as Nigeria, Equatorial Guinea, South Korea and Taiwan. All these countries have close political relations with the U.S. The U.S. media had run stories of huge investments by Najib’s stepson, Riza Aziz, and his wife in prime properties in New York and other cities. The transactions were done by shell companies. Much of the 1MDB money was also routed through shell companies. According to reports, a U.S. federal grand jury is looking into the allegations.

After he took over as Prime Minister in 2009, Najib struck up a close personal friendship with U.S. President Barack Obama and steered the country’s foreign policy in a direction so as to get closer to Washington. He may need all the help from his friend to bail him out of the mess he currently finds himself in. John Mallot, a former U.S. ambassador to Malaysia, said that Najib might now “be really sweating” over whether the Obama administration would make an announcement about the ongoing investigations. He said that the U.S. government made a statement only after it had compiled foolproof evidence.

Suspicious assets

Just days after the attorney general exonerated the Prime Minister, the Swiss government announced that there was a possibility that funds exceeding $4 billion were misappropriated from state-owned companies like 1MDB. The Swiss attorney general’s office said that it would be sending a dossier containing “significant evidence of illegal transactions and wrongdoings” to the Malaysian authorities concerned. Malaysia’s attorney general had promised full cooperation for the investigations in September last year. But apparently this cooperation has not been forthcoming. Instead, the Malaysian authorities have decided to close the case revolving round the $700 million deposited in the Prime Minister’s account. This amount seems to be only the tip of the iceberg.

The Swiss authorities have said that they believe that public money was misappropriated and transferred into the bank accounts of Malaysian and United Arab Emirates (UAE) nationals. 1MDB had entered into business deals with a UAE state-owned company, Aabar, in 2013. The middleman who negotiated the deal was a businessman, Jho Low, a close friend and business associate of Najib’s family. He was the one who helped the Prime Minister’s stepson acquire prime residential properties in New York City. The Swiss authorities have requested Kuala Lumpur to cooperate in the ongoing investigations. The Swiss attorney general’s office, however, pointedly noted that none of the Malaysian state-owned companies whose funds had gone missing had so far bothered to make any comments. Switzerland had frozen “tens of millions of dollars” in suspicious assets last year.

Around the same time, Singapore announced that “it had seized a large number of bank accounts” as part of its investigations into a company closely linked with Najib and 1MDB. Singapore has said that it is “actively” probing allegations of money laundering relating to 1MDB and was in touch with U.S., Swiss and Malaysian authorities regarding this. “Singapore does not tolerate the use of its financial system as a refuge or conduit for illicit funds,” a joint statement issued by the Singapore Monetary Authority and the Singapore Police said.

The announcements of the Swiss and Singaporean governments are obviously a signal to the Malaysian government that their investigations will not be derailed by the decision to give Najib a clean chit. Hong Kong is also carrying out separate investigations. Malaysia’s attorney general said in the last week of January that there was no need to cooperate with foreign authorities on investigations surrounding the Saudi “donation” to Najib.

To add to Najib’s discomfiture, the Saudi authorities have denied making any large political payments or loans to either the Malaysian government or individuals. A Saudi official told the U.S. media that a royal gift of such a big amount would be “unprecedented”. Saudi Foreign Affairs Minister Adel el-Jubeir, while being careful to not contradict the Malaysian attorney general’s “not guilty” verdict, said that he did not think that the money had come from the Saudi government or that it was a political donation. He said that he believed that the funds in the Prime Minister’s account came from a private Saudi individual and that it was a business investment. A member of the royal family, who remained unnamed, told TheNew York Times in the first week of February that the money had indeed come from a Saudi prince but clarified that it was not a donation. He claimed that it was connected to a business deal. A small oil company called PetroSaudi was involved in a joint venture with 1MDB.

Opposition demand

Malaysia’s opposition has demanded that the attorney general provide evidence to prove that the Prime Minister had not used 1MDB to launder political slush funds. The opposition has said that even if the money in the Prime Minister’s bank account came from a mysterious Arab donor, the attorney general should ascertain that the money did not originally come from 1MDB funds.

Apandi has refused to either divulge the findings of his investigations or answer questions. He said in the first week of February that he had “no further comments” to make on the subject and that he stood by his decision to completely exonerate the beleaguered Prime Minister. The Malay political establishment backing Najib is hoping that Apandi’s certificate will bring “closure” to the biggest scandal to hit the country since independence.

But fissures are emerging in the ruling party, and public opinion could turn decisively against the Prime Minister if more shocking revelations tumble out. Soon after the attorney general’s report, Mukhriz Mahathir, the Chief Minister of Kedah State, was ousted from his position. He and his father, Mahathir Mohammed, the former Prime Minister, have been vocal in their criticism of corruption and cronyism. Mukhriz said that the real reason for his ouster was his criticism of the Prime Minister. Mukhriz said that “scandal after scandal” in Malaysia “was traumatising all of us”.

Malaysia’s anti-corruption commission has said that it will refer the attorney general’s judgment that the Prime Minister had done no wrong to a special panel for deliberation. But under the country’s Constitution, the decision to initiate criminal prosecution lies solely with the attorney general. Last year, Apandi had dismissed Malaysia’s central bank’s plea for criminal proceedings against 1MDB for allegedly breaching the country’s Exchange Control Act.