Switzerland’s prosecutor has indicted two former executives at PetroSaudi, the Geneva-based oil production company, for helping to embezzle $1.8bn from Malaysia’s sovereign wealth fund, 1MDB.
The charges are the latest twist in the sprawling international law-enforcement effort against former employees and associates of 1MDB, which was declared insolvent in 2018 amid allegations of massive fraud.
In 2020, Malaysia’s former prime minister Najib Razak was jailed by Malaysian authorities for his role as one of the main figures in, and beneficiaries of, the scandal.
For years while prime minister, he served as president of 1MDB’s advisory board, a position from which he authorised billions in transfers by the fund into opaque financial structures and suspicious trading ventures. Several hundred millions of dollars flowed into his own bank accounts.
Taek Jho Low, the Malaysian businessman alleged to have masterminded the theft and been its main beneficiary, thanks to his connections to Razak, is meanwhile still on the run.
Low became the public face of the scandal owing to his high-rolling lifestyle in America, where he lavished cash on parties and luxury goods to wheedle his way into Hollywood society.
As investigators have sought to bring those involved to justice, the focus of efforts to follow the money trail has been Switzerland: A large amount of 1MDB investments passed through the country and Low used Swiss bank accounts to stash hundreds of millions of money allegedly taken from 1MDB for his own use.
The Swiss federal prosecutor’s case charges two leading associates of Low in the country, who it says were crucial in orchestrating one of the alleged central frauds that looted money from 1MDB.
The indictment, a copy of which was filed with the Swiss Federal Criminal Court on Tuesday, alleges that the pair helped set up a fake joint venture between 1MDB and their own employer, PetroSaudi.
The purpose of the scheme was to convince the board of 1MDB to unwittingly invest in the company, which was presented as a bona-fide joint deal with the Saudis.
A meeting was even brokered in August 2009 on a super yacht, the Alfa Nero, off the coast at Cannes, between Razak and PetroSaudi’s founder, prince Turki bin Abdullah al Saud — who was not aware of the true nature of the transaction — to lend the deal an air of legitimacy, Swiss prosecutors said.
Later that year 1MDB wired $1bn in cash to the venture believing that PetroSaudi had, on behalf of Riyadh, transferred $2.7bn of assets into the new holding company. No PetroSaudi assets were ever transferred.
In reality, the company was a shell and Low transferred $700mn of the money from 1MDB straight into an account held in Switzerland under the name of a company he controlled.
It is alleged he then transferred $85mn to the two accused PetroSaudi employees who helped fake the terms of the deal for him.
In a second leg of the alleged fraud, the two helped Low to persuade 1MDB’s unwitting board to lend a further $830mn to the fake joint venture in the form of an Islamic Loan.
The money given to the two by Low funded a “lavish” lifestyle, the prosecutor alleges, including purchases of property in Switzerland and abroad, as well as high-end jewellery.
Swiss authorities have so far frozen $192mn of assets in Switzerland they have traced to 1MDB, not including property owned in the country.
Last month, former Goldman Sachs banker Roger Ng was sentenced by a New York court to a ten year prison term for his role in the scandal as one of Low’s main facilitators.
Goldman itself struck a $3.9bn settlement in 2020 to end a legal dispute with Malaysia over its role in having helped Low.