With the humidity reaching 94% in Kuala Lumpur, it was a torrid week for Malaysians. But the prime minister, Najib Razak, had more reason than most to feel hot under the collar after the influential former premier Mahathir Mohamad called for his resignation over allegations of corruption in the Wall Street Journal, and challenged him to open his bank accounts to inspection.
The escalating scandal saw police this week raid the head offices of the state-owned 1Malaysia Development Berhad (1MDB), launched by Najib, who is also finance minister, in 2009. He also chairs the advisory board of the huge company, which emerged out of the Terengganu Investment Authority, a sovereign wealth fund, and is concentrated in the energy and property sectors. 1MDB raised funds by issuing bonds, but these have been downgraded to junk status by rating agencies concerned by the company’s opaque dealings. It now owes $11bn, Reuters said.
The WSJ alleged in June that 2.6bn ringgit ($685m) was moved through government agencies, banks and companies linked to the debt-ridden strategic development company before ending up in Najib’s accounts.
Najib, 61, has denied any wrongdoing, saying ‘I am not a thief’, and claimed there was a political plot against him, Malay Mail Online reported. He wrote on his blog: ‘I would like to stress again that I have never taken 1MDB’s funds for personal use.’
Sarawak Report, a UK-based investigative news blog, has doggedly pursued the money trail from 1MDB, alleging that the funds were siphoned out of a joint venture with a Saudi firm, PetroSaudi, into which 1MDB invested $1bn in 2009. It claims the deal was initiated and managed by Jho Taek Low, a 33-year-old businessman. Low denied being more than an informal adviser to 1MDB, despite evidence to the contrary. MPs investigating 1MDB’s activities called on Low to explain his role.
The New York Times has reported that a $24m Manhattan apartment was bought by a shell company linked to Low in 2010 and sold on to Najib’s stepson, Riza Aziz. In the same year Low bought a mansion in Beverly Hills for $18m, which was also sold on to Aziz. The next year Low bought another apartment on Central Park for $30m. The WSJ also tied Low to 1MDB. Among the many lines of inquiry are the origins of $529m reportedly deposited between 2011 and 2013 into an account in Singapore controlled by Low.
The 33-year-old Low is known for his lavish lifestyle, travelling with a large entourage and spending tens of thousands of dollars a night partying with socialites such as Paris Hilton. (Sarawak Report was prevented from using pictures of Low over what it called a misuse of copyright law to conceal information, so replaced one of Low and Hilton with a photo of copulating giant tortoises.)
A photo published by Sarawak Report showed the main players on a huge yacht off the French Riviera (yours to rent for $500,000 a week): ‘Jho Low, the mastermind of the joint venture; Prince Turki, the owner of PetroSaudi; Prime Minister Najib Razak, the man in sole charge of 1MDB; his all-powerful wife Rosmah Mansor; Nor Ashman, the couple’s son; Tarek Obaid, the Director of PetroSaudi and Rosmah’s favoured daughter, Nooryana Najwa.’
The tangled web led to murder, the son of a banker alleges. Pascal Najadi’s father, Hussain, was gunned down in 2013 in Kuala Lumpur. Sarawak Report reported that the AmBank founder’s son believes his father was assassinated because of his concerns about high-level corruption. At their last meeting, Najadi said: ‘Dad then spoke about massive corruption … that they [people in power] had lost the plot in the sense that they recklessly and behind their own population’s backs raked in billions of ringgit from construction, oil and gas to defence and transportation.’
1MDB hit back on its website, asserting that its balance sheet was healthy and posting Najib’s ripostes: ‘[Mahathir’s] attacks in reality are not motivated by 1MDB—he is just using the company as an excuse to try and topple a serving prime minister. If 1MDB had never existed, [he] would find another reason.’
However, as far back as 2010, 1MDB was dogged by criticism of a lack of transparency, with the opposition MP Tony Pua questioning whether 1MDB’s reported 425m ringgit ($112m) profit was down to a government sleight and calling for the accounts to be published.
Last December 1MDB failed to repay a 2bn ringgit loan, Malay Mail Online reported, as borrowings rose 15% on the year. Fears of a costly government bailout for 1MDB caused concern over Malaysia’s sovereign rating and the currency fell to a five-year low against the dollar. By July the ringgit was at its weakest for 16 years.
And as the scandal ignited internationally, one MP, Raja Kamarul Bahrin, was asking in March why 2.5bn ringgit had been transferred by 1MDB to the Cayman Islands: ‘While we were busy in Parliament last year debating enhancements to the fine and jail terms on money-laundering crimes, we got news that our own government was transferring state funds to the world capital for money laundering, Cayman Islands.’
The leader of the opposition Democratic Action Party, Lim Kit Siang, called for a commission to investigate 1MDB: ‘We have the makings of the biggest financial scandal in the nation’s history … we may have the first resignation or removal of a prime minister in Malaysia because of a financial scandal.’
Mahathir has split the United Malays National Organisation (UMNO), the ruling party since Malaya’s independence in 1957, with the foreign minister, Anifah Aman, accusing Najib’s predecessor of being ‘irresponsible’ for ‘spreading lies and distortions’ and undermining his country, the Malaysia Chronicle reported, after Mahathir wrote an open letter to the NYT.
The 90-year-old Mahathir is not without his own critics. ‘He ran Malaysia like a demented despot,’ was the verdict of his former deputy, Anwar Ibrahim, over Mahathir’s pet causes. Some were grandiose (such as building a new administrative capital, unloved Putrajaya), some quixotic (such as creating a car industry from scratch, struggling Proton) but he also propounds paranoid and racist conspiracy theories, such as his belief that the 9/11 attacks on the World Trade Centre had to be the work of the CIA and Mossad (‘The Arabs never seem to be able to plan or strategise … They are not disciplined people’).
And the former prime minister, as the NYT notes, has a record of turning on protegés: he sacked his deputy, Anwar Ibrahim, in 1998 for ‘sodomy’ (Anwar is now in prison for the alleged offence) and he attacked his successor, Abdullah Badawi, for economic mismanagement in 2006, and helped put Najib in power.
Mahathir’s repeated criticisms over 1MDB have been greeted with a certain scepticism by those who say that the nexus of party politics and big business was just as murky during Mahathir’s 22 years in power.
‘Mahathir is being disingenuous,’ said Ibrahim Suffian, of the Merdeka Center. ‘What we are seeing today did not happen overnight. It’s been heading this way for decades.’
Rafizi Ramli, an opposition MP, said: ‘We have been talking about and highlighting 1MDB for the last five years, and although it slowly gained momentum as a national issue, things changed the moment Mahathir picked 1MDB as an issue to bring down Najib.
‘For the first time, a government scandal has reached the attention of both sides of the political divide … it’s a bipartisan issue.’
Ramli, founder of National Oversight and Whistleblowers (NOW), said the police decision to investigate the WSJ for revealing the information ‘will only lower the integrity of police and further shame the country’, Malysiakini reported.
Meanwhile, a survey by Merdeka found 69% of voters did not fully understand the 1MDB controversy. Some relief to Najib, but only 18% of voters were confident the government could handle the matter.
Few foreign commentators are either. The Financial Times concluded: ‘UMNO should change course before it steers Malaysia into dangerous waters. The party’s six decade-long rule appears to have inculcated in its leaders a sense that they are somehow both indispensable to and indivisible from the state.’
As if Najib did not have enough fronts on which to fight, a court overturned the acquittal of police over the murder of the Mongolian mistress of a former Najib aide in 2006. A blogger who reported alleged links between Najib and the case fled to Britain.
‘Najib has always denied any involvement in the crime, and there is no evidence to the contrary. But the case is a magnet for conspiracists. Some wonder whether Mr Najib’s political opponents encouraged the court to deliver a verdict that would return the case to the headlines,’ The Economist said.
The prospects are not looking good for the embattled Najib, who led UMNO to its worst election results ever in 2013. The Economist was warning in January that knives were out for the prime minister, remarking that it said much for his battered image that a bout of the E.coli stomach bug had helped his plummeting popularity.
Najib’s approval rating has been sliding from about 60% in 2013, down to 44% in July, Bloomberg reported. The anti-corruption watchdog Transparency International has urged Najib to relinquish his position as finance minister amid increasing concerns about the lack of public accountability.
Attempts to douse the ever-widening affair, such as using the Malaysian communications regulator to threaten people commenting online with jail under computer crime laws, are backfiring with comic results. Responding on social media failed to set many minds at rest, going by comments on the prime minister’s Facebook page.
And the Financial Times reported: ‘The hashtag 1MDBMovies went viral this week, spawning mock-ups of Mr Najib at the centre of film posters such as “Lord of the Ringgits”.’
What the opposition failed to do at the ballot box, allegations of corruption and UMNO in-fighting, with a leadership challenge rumoured, might achieve before long.