1MDB used as Ponzi scheme to bribe officials, says Swiss A-G

Former Goldman Sachs banker Tim Leissner was in talks with US prosecutors, the Wall Street Journal reported on Monday.
Former Goldman Sachs banker Tim Leissner was in talks with US prosecutors, the Wall Street Journal reported on Monday.

Swiss authorities investigating six people for alleged involvement; Najib not under probe

KUALA LUMPUR • Malaysia's economic development fund 1Malaysia Development Berhad (1MDB) was used as a Ponzi scheme by a clutch of conspirators to pay bribes and enrich themselves, Switzerland's top prosecutor has said.

The Swiss authorities are investigating six people for their alleged involvement in the multi-billion dollar 1MDB scandal and two Swiss banks - Falcon Private Bank and BSI SA - remain under suspicion, Swiss Attorney-General Michael Lauber told reporters yesterday in Putrajaya following a meeting with his Malaysian counterpart Tommy Thomas.

1MDB is at the centre of money laundering investigations in at least six countries, including Switzerland, Malaysia and the United States.

Switzerland has been investigating how billions of dollars earmarked for economic development through 1MDB were diverted and made their way into Swiss banks for the personal enrichment of the accused.

"We think it was a pretext, it was kind of a Ponzi scheme," Mr Lauber said. "It was used for bribery of foreign officials, it was used for paying interest, it was used for motivating new officials to run against the legal requirements or it was just simply to reward them."

Mr Lauber did not identify any of the people he was referring to in his comments.

The Swiss Attorney-General's Office said in a statement that the six under investigation are two former officials from 1MDB, two former officials from Abu Dhabi sovereign funds and two officials from the Saudi energy group PetroSaudi. It said former Malaysian prime minister Najib Razak was not a target of the probe.

Najib was charged in Kuala Lumpur last Wednesday with corruption regarding payments received by him from SRC International, a former unit of 1MDB. He has denied any wrongdoing and pleaded not guilty to the charges.

Swiss prosecutors in May revealed they had opened criminal proceedings into two former officials of PetroSaudi. Lawyers for PetroSaudi have denied any wrongdoing.

Mr Lauber said about US$7 billion (S$9.5 billion) of funds from 1MDB and its former unit SRC International flowed through the global financial system from 2009 to 2015, and he was still assessing how much of that was misappropriated.

Meanwhile, the Wall Street Journal reported on Monday that former Goldman Sachs banker Tim Leissner was in talks with US prosecutors that would involve his cooperation with the government's criminal fraud probe into 1MDB and Goldman.

Mr Leissner, a one-time Goldman partner and South-east Asia chairman, has not been charged. A lawyer for Mr Leissner also declined comment.

A Goldman Sachs spokesman told Reuters that since suspending Mr Leissner, it had "discovered certain activities he undertook that were deliberately hidden from the firm, which we have brought to the attention of the relevant authorities who continue to receive our full cooperation".

Separately, Malaysian officials investigating the 1MDB scandal plan to meet US officials in Washington, sources familiar with the plans told Reuters. The visit could take place before the end of the month.

In another development, the request by Malaysian police to their counterparts in Macau to send a team there to arrest elusive businessman Low Taek Jho, wanted to assist in the 1MDB probe, is being verified. Macau Judiciary Police told The Straits Times yesterday it "will provide the information as requested by the country concerned as soon as possible".

BLOOMBERG, REUTERS, THE STAR/ASIA NEWS NETWORK

A version of this article appeared in the print edition of The Straits Times on July 11, 2018, with the headline '1MDB used as Ponzi scheme to bribe officials, says Swiss A-G'. Print Edition | Subscribe