NEW YORK - A US federal grand jury is investigating allegations of corruption involving Malaysian Prime Minister Najib Razak and people close to him over property purchases in the United States and a US$681 million (S$964 million) payment made to what is believed to be Najib's personal bank account.
The New York Times (NYT) reported on Monday (Sept 21) that the inquiry, by a unit of the Justice Department that investigates international corruption, is focused on properties in the US that were purchased in recent years by shell companies that belong to Najib's stepson Riza Aziz, as well as other real estate connected to a close family friend, businessman Low Taek Jho, also known as Jho Low.
The probe was opened partly in response to an examination by NYT of condominiums at the Time Warner Centre in Manhattan whose ownership is hidden behind shell companies, said the report, citing people familiar with the case.
In one article, NYT documented more than US$150 million in luxury residential properties connected either to Riza Aziz, a movie producer, or to Low. The properties include a penthouse at the Time Warner Centre purchased for US$30.55 million by a shell company connected to Low's family trust, said the report. Companies tied to Low's family have also purchased a US$39 million mansion on Oriole Drive in the Hollywood Hills in Los Angeles, the L'Ermitage Hotel in Beverly Hills and part of the Park Lane Hotel in New York.
Through shell companies, Najib's stepson reportedly purchased a US$33.5 million condominium at the Park Laurel on 63rd Street in Manhattan, a home in Beverly Hills known as the pyramid house for a gold pyramid in its garden, as well as other properties in the Los Angeles area. The Park Laurel condo and the Beverly Hills home were owned by shell companies connected to Low's family before being transferred to shell companies tied to Riza Aziz.
Shell companies - trusts, limited liability companies and other entities - are commonly used in real estate for privacy, wealth transfer or shared ownership. They also make it difficult, however, for law enforcement authorities and others to trace the true owners of property, NYT reported.
In the case of the Beverly Hills home, the property was transferred without any public filings, with Low's family trust selling ownership of the shell company to a corporate entity controlled by Najib's stepson, according to NYT. Low's spokesman had said this year that the transfers were done at fair market value and at arm's length.
US investigators are also looking at a US$681 million payment made to what is believed to be Najib's personal bank account. The payment falls under US jurisdiction because it was routed through Wells Fargo, an American bank, said the NYT.
In July, the Wall Street Journal (WSJ) reported that hundreds of millions of dollars flowed into Najib's accounts at AmBank, Malaysia's fifth largest lender. The funds are suspected to have originated from Malaysia's state investor, 1Malaysia Development Berhad (1MDB). The inflows included two payments totalling US$681 million from Wells Fargo Bank in 2013.
The Malaysian leader has denied any wrongdoing and has said the payment was a "political donation" to his Umno party from the Middle East. His office had also told NYT earlier this year that he was not involved in the US properties connected to his stepson and to Low.
The NYT, citing people knowledgeable about the case, said the US investigation is still in its early days, and it could take years to determine if any federal laws were broken.
The inquiry is being run by the Justice Department's Kleptocracy Initiative, which has seized properties in the US owned by relatives of politicians from Equatorial Guinea, Nigeria, South Korea and Taiwan.
Najib's office did not comment on the Justice Department inquiry, said the newspaper. His office had told NYT earlier this year that he was not involved in the US properties connected to his stepson and to Low.
A representative for Riza Aziz told NYT that he was not involved in any investigation, adding that "there has never been anything inappropriate" about his business activities.
A spokesman for Low said that the businessman had not been notified that he was the subject of any investigations, and that his business "adheres to all relevant regulatory requirements."
A spokesman for the Justice Department declined to comment, according to NYT.
Questions about where Low and Riza Aziz obtained money for the US properties have helped fuel political unrest in Malaysia, where several political leaders in the opposition and in Najib's Umno party have called for the prime minister to step down.
Several countries are investigating allegations that money from 1MDB is missing. This month, Swiss authorities said they had frozen several individuals' bank accounts, and investigations are also underway in Hong Kong and Singapore as well as in Malaysia.