NY law firm held funds taken from 1MDB, says report
US DoJ document names Shearman & Sterling as transit point for money misappropriated from 1MDB and used in multi-million dollar asset purchases.
PETALING JAYA: A law firm in New York has been identified as a key transit point for money that had allegedly been misappropriated from 1MDB and used in multimillion-dollar deals.
The civil suits filed by the United States Department of Justice (DoJ) in Los Angeles on Wednesday, had named Shearman & Sterling LLP as the owner of a trust account through which illicit funds flowed for the purchase of luxury real estate and private jets in the US, the Wall Street Journal reported.
The DoJ had filed suits on Wednesday saying that over US$3.5 billion was misappropriated from 1MDB.
In its suits, the DoJ said it sought to seize assets “involved in and traceable to an international conspiracy to launder money misappropriated from 1MDB”.
Among the assets purchased with money parked in the Shearman account, were a Beverly Hills mansion and hotel, a New York penthouse, a New York apartment building, a private jet and a major Hollywood motion picture.
According to WSJ, Shearman is an old New York firm known for handling big cross-border deals and project finance work, and none of its lawyers are accused of wrongdoing. However, the DoJ action has shed some light on the supporting role law firms can play in alleged criminal activity.
“Lawyers can unwittingly provide a smoke screen for people who want to launder money,” WSJ quoted legal ethics expert Stephen Gillers of the New York University School of Law, as saying about the legal fraternity in general.
WSJ added that they tried to contact Shearman representatives for comment on the issue, but were unsuccessful.
In the US, lawyers are not obliged to enquire as to the source of funds that their clients transfer to them for deals and other projects. However, some legal ethics experts have argued that lawyers should know, and must look out for potential warning signs that they are not handling “dirty money”.
The DoJ suits don’t target any individuals but instead seek the seizure of assets purchased in the US with allegedly corrupt money.
The suits detail hundreds of millions of dollars transferred in and out of Shearman’s “interest on lawyer account,” a type of account used by law firms to hold client funds for future use, like a deal closing, the WSJ reported.
Court filings say 11 transfers totalling US$368 million were sent into the Shearman account between October 2009 and October 2010 from a Swiss bank account, which prosecutors say contained US$1 billion siphoned from 1MDB, the report added.
The same Shearman account was then used to transfer out US$85 million in various transactions, including to Las Vegas casinos, a Hong Kong jeweller, an interior designer and yacht rental services, over an eight-month period beginning October 2009.
The Shearman account was referred to in 89 instances in the DoJ’s 136-page document filed in court. There were other law firms implicated as well, but much fewer times than Shearman.
The DoJ alleged offences were committed over a four-year period and involved multiple individuals, including Malaysian officials and their associates, who conspired to fraudulently divert billions of dollars from 1MDB.
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It specifically named Prime Minister Najib Razak’s stepson Riza Aziz, Low Taek Jho (better known as Jho Low), and Abu Dhabi government officials Khadem al-Qubaisi and Mohamed Ahmed Badawy Al-Husseiny.