The 1MDB global corruption scandal has toppled a government, ensnared a Wall Street powerhouse and set off investigations across the globe. The proposed settlement was filed Wednesday in a California court.
It would be the most significant win for the DoJ’s Kleptocracy Asset Recovery Initiative since it was set up almost a decade ago to prevent the US from becoming a safe haven for stolen money.
The deal, if approved by a federal judge, would help resolve forfeiture cases tied to Low, better known as Jho Low, who prosecutors say orchestrated the theft of more than US$4 billion from 1MDB that ended up paying for a private jet, a superyacht, mansions, diamonds and even Hollywood movie productions. The agreement doesn’t include an admission of guilt or wrongdoing. It’s unclear whether it affects the criminal charges against Low in the US.
”We were pleased to help negotiate this historic resolution in order to preserve the tremendous value of assets involved,” Chris Christie, the former governor of New Jersey said in a statement. His law firm represents Low.
“It is one of the largest civil forfeiture settlements in US history and represents a voluntary return of each and every asset claimed by the DoJ.”
The flurry of forfeiture complaints filed initially by the DoJ in 2016 connected big purchases in the US to the proceeds of a crime. But even after assets are seized, the proceeds from them can end up in legal limbo until a court awards judgment in favour of the US or, as in this case, reaches a settlement. The two sides negotiated a deal to avoid the legal costs and uncertainty of extended litigation.
The case laid out the ways in which money meant for economic development in Malaysia found its way past bank watchdogs and ended up paying for the lavish lifestyle of Low and his associates.
Much of the money was raised by Goldman Sachs Group Inc. The 1MDB episode has turned into a major reputational problem for the New York-based bank, which has been in conversations with the US and Malaysian governments over a monetary settlement for its involvement in the 1MDB scandal. A former senior executive at the firm has pleaded guilty to his role.
The DoJ settlement would allow it to recover proceeds from properties in Los Angeles, New York and London, and the sale of a Bombardier jet. Low is also expected to surrender his claim to a superyacht that has already been seized by the Malaysian government and sold. In all, a settlement would resolve more than a dozen forfeiture lawsuits.
Several of those properties have been sold, and proceeds are being held for restitution payments.
“I am very pleased” that a global settlement has been reached, Low said in a statement distributed by his representatives. The “agreement builds on a series of successful prior agreements negotiated withe the US Department of Justice and is a result of good faith discussions,” he said.
Money taken from 1MDB was also funnelled into private-equity investments. The appreciation in the value of those stakes is likely to represent the largest chunk of the money to be recovered by the US government.
The most noteworthy of them was Low’s stake in EMI Music Publishing, which is now fully controlled by Sony Corp. His original investment of just over US$100 million grew to more than US$415 million. That stake has since been liquidated, and the proceeds are being held pending the outcome of the forfeiture lawsuits.