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The Wolf of the Tun Razak Exchange: Malaysia’s Former Prime Minister Faces Financial Scandal

A historic election in Malaysia. An intrepid reporter. A scandal so big, it’s being investigated by more than 10 different governments.

It was all supposed to come to a head this week, in the now-postponed corruption trial of Najib Razak. But how did we get here?

The first time I visited Malaysia, I noticed a strange phenomenon on the streets: almost everyone seemed to have black ink on one finger. Was this some kind of local custom, I wondered, or a religious practice? Evidence of a holiday I didn’t know about?

The answer was yes, but not in the way I expected: it was Election Day.

“Malaysia has lost a decade to corruption. Now we can finally work to get it back.”

That morning I attended a lecture put on by Rakan KL, a historical advocacy group based in Kuala Lumpur. The room was full of passionate young people, and the atmosphere was buzzing with excitement—when I walked in, the only thing on anyone’s mind was politics. They proudly explained their black fingers: in Malaysia, an ink which is very difficult to wash off, similar to the kind used in anti-theft tags in the United States, is applied to voters’ fingers so that they cannot vote twice.

What had happened that day, May 9th, 2018, was historic: the ousting of former Prime Minister Najib Razak, and Malaysia’s first transfer of power away from the ruling Barisan Nasional (BN) party since the country’s independence from Britain in 1967. It was a proud moment for Malaysia, demonstrating strong evidence of a working democracy in action. When I asked one of the Rakan members what made him most excited about the transfer in power, however, he didn’t cite the victory for democracy. Instead, he said, “Malaysia has lost a decade to corruption. Now we can finally work to get it back.”

In order to understand the monument of this event, we need to look at the history of Najib Razak’s time in office.


  1. The Scandal (2009-2015)

The decade of corruption my friend from Rakan was referring to was the time that Najib Razak spent in office, beginning in 2009, during which he and his associates are said to have embezzled upwards of $4 billion USD from the 1MDB (1Malaysia Development Berhad) fund—possibly as much as $7 billion USD, according to Swiss officials. The fund’s stated purpose was to transform Malaysia into a sustainable, inclusive, and developed nation, by building infrastructure and investing in Malaysian businesses.

Instead, it made the film Wolf of Wall Street. Yes, you read that right— according to US prosecutors, 1MDB money also funded the notable critical bombs Daddy’s Home and Dumb and Dumber To, through Najib’s stepson’s production company, Red Granite Pictures (according to reports, Leonardo DiCaprio has promised to pay back any funds misappropriated from the people of Malaysia). In addition, 1MDB was involved in commodity trading in the US, making three trades alleged to have garnered more than 6.5 billion USD in profits through US bank Goldman Sachs, which has garnered accusations of money-laundering for 1MDB.

In a unique Philadelphia connection, one of Najib’s closest associates, prominent Malaysian “investor” Jho Low attended Penn’s Wharton business school. The investor part is currently suspect, as prosecutors now allege that most of his supposed investing profits came directly from the 1MDB fund.


  1. The Reveal (2015)

The corruption began to come to light in 2015, through the work of Clare Rewcastle-Brown, an intrepid Malaysian-born reporter currently living in the UK. Since 2010, Brown, who retired from a position with the BBC World Service, has been running a website called the Sarawak Report, named for the site’s initial purpose, to expose the ongoing environmental crisis in Brown’s birth state of Sarawak. Since that initial story in 2010, Brown has continued to publish on new topics related to Malaysian politics and affairs, seeking to expose corruption and financial fraud within the government of Malaysia. Eventually, leading her, in 2015, to publish a ground-breaking report accusing Najib Razak of having embezzled at least $680 million USD from the 1MDB Fund.

Her report, including over 227,000 documents leaked to her or available online, would become the basis for investigations by other news outlets such as the Wall Street Journal. Her report and others prompted the Malaysian government to raid Najib’s offices, surfacing documents which would form the basis of criminal investigations around the world, from Switzerland to the US.

After her groundbreaking 1MDB story began coming out, complete with weekly updates as more information became available, Brown’s Sarawak Report garnered its own historic Malaysian first: the first news site censored in Malaysia. Although Brown has been somewhat protected by her physical distance from Malaysia, Najib’s government took such extreme measures as applying to Interpol for her extradition to face charges for “activities detrimental to parliamentary democracy.” Although Interpol denied Brown’s extradition, many Malaysians have not been so lucky; under Najib, colonial-era anti-sedition laws were used to arrest Malaysians who criticized his government.


  1. The Aftermath (2015-2019)

In January 2016, Malaysia’s Attorney General exonerated Najib of all allegations of wrongdoing related to Brown’s initial accusations, claiming that the $680 Million in Najib’s personal bank account was a loan from the royal family of Saudi Arabia. However, the Malaysian populace was not convinced. Even with the Sarawak Report being blocked, citizens turned out onto the streets in the tens of thousands to demand Najib’s resignation—not only in Malaysia, but in Malaysian diaspora communities around the world, including Brown’s hometown of London.

By 2017, though, the situation still looked dire: Najib was still in power, and in the process of firing or jailing any officials who tried to follow up on the scandal; it seemed unlikely that any government action within Malaysia would be possible.

Which brings us back to 2018’s historic election, when I asked my Malaysian friends what they were so excited about. This explains the electric atmosphere I felt in the streets, the feeling that a holiday had come: Najib had lost the election. Finally, he was beginning to fall from grace. That same day, Malaysian police were raiding Najib’s home, seizing millions of dollars worth of property. By July 18, 2018, there were formal charges against him.

And just this summer, it felt like the tide was turning: halfway across the world in a US courtroom, Goldman Sachs faced its first ever criminal charges for bond sales, as partner Tim Reissner pleaded guilty to charges related to 1MDB investments in November, 2018. His subordinate, Roger Ng, announced this February 14th that he would also return to the US to stand trial.


  1. What’s Happening Today?

Tuesday, 2/12: Although Najib’s first trial was set to start on the 12th, a surprise stay was issued on the afternoon of the 11th. Since being released on bail, Najib has been campaigning, claiming that his 93-year-old opponent is running a political smear campaign on him. It is likely he’s hoping that, due to the months or even years this and other trials against him may take to come to a conclusion, he can return to power before any jail time is officially levied.

Sunday, 2/17: Swiss national Xavier Andre Justo, who was instrumental in providing documents that exposed important aspects of the 1MDB scandal, is now under investigation by Swiss officials for economic espionage following a “personal gift” of 8.2 million Malaysian Ringgit (about $2 million USD) from the chairman of the Edge Media Group, a financial news publisher in Malaysia and Singapore.

Tuesday, 2/19: Although he has not been officially implicated in any criminal cases, Goldman Sach’s CEO of the Asia Pacific region, Ken Hitchner, announced he would step down after only 2 years in the role.

Wednesday, 2/20: Paul Stadlen, a British national who worked as a media advisor under Najib, has been charged in absentia with two counts of money laundering by the Malaysian government.

Thursday, 2/21: James Shipton, the current head of Australia’s largest financial regulatory agency (the Australian Securities and Investments Commission, or ASIC), was called before the Australian parliament to face questioning about his role in the 1MDB scandal. Before taking the ASIC job, he was head of Goldman Sach’s government and regulatory affairs division in Asia and the Pacific from 2009 to 2013.


The 1MDB scandal is an evolving story, which continues to impact people and governments around the world. Whatever happens in Najib’s case, one thing is for sure: Malaysia and the wider world will be feeling the effects of this case for years or even decades to come.



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