BERN, Switzerland, 25 April — The Office of the Attorney General of Switzerland has filed an indictment against two PetroSaudi managers.
The two accused are alleged, with the aim of enriching themselves and others, to have misappropriated at least $1.8bn transferred by the Malaysian sovereign wealth fund 1MDB in connection with a joint venture with PetroSaudi, an operation subsequently converted into an Islamic loan, and then to have laundered the amounts involved.
The allegations cover a period at least from 2009 to 2015 and constitute the offences of fraud on a commercial basis (Article 146 paras 1 and 2 of the Swiss Criminal Code, aggravated criminal mismanagement (Article 158 no 1 para 3, Swiss Criminal Code), and aggravated money laundering (Article 305bis nos 1 and 2, Swiss Criminal Code).
The indictment filed in the Federal Criminal Court makes the following allegations:
A joint-venture…
Acting in concert with Low Taek Jho, a Malaysian businessman, confidant of the Malaysian Prime Minister at the time, Najib Razak, and informal consultant who did not hold an official position within 1MDB, and with the support of two managers from 1MDB, the two accused proposed an investment scheme consisting of a purported ‘government-to-government’ transaction between Saudi Arabia and Malaysia through 1MDB, the Malaysian sovereign wealth fund.
It comprised a joint venture between PetroSaudi and 1MDB that was intended to invest in economic opportunities in Malaysia and abroad.
In order to reinforce the appearance that the joint venture would be a government-to-government operation, the accused and Low manipulated a meeting that involved Najib – who in addition to being the Prime Minister of Malaysia was also finance minister, president of the 1MDB board of advisers, and representative of the sole shareholder in 1MDB – and Prince Turki Bin Abdullah Bin Abulaziz Al Saud, son of the late king of Saudi Arabia, which was held near Cannes in August 2009 on the yacht Alfa Nero.
Furthermore, the two accused and Low benefited from the support of two managers at 1MDB who spread a narrative throughout 1MDB which was intended to mislead the board of directors of the sovereign wealth fund.
This left the 1MDB board with an inaccurate understanding of the government-to-government operation: the Kingdom of Saudi Arabia was not in involved in the transaction, and the 1MDB board was unaware of the debt amounting to $700m due by the joint venture company to PetroSaudi,, or indeed that PetroSaudi did not hold the rights it was said to have to the Turkmen assets that it claimed to be bringing into the joint venture.
As a result, the 1MDB board eventually agreed to the transaction, albeit after attaching conditions to it, which ultimately were not respected by the two managers who were acting in concert with the accused and Low.
…for personal purposes
The joint-venture contract between 1MDB and PetroSaudi was, as a consequence, concluded in September 2009. It required that in exchange for a shareholding in the joint-venture company, 1MDB would provide $1bn in cash and PetroSaudi would provide assets valued at $2.7bn – which in reality it did not possess.
From the $1bn paid in by 1MDB, and contrary to what had been authorised by the 1MDB board, $700m was transferred to an account opened at a bank in Switzerland in the name of a company whose beneficial owner was Low Taek Jho.
From that $700m, Low transferred $85m to one of the accused, who in turn, transferred US$33m of that sum to the other accused. The remaining $300m was transferred to the account of the joint-venture company at a bank in Switzerland. In reality, only PetroSaudi derived any benefit from this $300m.
A series of further investments
In addition, the two accused, acting with Low, and once again with the aim of enriching themselves and others, devised other plans to induce the 1MDB board of directors of 1MDB to authorise transfers totalling a further $830m between September 2010 and October 2011 as part of an Islamic loan that followed on from the joint venture; the funds transferred were also misappropriated. The same arguments as those mentioned above were presented to the 1MDB board.
In addition, interest of more than $80m was transferred to 1MDB. This amount was in fact taken from the funds that 1MDB had itself transferred.
Laundering
Finally, and to sum up, the accused are alleged, from September 2009 to July 2015 at the very least, to have arranged for bank accounts to be opened in Switzerland and abroad to hold the funds, to have accepted these funds, to have given – and in the case of one accused, validated – transfer orders for these funds and to have organised the transfers of funds in order to obstruct the identification of their origin and their forfeiture.
The two accused used money misappropriated from 1MDB to acquire, among other assets, real estate in Switzerland and in London, jewellery, private equity, to develop PetroSaudi activities from which they received substantial income, and to maintain a lavish lifestyle.
An investigation with international ramifications
The investigation into the misappropriation of funds from the joint venture and from the Islamic loan between PetroSaudi and 1MDB as well as the suspected laundering of these sums may be regarded as the Swiss component of the ‘1MDB affair’, which is part of a much larger international pattern [see coloured boxes below].
This enormous investigation, opened by the Office of the [Swiss] Attorney General in November 2017, has not only required interviews with the accused, persons providing information and witnesses in Switzerland and abroad, but also the examination of hundreds of thousands of documents obtained from PetroSaudi’s electronic mailboxes and through international mutual assistance, not to mention extensive forensic analysis of the financial transfers.
The Office of the Attorney General would like to thank the prosecution authorities in the US, Malaysia, the UK, Singapore, Jersey, Canada and Barbados for their excellent cooperation. It should be noted that the US Department of Justice described the affair as “the largest kleptocracy case to date”.
The Office of the Attorney General will submit its conclusions, including its requests relating to the forfeiture of the assets under seizure, at the hearing before the Federal Criminal Court in Bellinzona. The assets under seizure total around 192 million Swiss francs, not counting the real estate seized in Switzerland and in London.
The accused are entitled to be presumed innocent unless and until a final judgment has been pronounced finding them guilty. Once the indictment has been filed, the Federal Criminal Court has sole responsibility for providing further information.
Criminal complaint by the whistleblower: No proceedings to be taken
At the same time that the criminal proceedings described above were opened, an ex-employee of PetroSaudi who had sent copies of data from his former employer’s server to the press submitted a criminal complaint to the public prosecutor in the Canton of Geneva alleging that the accused and a third party had committed various offences against him and his wife.
These comprised threatening behaviour (Article 180, Swiss Criminal Code) extortion and blackmail (Article 156), coercion (Article 181), false imprisonment and abduction (Article 183), endangering the life of another person (Article 129), wilful defamation (Article 174), making false accusations (Article 303), misleading judicial authorities (Article 304), bribery of foreign public officials (Article 322septies), forgery of documents (Article 251), membership of or support for a criminal organisation (Article 260ter) and money laundering (Article 305bis). The complaint was assigned to the office of the attorney general for processing.
However, following analysis of the allegations, it appears either that the constituent elements of the reported offences have not been met, that the right to file a complaint is time-barred, or that the matters reported do not give rise to a reasonable suspicion in terms of Article 309 paragraph 1 letter a of the Criminal Procedure Code. It has therefore been decided not to proceed with the prosecution.
Furthermore, the offence of money laundering (Article 305bis) will be dealt with in the proceedings mentioned above. The Office of the Attorney General wishes to point out that this decision may be appealed to the Federal Criminal Court. As the appeal deadline has yet to expire, the decision is not final and is not therefore currently available for inspection.
The 1MDB affair at the Office of the Attorney General
The global dimension of the misappropriation of assets from the Malaysian sovereign wealth fund 1MDB goes far beyond the Office of the [Swiss] Attorney General’s investigations, with a number of jurisdictions having opened criminal proceedings into the matter.
However, Switzerland is not being outdone, and in addition to the case in which the indictment has today [25 April] been filed with the Federal Criminal Court, the office of the attorney general has other criminal proceedings ongoing in connection with the 1MDB matter, namely:
– Criminal proceedings opened in August 2015 against two former officers of 1MDB and against persons unknown on suspicion of bribery of foreign public officials (Article 322septies, Swiss Criminal Code), misconduct in public office (Article 314), money laundering (Article 305bis) and criminal mismanagement (Article 158), which was then extended in April 2016 to include two former public officials from the UAE who were in charge of the sovereign fund of Abu Dhabi, on suspicion of fraud (Article 146), criminal mismanagement (Article 158), misconduct in public office (Article 314), forgery of documents (Article 251), bribery of foreign public officials (Article 322septies) and money laundering (Article 305bis)
In May 2016 following the decision taken in enforcement proceedings brought by the Swiss financial market supervisory authority, Finma, criminal proceedings were opened against the BSI SA bank on suspicion of inadequate internal procedures. Due to the suspected deficiencies, the bank is alleged to have been unable to prevent the commission of the offences currently under investigation
Criminal proceedings being conducted since November 2018 against an ex-employee of PetroSaudi on suspicion of industrial espionage (Article 273)
Finally, it should be noted that the criminal proceedings opened in October 2016 against the Falcon Private Bank SA, now known as Falcon Private SA, are currently suspended in terms of Article 314, Criminal Procedure Code.
– Office of the Attorney General of Switzerland
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