In 2020, the former Prime Minister of Malaysia was found guilty of stealing money meant for government spending and economic development.
However, Najib Razak has yet to spend any time in prison after launching a series of appeals against the conviction in 2020.
In 2008, 1Malaysia Development Berhad (1MDB) was set up as a development fund for the Malaysian state of Terengganu.
The idea was that the state would issue bonds backed by future oil revenues, with the money raised invested in creating an income that could be used to fund government spending and economic development.
A year after it was set up, the fund was taken over by the Malaysian finance ministry, which argued that the money should be used to benefit the whole of the country, rather than just one region.
Najib Razak was Malaysian Prime Minister between 2009 and 2018 and was convicted in 2020 after losing the election.
What was the scam?
Under the direction of the then Malaysian president, Razak, 1MDB borrowed by issuing bonds backed by the government, then diverted large sums into personal accounts controlled by Razak and his associates, some under cover of a joint venture with PetroSaudi.
It has been claimed that the fund’s money was also used to bankroll the personal investments and purchases of businessman Jho Low, who was hired as a consultant.
These included a $260m yacht, $85m in gambling debts, and, ironically, investments in the Hollywood film The Wolf of Wall Street about fraudster Jordan Belfort.
Low remains on the run and faces numerous charges over his alleged role in the crimes if he is ever caught.
What happened next?
In 2015 various media outlets, including The Wall Street Journal, started publishing stories about the scandal based on documents leaked to them by a PetroSaudi employee.
Razak’s government denied the allegations and fired the attorney general in 2016 when he started to investigate.
After Razak lost the 2018 election, his properties were raided by police, and he was arrested.
In 2020 Razak was convicted of multiple counts of fraud and money laundering.
He was found guilty and given a jail sentence of 12 years for his crimes in July 2020.
He failed in one appeal in December 2021 but is awaiting another in the High Court in March.
At the appeal, Judge Abdul Karim Abdul Jalil said: “We dismiss the appeal on all seven charges and affirm the conviction on all seven charges.”
Razak faces several other charges, and his wife has also been charged with corruption and has denied money laundering and tax evasion charges.
What was the aftermath?
The US government estimates that as much as $4.5bn was stolen; the Malaysian government claims the scandal cost $23bn.
Some of this has been recovered- Low agreed to forfeit $700m in assets before disappearing, and Goldman Sachs (which arranged the bond sales) agreed to pay $2.5bn.
Countries like Norway have shown that sovereign wealth funds can be an excellent way to ensure that national wealth such as oil revenue is invested rather than squandered. Still, without proper institutional safeguards, they can themselves become centers of corruption and mismanagement. And funding them with borrowing, rather than revenue, is extremely risky.
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Kris Paterson is a writer for WhatJobs.com