The law of rule in Malaysia


NewMandala

James Giggacher

1MDB shows that an already fragile rule of law is being stretched to the limits, writes James Giggacher.

Malaysia’s rule of law may have reigned supreme in this week’s case of the Budgie Nine – saving the Southeast Asian state from gross national insult at the hands of some silly young Australians.

Too bad the same thing can’t be said about another national disgrace, the 1MDB financial scandal.

In the face of investigations into the country’s failing sovereign wealth fund, and Prime Minister Najib Razak’s alleged links to millions of missing dollars, the rule of law has in fact gone missing in action.

This was certainly the case when Najib sacked attorney general, Abdul Gani Patail, who planned to bring charges relating to 1MDB against the PM in July 2015.

The plan was leaked, and Abdul Ghani stepped down, officially for ‘health reasons’. Perhaps he’d heard about what happened to former Mongolian model and Najib’s inner circle mainstay, Altantuya Shaarribuu.

At the same time, Najib removed his deputy and one of his most vocal critics — Muhyiddin Yassin.

The former AG’s replacement, Mohamed Apandi Ali, almost immediately cleared his embattled PM of any wrongdoing.

Apandi said that the royal family of Saudi Arabia had gifted Najib $US 681 million, of which $US 600 million had been returned. He also said no criminal offence had been committed. However, several countries, including the US, Switzerland, Singapore and the Seychelles, are still investigating the case.

Reports on the scandal by Malaysia’s central bank and anti-corruption commission have also been dismissed by Apandi; according to him the PM has no case to answer.

And in June, Najib filed court documents that denied graf, misuse of power, and interference in 1MDB investigations in response to a lawsuit brought by former PM and mentor, and now key adversary, Dr Mahathir Mohamad.

Meanwhile, the almost 700 million dollar question of how 2.6 billion ringgit managed to find its way into Najib’s personal bank accounts has yet to be satisfactorily answered.

So much for due process, democratic safeguards, transparency, and holding those in power to account. But can we expect anything better from a Malaysia still under the sway of long-ruling coalition Barisan Nasional (BN) and its leading party, Najib’s UMNO?

As Jayson Browder notes, BN has long had a poor record of abiding by the rule of law.

It has consistently leveraged several national laws – including The Peaceful Assembly Act of 2012, the Sedition Act of 1948, and the Printing Presses and Publications Act of 1948 – to curtail freedoms, assembly, political expression as well as intimate activists and the media, and ensure its power.

These tactics guarantee the ruling coalition’s stranglehold over Malaysia’s political system “through a combination of economic rewards, intimidation of political opponents, and several national laws, which are in direct violation of Article 10 of the Federal Constitution in Malaysia.” Article 10 is meant to guarantee Malaysian citizens the right to freedom of speech, freedom of assembly and freedom of association.

An embattled Najib has only sharpened the teeth of a legal system already heavily stacked in his party’s favour. In August he brought in an unprecedented law that allows him to designate ‘security areas’ and deploy forces to search people, places and vehicles without a warrant.

Draconian would be an understatement.

Laurent Meillan, from the UN Human Rights Office for Southeast Asia, said that they were “gravely concerned” about human rights violations as a consequence of the act. The act could further restrict already highly limited rights of free speech and free assembly.

And in March this year, the independent news site The Malaysian Insider, went offline. Owners cited poor financial returns and high costs. The then editor, Jahabar Sadiq, said it was because the threat of being charged with sedition that could lead to jail time had become all too real.

The decision to pull the plug came almost three weeks after Malaysia’s Internet regulator — the Malaysian Communications and Multimedia Commission – issued a gag order on the site because of a report alleging the country’s anti-corruption commission had sufficient evidence to bring criminal charges against Najib in the 1MDB case – even though he had already been cleared by Apandi.

The lesson? Smuggling budgies and smearing the flag is a clear no-no. Smuggling billions and smearing the nation’s sovereign wealth fund is a-ok.

It all goes to show that in Malaysia there is the rule of law – but most of the time there’s the law that lets BN rule.

James Giggacher is an associate lecturer in the ANU Coral Bell School of Asia Pacific Affairs and editor of New Mandala

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The Cracks in Malaysia’s Political Order Begin to Show


Stratfor

Prime Minister Najib Razak will remain in his position until the ruling coalition decides he has become too much of a political liability to do so. But his opponents are nonetheless preparing for the next election, whenever it may be. (NICKY LOH/Getty Images)


Forecast

  • Neither Malaysia’s opposition nor its upcoming mass anti-government protests will supplant Prime Minister Najib Razak before the next general election.
  • Longtime Malaysian leader Mahathir Mohamad’s new party will struggle to gain traction, but it may still tip the electoral balance.
  • Growing restlessness in Malaysia’s outlying states could expose new fault lines in the country’s long-established political order. 

Analysis

As rumors circulate that Malaysia’s next general election may be moved up to early next year, the country’s next political showdown is beginning to take shape. Over the past two years, Malaysian Prime Minister Najib Razak has been implicated in a scandal in which he allegedly looted nearly a billion dollars from state investment fund 1MDB. Najib is widely considered guilty at this point, and the scandal has sparked mass protests, purges in his ruling United Malays National Organization (UMNO) party and international scrutiny. But it has yet to seriously threaten him. Until the UMNO-led Barisan Nasional coalition sees the crisis as souring its electoral prospects, whether by alienating voters or by undermining the power of its patronage, the teflon prime minister will remain relatively secure in his position.

Still, for UMNO, which has ruled Malaysia every year since the country gained its independence, several challenges loom on the horizon. Combined with the country’s lingering economic woes and the continued 1MDB fallout, those challenges could expose new cracks in the political order and stability that have underpinned Malaysia’s rise to global prominence.

Staying Power

Despite his involvement in the 1MDB affair, Malaysia’s prime minister has managed to maintain his power over the country and the ruling party. As the scandal has unfolded, most UMNO members have closed ranks around Najib, and the party’s coalition partners have stayed put. Party members who have questioned the prime minister (including former Deputy Prime Minister Muhyiddin Yassin) or tried to investigate him (as Najib’s former attorney general did) have been purged and replaced with loyalists who absolve him of any wrongdoing. The fractured opposition, meanwhile, is simply too weak to oust him through a no-confidence vote — as it tried and failed to do a year ago. The corruption scandal has also had little effect on voters; Barisan Nasional coalition partners won each of the state and parliament by-elections held over the past year. The reason for its longevity is simple: Patronage remains the dominant tool of political power in Malaysia, and Najib’s administration controls the purse strings. A half-century of UMNO rule, moreover, has allowed the party to redraw political districts to its favor, something it is trying to do again in the electorally critical Selangor state.

Even so, if the scandal starts to hurt the ruling coalition’s electoral prospects, UMNO may be compelled to devise an exit for Najib before the next election to save him from prosecution and the party from an unprecedented defeat. The vote does not have to take place until late 2018, but over the past month, UMNO has reportedly intensified discussions on whether to call snap elections as soon as early 2017. Regardless, the possibility is accelerating realignments ahead of the next vote — among both the opposition and Barisan Nasional’s nervous coalition partners.

Enter Bersatu

The biggest complication for UMNO heading into the next election will be the newly formed Parti Pribumi Bersatu Malaysia, or Bersatu for short. Launched in August, Bersatu was established by longtime Malaysian leader and former Prime Minister Mahathir Mohamad, who also serves as the party’s chair. Muhyiddin is its president. The 91-year-old Mahathir has been trying to oust Najib, his former protege, for much of the past year, but his efforts have not gained much traction. His latest attempt to unseat UMNO is also unlikely to succeed on its own. Bersatu lacks the grassroots support and party machinery necessary to drive turnout, and Najib has been chipping away at Mahathir’s business interests, giving him less weight to throw around.

As part of an opposition alliance, however, the new party could play a decisive role in the next election. A similar opposition coalition nearly unseated Barisan Nasional in the 2013 general election and cost it the popular vote; Barisan Nasional retained a majority in parliament in that election mostly because of gerrymandering. During the week of Sept. 5, Mahathir was seen shaking hands with Anwar Ibrahim, a charismatic, reform-minded opposition leader. The incident was a boon for Bersatu, which found in Anwar an unlikely source of legitimacy — Mahathir ousted him in 1998 and then had him jailed on politically motivated charges.

By admitting only ethnic Malays into its membership, Bersatu has positioned itself as a natural landing place for Malay nationalist voters disenchanted with UMNO’s scandals but unsure of other opposition parties’ commitment to protecting their interests. UMNO’s stranglehold on the “Bumiputera” (the umbrella term for ethnic Malays and indigenous groups) vote is a perennial obstacle for the opposition. The party has long styled itself as safeguarding the interests of the Bumiputera against other ethnicities in Malaysia, stoking fears that the country’s economically powerful Chinese and Indian populations will try to do away with pro-Malay affirmative action policies. (Mahathir himself quietly sought to roll back some of the affirmative actions near the end of his term, to no avail.)

In the 2008 and 2013 general elections, opposition factions overcame their deep-seated differences and united behind ethnic Malay figures such as Anwar to appeal to Malay voters. But Anwar has since been jailed again, and the alliance has largely collapsed amid infighting and ethnic rivalries. For instance, the Pan-Malaysian Islamic Party (PAS) — the opposition Islamist party dominant in northern peninsular Malaysia — severed ties with a former ally, the Democratic Action Party (DAP) in 2015 and has yet to commit to the new coalition, possibly positioning itself as kingmaker in the next general election. But considering that the opposition won the popular vote in 2013, Bersatu theoretically would not need to peel off much support from the ruling coalition to swing the next election. Bersatu’s best bet may be to focus on splitting the ethnic Malay vote in key races rather than on winning seats for itself, allowing other opposition parties to prevail.

First, however, the opposition parties will need to find a workable marriage of convenience. Though Anwar has tentatively endorsed Bersatu, the main opposition parties do not trust Mahathir. After all, he was the main architect of the system that has made it so difficult to dislodge Najib, and his own rise was fueled by exploiting Malay and indigenous fears of, for example, “the Chinese tsunami.” And several opposition leaders — from Anwar to members of the DAP — were jailed on politically motivated charges during his tenure. Even if Barisan Nasional does not call snap elections, the opposition has less than two years to find a way to cooperate and come to terms on sticking points such as seat allocations and conflicting policies. So far, they have not made much progress. The DAP has been reluctant to follow Anwar’s lead by accepting Mahathir’s olive branch, and the PAS (which itself is facing internal splits between Islamist hard-liners and a breakaway faction that supports the opposition alliance) remains a wildcard.

A Spotlight on the Scandal

Disorganized though it may be, the opposition will still benefit from the activities of Bersih, or the Coalition for Clean Elections, an activist group that is agitating for Najib’s ouster. Next month, the group plans to launch a nationwide roadshow to spread awareness of the 1MDB scandal in Barisan Nasional-controlled areas of Malaysia — an important endeavor given the government’s censorship of news related to the case. The roadshow will culminate in mass protests in Kuala Lumpur and other cities on Nov. 19. Although Bersih is not formally aligned with any of the opposition parties and is wary of Mahathir’s legacy, its efforts will serve the needs of the opposition, especially if elections are on the horizon.

Though protest turnout promises to be high — the last Bersih protest in 2015 drew some 300,000 participants over the course of 30 hours — the demonstration itself will not be designed to overthrow Najib. Mass protests in Malaysia are not typically the go-for-broke affairs seen, for example, in Thailand, where protesters occupy urban areas for prolonged periods of time to force a confrontation and delegitimize the government. Furthermore, any attempt to lock down Kuala Lumpur would spark ethnically tinged counter-protests that would raise the risk of violence. (Last year’s UMNO-funded counter-rallies, for instance, took on a noticeable anti-Chinese bent, and police narrowly prevented party supporters from storming a prominent ethnic Chinese business district in the capital.) The opposition does not want to validate fears among ethnic Malays that UMNO’s defeat would throw off the tenuous ethnic balance that the party’s rule has helped preserve. Instead, with the upcoming elections in mind, the protest organizers will aim primarily to put the focus of the next race squarely on the 1MDB affair and turn the vote into a referendum on Najib himself. The more it succeeds, the less the opposition’s internal fractures will matter.

Cracks at the Fringes

Along with its other political concerns, Najib’s government has to contend with growing restlessness in the country’s outlying, semi-autonomous states. Lacking geographical or ethnic coherence, Malaysia’s solidarity has long relied on shrewd, inclusive policymaking and plentiful resource wealth to grease any friction. The farther from the capital one gets, the more important the flows of revenue and patronage from the government become — whether in the form of large-scale infrastructure projects, extraction licenses or cash transfers.

But over the past eight years, several outlying states have increasingly tried to take advantage of Barisan Nasional’s weaknesses to push for a greater devolution of powers from the capital. Sarawak, for example, has been pressing Kuala Lumpur for more authority and oil revenues. In addition, protests erupted in that state and neighboring Sabah — both of which were critical to Barisan Nasional’s victory in the 2013 election — in September, demanding greater autonomy and a referendum on their status in Malaysia. Meanwhile, the crown prince of wealthy Johor state has suggested that the state may consider leaving the federation — as its southern neighbor, Singapore, did in 1963 — if the central government does not honor agreements on issues such as water and land rights. And the PAS, based in the northern Kelantan state, has been flirting with supporting Barisan Nasional in exchange for considering a bill to increase the power of regional Sharia courts, a move that threatens to spark ethnic backlash on both sides of the aisle.

At this point, none of these nascent movements presages upheaval that would threaten the integrity of the Malay Federation, or even major defections away from Barisan Nasional. Johor’s secession threats are particularly hollow, and Barisan Nasional’s dominance in an April state election in Sarawak demonstrated that local issues will play as great a role in the next election as will turbulence in the capital. Still, the trend reveals the lines along which the UMNO-led political order could begin to crack in the face of prolonged political uncertainty — particularly if persistent economic problems and low oil prices pinch patronage flows — with or without Najib.

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Malaysia’s obsession with uniformity is tearing the nation apart.


NewMandala

Behind the rifts in modern Malaysia

by Lim Li Ann – 14 Sep, 2016

A rise in nativism, eroding civic values, and a failing democracy are exacerbating already dangerous divisions.

Modern Malaysia’s obsession with uniformity is tearing the nation apart.

This trend, which sees difference as inherently dangerous, is being driven by ‘nativism’ – being against ethnic and religious minorities and having an instinctual allegiance towards one’s community intensified by agent provocateurs.

Within the span of a year, a state mufti has condemned the multi-racial but Chinese-dominant opposition party, DAP, as “kafir harbi” – non-Muslims who can be slain. Malay protesters, arriving in mobs, became entangled in brawls and shouting matches with Chinese vendors at Low Yat Plaza. Even the silver screen took on a dark tone when the Malaysia Film Festival segregated its nominations into “Best Films” and “Best non-Malay language films” — the former assumed to be in the Malay language.

Late last year, tens of thousands hit the streets to demonstrate support for Prime Minister Najib Razak during an event now known as the red shirt rally. The rally sought to “make it clear to Malaysian citizens, don’t challenge the Malays, don’t touch the Malays.” Despite the antagonistic rhetoric about the inferiority of other races, Prime Minister Najib Razak endorsed the rally, offering his “congratulations to everyone who attended.”

Pockets of Malaysian society, once humble, tolerant and moderate, are now rallying behind arrogance, antagonism and illiberalism.

Such assertions of supremacy appear perplexing. Contemporary psychologist Jonathan Haidt determines one key pillar of morality to be “in-group loyalty”. At one end of the spectrum lie people whose instinct is to care universally, while those at the other protect members of their community. In The Elementary Forms of the Religious Life (1912) classical sociologist Emile Durkheim explains that these moderate feelings of tribalism are then elevated when one is in a collective.

Amid last year’s red shirt rally in Malaysia, one voice stood out. Sungai Besar UMNO division chief Jamal Yunos grabbed the limelight and chanted “Cina babi!” (“Chinese are pigs!”), triggering pitchfork-level outrage in others. But by Durkheim’s line of thought, Jamal’s behaviour was nothing egregious.

Narrating a man leading a crowd of ardent supporters, Durkheim writes:

His language becomes high-flown in a way that would be ridiculous in ordinary circumstances; his gestures take on an overbearing quality; his very thought becomes impatient of limits and slips easily into every kind of extreme. This is because he feels filled to overflowing, as though with a phenomenal oversupply of forces that spill over and tend to spread around him. … This extraordinary surplus of forces is quite real and comes to him from the very group he is addressing. … It is then no longer a mere individual who speaks but a group incarnated and personified.

Standing alone, any one person’s bold cries for racial hegemony would appear outrageous. But on that fateful day, in moral consensus with people surrounding him, social approbation begets reckless confidence in his judgment and fearlessness in his actions.

The dangerous rise of nativism in Malaysia is also explained by the country’s failing democratic culture.

Pillars of democracy can only be upheld when society embraces democratic virtues. Institutes of democracies are meaningless — precarious at best — if they do not go hand-in-hand with democratic values in the hearts and minds of citizens.

Outwardly, Malaysia is a democracy. Elections are held regularly, the elected are accountable to the electorate, to a certain extent as the 1MDB scandal shows, and the state apparatus to the elected members of parliament.

But, Malaysians lack the appreciation for democratic values that makes the term “parliamentary democracy” anything more than a soundbite.

And then there are the problems with Malaysia’s civic education – which helps feed this trend of nativism and democratic deficit. Malaysia’s current syllabus for Civic and Citizenship Education boils down to nothing more than a laundry list of moral dos and don’ts.

Malaysia’s civic education needs an overhaul — to be one that mandates critical moral reflection, as opposed to rote memorisation of civic duties — to overcome the political apathy that has enveloped society.

Amy Gutmann, author of Democratic Education (1987), offers that such an education should inculcate truthfulness to one’s self, mutual respect for and the ability to deliberate over differences with others, commitment to society — thus teaching the importance ranging from individual freedoms to collective social consciousness.

When formal institutions of democracy are not accompanied by a corresponding level of public commitment towards core democratic values, institutions of democracy are easily collapsible — and that won’t seem to matter.

Before we unquestioningly accept the many platitudes that are imposed on us, whether by pillars of power or factions in society, perhaps it would do us good to develop our own independent thoughts.

Ultimately, these are moral choices that we need to identify, but even more importantly, ones that we are able to legitimately justify predicated upon personal autonomy and societal interests.


Lim Li Ann is an economics and public policy graduate from Singapore Management University. She is a co-author of the chapter on arbitrary detention in the forthcoming book, The History of Human Rights Society in Singapore, 1965-2015.

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#1MDB and Malay Nationalism


WSJ

Najib fans fear of foreign plots and traitors to shore up support.

Can Najib Razak survive the 1MDB corruption scandal? The Malaysian Prime Minister came under increased political pressure in July when the U.S. Justice Department filed a lawsuit alleging that a family friend embezzled $3.5 billion from the state-run investment fund. But he has fought back and could even turn the case to his advantage if he calls a snap election early next year.

Mr. Najib is using the same strategy predecessors used when faced with domestic opposition: Play the Malay nationalism card. The country’s racial divide makes this a powerful and dangerous weapon.

On Aug. 5 Mr. Najib said he wasn’t involved in the 1MDB case and blamed “certain enemies” for politicizing it. On Aug. 14 he warned that foreign enemies could impose neocolonialism if Malaysians share confidential documents with outsiders: “History is a testimony of how we could lose our sovereignty if we were in cahoots with foreigners.”

During an Aug. 30 speech on the eve of Independence Day, Mr. Najib reiterated the danger of foreign neocolonialists using “dirty hands” within the country. People in “certain quarters who want to topple the government in an undemocratic manner” were “poisoning the minds of the people,” he said. Other politicians from the ruling United Malays National Organization (UMNO) are making similar statements.

One target of this rhetoric is the anticorruption organization Bersih. On Wednesday the group announced plans for a mass rally in November calling for Mr. Najib’s resignation. Since Islamists dropped out of the group, Chinese and Indian activists have played a leading role.

UMNO politicians portrayed the last such rally in August 2015 as an attempt by minority leaders to seize power and take race-based privileges away from Malays. In the aftermath of that rally, a Malay nationalist group known as the red shirts, led by UMNO official Jamal Yunos, tried to protest in Kuala Lumpur’s Chinatown, the scene of race riots that killed hundreds of Chinese in 1969. The police kept the red shirts out of Chinatown, but Mr. Najib defended the protest as a response to posters insulting Malay leaders at the Bersih event.

A new opposition party set up by former Prime Minister Mahathir Mohamad and former Deputy Prime Minister Muhyiddin Yassin poses the real challenge to Mr. Najib. The Parti Pribumi Bersatu Malaysia—which translates to Party of Malaysia’s United Indigenous People—restricts membership to Malays. Mr. Mahathir attacked the government for selling national power-production assets to Chinese companies to bail out 1MDB.

The battle between UMNO and PPBM will depend on the loyalty of rural, less-educated Malays. Both portray themselves as defenders of Malay interests against outside forces.

The risk of communal violence is real, and there are striking parallels to past eruptions. The 1969 riots began after the UMNO-led coalition almost lost a general election as Chinese voters turned to the opposition. Then-Prime Minister Tunku Abdul Rahman supported a protest against insults to Malay leaders, much as Mr. Najib did last year.

Since 1969, racial tensions have risen whenever disunity within the Malay community threatened UMNO’s political dominance. The ruling coalition barely held on to its parliamentary majority in the 2013 election despite losing the popular vote.

The government’s motive to fan Malay nationalism will grow as details of the U.S. lawsuit and international investigations into 1MDB reach the Malay heartland. If Mr. Najib chooses to stoke resentments against ethnic minorities, he may succeed in holding on to power, but at immense cost to Malaysia.

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Was It Some Ban$ker$, Their Bank$ Or The Regulators Who Let Malaysia Down?


Sarawak Report

The metaphorical longhouse of 1MDB is gathering an impressive set of bankers’ skulls to hang up in the porch!

The latest head to roll is that of the former Goldman Sachs Swiss banker, Eduardo Leemann, who departed yesterday as CEO of Falcon Bank.

He follows high-profile figures such as BSI’s Singapore boss, Hanspeter Brunner; Goldman’s South East Asia boss, Tim Leissner; Edmond de Rothchild’s Luxembourg’s boss, Marc Ambroisien; ANZ Bank’s CEO, Mike Smith along with a number of their collective underlings.

Naturally, as with all the rest, Mr Leemann and his bank have stated that the unexpected departure had nothing whatsoever to do with 1MDB. Indeed, Falcon yesterday announced that Leemann’s exit was long-planned since the very beginning of 2015:

“Eduardo Leemann informed the board (at the) beginning of 2015 that he wanted to retire from the operational management at the age of 60,” Chairman Murtadha M. al Hashmi said in a statement. [Reuters]

In which case, it seems a lamentable reflection on the bank’s basic organisational skills that today, almost two years after it received that notice, Leemann remains advertised on their website as the Chief Executive.

Even more indicative of a less than organised rearrangement of the bank’s affairs is the fact that still featured next to him, as the second most important public face of this private bank, is another chap who had already earlier departed in July. Chief Operating Officer Tobias Unger had been previously touted as Leemann’s Deputy and obvious successor, but took off to another job as storm clouds swirled over the Aabar-owned bank.

The man who has taken over at Falcon was only brought onto the Board last year and remains, according to the present website, as a Board Member and not top management.

Nothing to hide

The reality of course is that this confusion in the shop window is a mere reflection of what must be chaos behind the scenes at Falcon following the DOJ’s detailed disclosures of its deep involvement in the laundering of billions of dollars of 1MDB’s stolen cash.

The bank was taken over by Abu Dhabi’s Aabar/IPIC fund in 2009 under the initial Chairmanship of Aabar’s CEO Khadem Al Qubaisi, now arrested and under investigation in Abu Dhabi for massive fraud relating to 1MDB.

Khadem’s successor on the Board at the time of the 1MDB thefts was his close side-kick Mohamed al Husseiny, also named in the DOJ indictment and also under investigation by the US, Abu Dhabi and Switzerland for his role in the misappropriation of the funds.

Handily in position as Chairman of the Board at Falcon as the 1MDB money flowed through in 2012 was Mohammed Al Husseny – Leemann was his CEO
Handily in position as Chairman of the Board at Falcon as the 1MDB money flowed through after April 2012 was Mohammed Al Husseny – Leemann was his CEO

Al Husseiny helmed the Board of the bank right through the ‘Aabar/BVI’ phase of the 1MDB scan in 2012 and also through the ‘Tanore phase’ in March 2013, when huge sums were funnelled via the Falcon Bank Singapore account of Tanore Finance Corporation into Najib’s private KL account.

Straight after Najib recieved that money in March 2013 (just in advance of the general election) Al Husseiny resigned from the Board (in May 2013). The DOJ detailed millions of dollars in kickbacks he had received:

“Between approximately May 29, 2012, and December 3, 2012, Blackstone [funded by 1MDB] sent four separate wire transfers, totaling $55,000,000, to an account at BHF Bank in Frankfurt, Germany, held in the name of Rayan Inc. (“Rayan”)….HUSSEINY is the beneficial owner of the Rayan Account….

December 18, 2012 – .. Blackstone sent $10,100,000 to an account at Bank of America in Texas held in the name of MB Consulting LLC (“MB Consulting Account”). The payment details on the wire read: “PAYMENT FOR SERVICES.” HUSSEINY is the beneficial owner of the MB Consulting Account and the only authorized signatory on the account. The MB Consulting Account received another wire transfer of $1,500,000 from the Blackstone Account on or about January 22, 2013. [DOJ filing sections 189-192]

Then when crisis hit at Falcon, owing the the exposure over 1MDB and Aabar stepped in to take over 1MDB’s debts, Husseiny returned to the Board in April 2015, remaining until he was sacked from all Aabar/IPIC related posts in August.

falcon
Falcon Bank announcement

Heading the management team through the entire period was Leemann.

Back in September of last year, long before Falcon was officially revealed as a key player in the laundering of Malaysia’s development money, Sarawak Report identified the Swiss branch of Falcon as the outfit which had facilitated the setting up of the off-shore company Tanore Finance Corporation, which had sent $681 million to Najib’s personal account.

Yet, as recently as March of this year Falcon’s then boss Leemann was still adamant the bank had “nothing to hide” over 1MDB:

Falcon Private Bank AG, owned by Abu Dhabi’s Aabar Investments PJSC, said it has nothing to hide from regulators probing possible financial irregularities at a Malaysian state investment fund and is cooperating fully with investigators.

“We are totally transparent, fully cooperative and there’s nothing to hide,” Falcon Chief Executive Officer Eduardo Leemann said Wednesday in an interview in Dubai, saying the bank’s business hasn’t been affected by the investigation. “We’re open as a book. That’s all I can say.” [Bloomberg]

Leemann was further quoted by the Wall Street Journal claiming the Aabar bosses on the Board had no influence whatsoever on his operational decisions at the bank:

On Wednesday, Falcon Private Bank’s chief executive, Eduardo Leemann, said the Zurich-based wealth-management firm operates independently from its Abu Dhabi owner and that the emirate plays only a minor role in helping it gain new business or clients.

“The owners, IPIC as well as Aabar, never until today, never have never had and never will get involved in any operational issues,” Mr. Leemann said. “It opened doors but no more than that,” he said. He made the comments at the inauguration of the bank’s new office in Dubai’s financial center.

Mr. Leemann said the bank suffered no impact from the association with the Malaysian scandal and that it has internal compliance mechanisms in place that have been audited internally, externally and by regulators.

“There’s a process about documenting each and every transaction we execute,” Mr. Leemann said. “It’s excess documentation, believe me, we have followed that process on all cases, and I’m not talking on 1MDB only,” he said.

Such talk was impossible to maintain once the July 20th DOJ court filing on asset seizures had been published to an astonished world.

That court filing shows in devastating detail how Falcon Bank was involved in the suspicious transfers of enormous sums of money linked to the activities of its Aabar Board members in both the two power purchase bond issues for 1MDB in 2012 (worth $3.5 billion) described as the Aabar/BVI phase of the scam.

It was already highly irregular that a small private bank should receive the full total of a multi-billion dollar state loan to take care of. But apparently Leemann’s due diligence then proceeded to fail to pick up that the outfit to which he was then immediately instructed to send on $1.4 billion of that money was a bogus company set up by his own bosses at the bank, Aabar Investments PJS BVI.

The Aabar/ BVI phase 2012 – Falcon transferred $1.4 billion from 1MDB to its bosses accounts at the bogus BVI company Aabar Investments PJS Limited

In the next 2013 1MDB bond issue, called the ‘Tanore phase’ of the scam, Falcon played and even more obviously culpable role.

Tanore Finance Corporation was a shell company set up by the Singaporean Eric Tan, who was a known associate of Jho Low, a highly controversial and politically exposed associate of Najib Razak. Nevertheless, Falcon’s Singapore branch took on the account and assisted in setting up the offshore company registered in the BVI.

b1
The Tanore phase of the 1MDB scam also involved Falcon Bank

The bank then willingly received in the course of just 48 hours no less than three separate payments in Mid-March 2013 totalling a boggling $835,000,000 into this one Tanore Finance account.

A day later Falcon sent $620,000,000 of that straight on from this account to the Prime Minister of Malaysia’s account in Kuala Lumpur!

Presumably, Eduardo and his colleagues did not turn a hair that their cupboard sized branch in Singapore appeared to have acquired such a massively wealthy single client whose shell account received these enormous payments out of the blue and then transferred them on to the Prime Minister of Malaysia?

The ‘open book’ bank then obligingly followed up with a second payment from Tanore to Najib of $61,000,000 a couple of days later.

Eduardo Leemann has left his post and a bank which will have to deal with the regulators on this matter, alongside fellow institutions such as BSI, UBS, Goldman, ANZ/AmBank, Coutts, JP Morgan, Rothschild and others.

He, like the other former top players involved is likely to find that he is wanted for extensive questioning on these matters in an individual capacity, despite having retired from banking life. Hanspeter Brunner, for example, has been denied exit from Singapore while the BSI investigation continues.

Totally against more regulation

Yet is was this Swiss senior banker who not long before was quoted denouncing the idea of any further regulation of the banking system. We quoted Leemann from an interview with the Abu Dhabi media saying he was “totally against more banking regulation”:

“I understand you need regulation but more regulation does not solve the problem. The most regulated market has always been the United States. What happened in 2008? Regulation as such does not solve the issues….” said Leemann.

In fact, Leemann’s interpretation of the causes of the financial crash was of course self-serving and in opposition to what is widely agreed went wrong.

Inadequate regulation is what is widely recognised as having caused the failures of 2008. Illegal and irresponsible greedy bankers had broken all their own rules and guidelines in order to make a fast buck and lax oversight had let it happen.

Yet, over the following years more lax over-sight of banks such as Falcon had clearly allowed more illegal and irresponsible transfers to continue un-investigated, allowing global scams such as 1MDB to almost pass unnoticed.

The first enormous misappropriation of 1MDB money took place through the Zurich branch of RBS Coutts Zurich back in 2009.

Yet, nothing whatsoever had been done to investigate the matter right up until early 2015, when finally Xavier Justo released his devastating documents to Sarawak Report and Malaysia’s business paper The Edge, who both started reported on the scandal.

Either the banks did not raise the “Red Flag” money laundering alerts which ought to have been raised to central regulators in Malaysia, Switzerland, Britain and the United States as the interested parties in this particular transaction or the regulators concerned in all these countries simply failed to act.

The same applies to each and every other bloated, politically sensitive mega-1MDB transaction that occurred in ensuing years. Was it the banks who failed to notify the regulators in Singapore, Switzerland, Australia, America, Hong Kong and elsewhere or was it those regulators who failed to do their jobs?

The business media, meanwhile, did little more than muse over 1MDB’s banking irregularities. After all, who pays for them and all their adverts?

It is a huge relief for all Malaysians that at last this scandal has been addressed by all those forces. But, it well might not have been the case had the still imprisoned Xavier Justo not nailed his former bosses.

But it is clear that global regulators have failed to nab rogue banks, who have failed to nab rogue bankers for far too long and it is time to make the system start working for the public instead of protecting these dangerous illegal operators.

The intention behind the 1MDB money flows are illustrated in this WSJ chart showing the DOJ money trail orchestrated by Malaysian Official 1, the man in charge of the fund,

 

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Everything Went Wrong For Malaysia


Asian Tribune

By Habib Siddiqui

Malaysia’s Shameful Scandal

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What’s happening in Malaysia? Are we witnessing some conspiracy to break the head of this emerging economic power, or something else?

As readers may recall, the Malaysia Airlines Flight MH17, en route from Amsterdam to Kuala Lumpur, crashed after being hit by a Russian-made Buk missile when it was travelling over the conflict-hit region over eastern Ukraine on 17 July 2014. Three months earlier Malaysia Airlines Flight 370 (MH370/MAS370) disappeared on 8 March 2014 while flying from Kuala Lumpur to Beijing. The aircraft, a Boeing 777-200ER, was carrying 12 Malaysian crew members and 227 passengers from 15 nations. Its cause of disappearance still remains a mystery.

Before those unfortunate disasters, Malaysian Airlines had one of the best safety records — just two fatal accidents in 68 years of operation, including the hijacking in 1977 of Flight 653 that resulted in 100 deaths. Those accidents exacerbated the airline’s financial troubles and led to the renationalization of the airline.

Well, Malaysia is now hit by another major disaster whose impact internally may dwarf those two disasters in the sky. It involves scandals surrounding 1Malaysia Development Berhad (1MDB) – Malaysian government investment fund – founded in 2009 (and closely overseen) by Prime Minister Najib Razak. According to civil lawsuits filed by the US Justice Department, more than $US 3.5 billion was allegedly misappropriated from 1MDB. According to the Justice Department, the money followed a circuitous path among private banks, offshore companies and funds that originally sent it to Mr. Najib’s accounts, and from there it was used to fuel other investments and spending by a Malaysian financier Low Taek Jho, popularly referred to as Jho Low.

A portion of the money from 1MDB passed through Saudi Arabia on its way to Mr. Najib’s accounts and $80 million appears to have been transferred by the Ministry of Finance in Saudi Arabia. The origin of the rest of the Saudi money is still under investigation. According to a Wall Street Journal (WSJ) report, roughly $1 billion landed in the private bank accounts of Malaysian Prime Minister Najib Razak, which the civil suits also seek to seize – the largest case to date in the US Justice Department’s Kleptocracy Asset Recovery Initiative.

Mr. Razak has previously ¬acknowledged a similar amount went into his accounts before the 2013 general election. He said the money was a private donation from the Saudi royal family and most of it was later returned. Among those identified in the US suit was Najib’s stepson Riza Aziz and his associates. The US did not name any individuals as ¬defendants.

The money was raised on three separate occasions and took three separate paths, sometimes flowing directly, while in other cases it split and took different routes, only to be reunited in the AmBank accounts according to the Justice Department complaint. The cash flowed through Singapore, Switzerland, Saudi Arabia, Thailand, the Seychelles, the British Virgin Islands and Curaçao. Other funds disappear, often into accounts controlled by other players in the scandal, the complaint said.

Here below are some useful information from the WSJ on how the money got transferred.

Transaction 1: 1MDB borrowed about $1.8 billion for a joint venture with Saudi oil company PetroSaudi International Ltd. About $1 billion of the cash went to a Seychelles company called Good Star Ltd. A co-founder of PetroSaudi, Prince Turki bin Abdullah, received $24.5 million from Good Star before transferring $20 million to Mr. Najib via an intermediary, according to the Justice Department and a person familiar with the U.S. investigation into 1MDB. The same intermediary sent other funds into Mr. Najib’s accounts, bank transfer documents show, but the origin of the funds is still under investigation. PetroSaudi, Prince Turki and Prince Faisal did not respond to requests for comment.

Transaction 2: Two bonds worth a total of $3.5 billion were sold for 1MDB by Goldman Sachs to fund the purchase of power plants. After paying a substantial fee to Goldman, 1MDB was supposed to pay money for a guarantee on the bonds to a unit of Abu Dhabi’s International Petroleum Investment Company called Aabar Investments PJS. Instead, the funds went to the similarly named Aabar Investments PJS Ltd., a British Virgin Islands registered company that IPIC says isn’t part of its corporate structure, which received billions of dollars from 1MDB entities over the years. The money was then distributed to beneficiaries of the alleged fraud, according to the Justice Department. From Aabar BVI, about $637 million went to a company called Blackstone Asia Real Estate Partners in the British Virgin Islands, where it was pooled with other funds. Blackstone has no connection to the Blackstone Group, the New York private-equity firm. Another $463 million went from Aabar BVI to two mutual funds in the Caribbean island of Curaçao and then onto Blackstone Asia Real Estate Partners, which transferred a total of $170 million to Mr. Najib’s bank accounts in multiple transactions during 2012, bank transfer documents show.

Transaction 3: 1MDB sold $3 billion in bonds via Goldman Sachs to fund a real-estate joint venture with Abu Dhabi. Immediately after paying Goldman Sachs its substantial fees, 1MDB transferred nearly half of the cash to a series of funds, shell companies and other intermediaries located in the British Virgin Islands and Curaçao. Eventually $1.27 billion ended up in a British Virgin Islands company called Tanore Finance Corp. Tanore transferred $680 million to Mr. Najib’s accounts. A few months later, $620 million was returned to Tanore before disappearing back into a maze of offshore companies, according to the Justice Department and investigative documents reviewed by the Journal.

The Last Step involved the four paths into the prime minister’s bank accounts. Of the $1.05 billion Mr. Najib received in his accounts, only $80 million appears to clearly originate with Saudi Arabia, via its Finance Ministry, though the details of that transfer are still unknown.

Another $120 million that came via an intermediary based in Saudi Arabia are still under investigation, according to a person familiar with the U.S. investigation. At least $20 million of that $120 million has been traced clearly back to 1MDB by investigators. The remaining $850 million came via Tanore Finance and Blackstone Asia, and has been traced back to 1MDB by investigators, according to people familiar with the probe. Mr. Najib used the money in his AmBank accounts for personal and political spending, according to investigative documents reviewed by the WSJ that detail more than 500 transactions. He wrote checks to politicians in his political party and also paid millions of dollars for personal expenses, including $130,625 at a Chanel store in Hawaii and €750,000 at a jewelry store in Switzerland.

Mr. Najib hasn’t acknowledged all of the transfers into his accounts, but he said that $681 million was a legal donation from the royal family of Saudi Arabia. Mr. Najib said he returned most of the funds to the Saudi Arabian donor. 1MDB has denied wrongdoing and said it would cooperate with any lawful international investigation.

Prime Minister Najib has weathered persistent calls for him to step down over his handling of the 1MDB scandal, which is also being investigated by at least five other countries. Mr. Najib has denied any wrongdoing and has said the US Department of Justice lawsuit does not involve him.

Malaysia’s Minister of Urban Well-Being, Housing and Local Government Abdul Rahman Dahlan, however, admitted in a BBC interview that Prime Minister Najib Razak was the mysterious unnamed official who the US Justice Department claimed took part in rampant looting of state funds. The admission confirmed widespread suspicions that Mr. Najib was “Malaysian Official 1” mentioned in a Justice Department lawsuit filed in July.

Allegations of a vast international scheme of embezzlement and money-laundering involving billions of dollars of 1MDB money began to emerge two years ago. A Four Corners investigation in March revealed that Malaysia’s former attorney-general had planned to lay charges of misappropriation against Mr. Najib shortly before he was sacked. The story made headlines when the Four Corners crew was detained by police for trying to question the Prime Minister over the corruption scandal.

In its scathing lawsuit, the US Justice Department detailed how “Malaysian Official 1”, family members, and close associates diverted billions from the now-stricken fund. The Justice Department has moved to seize assets including real estate in Beverly Hills, New York and London, artworks by Monet and Van Gogh, and a Bombardier jet that it alleges were purchased with money stolen from 1MDB.

The Malaysian opposition and its supporters were already certain that Najib had a hand in money laundering from 1MDB. Within the ruling party – UMNO, Najib has forced out all those who thought the same, so all that is left are loyalists who are either convinced that he is innocent or don’t care one way or another.

Other Malaysian government officials said the US suit was part of a wider plot by Najib’s -detractors to topple a democratically-elected government, with one warning foreign meddling may lead Malaysia to become like Syria or Iraq.

Investors meanwhile are focused on the need for stability. The currency has seesawed this year amid an uncertain economic outlook, turning Asia’s best performance in the first three months of 2016 to one of the region’s worst since then. The economy is projected to expand at the slowest pace in seven years amid falling oil revenue and weaker exports. For Najib, economic stability is crucial as he seeks the votes of rural and semi-urban areas in the next election due by 2018.

At stake for UMNO is the un¬broken rule of its National Front coalition since independence in 1957. He’s had recent wins in local polls in Malaysia’s biggest state of Sarawak on Borneo Island and two federal by-elections.

While the 1MDB drama has raised doubts about governance and accountability in Malaysia, the structure of domestic politics is likely to protect Najib. His mentor-turned-nemesis Dr. Mahathir Mohamad, who was premier for over two decades, has repeatedly said UMNO will lose the next election if Najib remains the party leader. It is worth noting here that Dr. Mahathir Mohammad has repeatedly called for Najib’s resignation. Half a year ago, he also sued Najib for abuse of power and corruption.

As long as Najib retains the backing of UMNO’s powerful div¬ision heads fresh protests will carry little weight to unseat him. The views of those chiefs will become increasingly important closer to an election, depending on whether they feel Najib can carry the party to another win. Some economists have said Najib may consider an early election for 2017 to take advantage of the ¬opposition infighting.

My earlier trips to Kuala Lumpur years ago had left an indelible memory about the country and its energetic people. I felt proud of the achievement this south-east Asian nation has made in spite of all those airline disasters. It is sad to see now the level of corruption in Malaysia at the highest level. This scandal once again shows that the greatest threat to an emerging economy is often corruption and incompetence in administration.

Malaysian civil society must now take firm and immediate action to put the country back on track. If not, the country will tragically end up as the perfect case study into how the problems stem primarily from domestic crime and corruption.

– Asian Tribune –

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An American conspiracy to oust Malaysia’s Najib – or a propaganda war?


The Edge Markets

By South China Morning Post 

KUALA LUMPUR (Aug 29): As Malaysian Prime Minister Najib Razak becomes increasingly besieged by revelations in a US civil suit alleging fraud in his brainchild 1Malaysia Development Berhad (1MDB), his supporters are hitting back with a textbook tactic straight from classic psychological warfare manuals.

Over the past several days leading up to Malaysia’s 59th Independence Day on August 31, senior leaders and operatives of Najib’s party, United Malays National Organisation or Umno, are claiming that the suit by the Department of Justice is the start of a US plot to topple Najib.

Comparisons have been made between the DoJ suit and the 2003 invasion of Iraq when then-US President George W Bush used destroying weapons of mass destruction as a pretext for war.

By channelling nationalistic feelings that intensify at this time of year, they hope to nullify a key message in the DoJ suit which has grabbed the public’s attention – that Najib’s associates and his stepson defrauded 1MDB. And that Najib very possibly benefited from the graft.

The propaganda war around the DoJ suit also serves to neutralise the latest two threats to the political survival of Najib and Umno. The first is a series of massive rallies by electoral reform group Bersih 2.0 to pressure the government to reopen investigations into 1MDB.

The other, bigger, threat is Bersatu, a political party set up by the former premier Mahathir Mohamad, Najib’s highly regarded former deputy Muhyiddin Yassin and other former Umno rebels. Bersatu aims to replace Umno as the party of choice among Malaysia’s rural ethnic Malays, a key voting bloc, and to defeat Umno and its allies in the next general election.

By using the foreign conspiracy bogeyman, Umno hopes to discredit Mahathir, the political opposition and Bersih 2.0 in the eyes of rural Malays.

The DoJ suit claims that US$3.5 billion was stolen from 1MDB and funnelled into the accounts of controversial businessman Low Teck Jho, Najib’s stepson Riza Aziz and two others. About US$1 billion of those funds were used to buy luxury properties, paintings and pay for gambling debts in the United States, the suit claims, and US$731 million deposited into the personal account of an individual called “Malaysian official One” (MO1).

Although Najib is not specifically named, the suit states that MO1 is a relative of Riza and held high positions in the Malaysian government and 1MDB. (Najib had been a chairman of 1MDB’s advisory board).

Najib has denied any wrongdoing, while Malaysia’s attorney general has also cleared him of any crime related to 1MDB.

The term “MO1” has been a lightning rod for Najib’s critics and a viral meme much to the chagrin of his supporters. Numerous news reports claim it refers to Najib and a protest is being planned to “arrest MO1”.

According to Bersatu founding member Kamarul Azman Habibur Rahman, the DoJ suit was a turning point in the public’s perception of the 1MDB affair.

For the first time, the suit spelled out in clear terms how the scandal was a crime, unlike the probes by Malaysian authorities.

“When you talk to rural folk about 1MDB it’s hard for them to grasp concepts such as bad investments, shell companies and debt,” said Kamarul Azman, who was expelled from Umno for criticising Najib.

“But the suit makes it clear that 1MDB money was stolen and these individuals have to go to court to defend themselves. So now, rural folk can see that something seriously wrong happened. And that is what Umno is so scared of,” he said.

Umno, together with its partners in the Barisan Nasional coalition, was re-elected in the 2013 general election thanks largely to rural Malays.

“Because they cannot defend themselves against these allegations they claim it’s a foreign conspiracy,” said Kamarul Azman.

Over the past three weeks, two of the party’s senior leaders, Idris Haron and Ahmad Bashah Md Hanipah, have painted the DoJ suit as a foreign conspiracy to topple the democratically-elected Najib.

Similar claims were made by articles in Umno-owned daily Utusan Malaysia and its portal Umno Online. These reports also accused Bersatu’s leaders Mahathir and Muhyiddin of conspiring with foreign powers.

In the past Umno has also tarred political rivals the People’s Justice Party (PKR) and Democratic Action Party as foreign agents in order to discredit them among rural folk. Ironically Mahathir used this tactic repeatedly in 1998 against then estranged Deputy Prime Minister Anwar Ibrahim, the founder of PKR.

Umno declined to comment.

The problem with the smear campaign, said another Bersatu leader, Syed Saddiq Abdul Rahman, was that it did not gel with Najib’s own public persona of being a darling of the US. Najib has been fond of boasting of his cosy relationship with US President Barack Obama. “He’s played golf with Obama, he tells everyone his administration managed to bring Obama to Malaysia twice and how he’s even ridden in The Beast [the US president’s official limousine]. So there’s this cognitive dissonance there.”

Also, Mahathir’s notoriety for being a critic of Western superpowers was embedded in the Malay psyche, said Syed Saddiq.

Ibrahim Suffian, of the think tank Merdeka Centre, said the bogeyman tactic had been used too often in the past. Coupled with the inconsistencies of Najib’s own explanations of where the donation came, Ibrahim said such conspiracy theories were starting to look like a propaganda campaign to mask an inconvenient truth.

Kamarul Azman added: “Even rural folk understand that when you have to go to court to face charges, then something is seriously wrong.”

Sheridan Mahavera is a Kuala Lumpur-based journalist

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