The Malay Shame and Tragedy that is 1MDB

July 31, 2016

The Malay Shame and Tragedy that is 1MDB

by  Dr M. Bakri Musa

Morgan-Hill, California, July 25, 2016

Imagine had Prime Minister Najib Razak responded differently to the US Department of Justice Asset Forfeiture lawsuit and said instead, “I have instructed my Foreign Minister to seek clarification to determine who this “Malaysian Official 1” so we could investigate him. I have also directed the Attorney General to review the evidence in the DOJ complaint.”

As for 1MDB, imagine if its spokesman had responded, “We view with deep concern allegations that assets meant for our company, a public trust, had been corruptly diverted. We seek clarification on who 1MDB Officials 1 and 2 are to make sure that they are no longer in our employ. We will review our policies to ensure that such pilferages as alleged by DOJ if they did occur will not recur. Additionally, we are engaging legal counsel to protect our interests in the American trial.”

The US Attorney-General Loretta Lynch and her Team

Malaysia’s Attorney-General, Apandi Mamak Ali

Instead, what Malaysians and the world heard last Wednesday were irrelevant and meaningless statements to the effect that neither Najib nor 1MDB are the defendants in the suit. True and obvious, needing no response or clarification. The defendants are the owners of those seized assets which are alleged to have been acquired with funds corruptly siphoned from 1MDB, a GLC of which Najib is the Chairman.

The responses from Najib, his ministers, and 1MDB only brought shame to themselves, to Malays, and to Malaysia.

As for the defendants, their options are either not to contest the suit and thus forfeit those assets, or fight it. Negotiated settlement is unlikely. This is the biggest asset forfeiture in US history; Attorney-General Lynch is out to make a point to corrupt kleptocrats everywhere in these days of complex cross-border money laundering.

Before this, the biggest forfeiture involved the giant telecom company, Amsterdam-based, and individuals close to the president of Uzbekistan. The Uzbeks ignored the suit while the company pleaded guilty to the criminal charges. Rest assured that those defendant Uzbeks won’t be visiting Disneyland or Las Vegas any time soon!

The  Fawning Malay Public Officials who have yet to learn from Gani Patail, Zeti Aziz and Abu Kassim. Loyalty to Najib Razak does not pay

This 1MDB corruption may be a legal case but politics is never far off the radar in Putrajaya and Washington, DC, as well as in the potentially more volatile international arena.

No-Contest Option

Not contesting would save substantial legal fees and other costs, as well as the not insignificant personal hassle factor. Those aside, the biggest advantage would be not further exposing the defendants and others, legally as well as in many other ways, during the pretrial discovery and trial. Spared a trial the identity of “Malaysian Official 1” will never be known, at least not officially, a crucial consideration in Putrajaya.

The loss of those assets, even though in the hundreds of millions (in US dollars, not worthless ringgit), is at least quantifiable. However, even the Sultan of Brunei could not shrug off a loss of that magnitude.

Choose this option and Riza Aziz, one of the defendants who according to court documents is also related to Malaysian Official 1, would be well advised to pack up and find a country that does not have extradition or tax treaty with the US. He also had better get used to a much less luxurious lifestyle.

Were Riza to pursue this course, at least in his old age he could regale his grandchildren with stories that he once owned a glittering condo in Manhattan and shared drinks with Hollywood stars in Las Vegas.

That would also be a very Malay story. At Kampung Baru today there are many elders who look with nostalgic gaze at the skyscrapers in the Golden Triangle and lament, “Ah, itu cerita dulu!” (Those are old stories!)

The US Government would recoup its considerable costs from those assets. Rest assured there would be itemized bills for every paper clip and DOJ lawyers would be charging senior partners’ rates. Even after factoring that there will still be substantial loot left. By statute, that belongs to the people of Malaysia.

Malaysians knew about this since last year except for the few clowns who thought otherwise

This is not the time for me to be politically correct to someone as corrupt as Najib Razak —Malaysian Official 1?-Malaysia’s Kleptocrat–Din Merican

If Najib is still Prime Minister, do you think those Americans would be dumb enough to return those millions to the same scoundrels? America could not disburse them to Malaysian NGOs either as most are not sympathetic to UMNO. That would present a delicate diplomatic problem. On the hand it could prove to be the most sophisticated and effective exercise of “soft power,” more powerful than “boots on the ground” in effecting regime change.

At any rate don’t expect those Monet paintings to hang on the walls of kampung huts any time soon.

Contesting the Forfeiture

Contesting would be no walk in the park. It would be expensive, protracted, and risk uncovering details that could trigger criminal charges. American lawyers are not cheap and potential defense attorneys would want their substantial fees paid upfront and from “clean” sources. With those assets tied, Riza better have other fat bank accounts. Even if he were to receive help from his “Malaysian Official 1” relative, Reza’s defense attorneys would insist, and need unchallenged documentation, that the money is legitimate and not siphoned public funds.

The earliest a trial could begin would be a year or two hence, in time for the UMNO Leadership Convention or worse, the next Malaysian election. A trial would also risk exposing the identity of “Malaysian Official 1, a consideration for Putrajaya.

Being a civil case the burden of proof for the prosecution is lower, merely the preponderance of evidence, not the much higher “beyond a reasonable doubt” of a criminal trial. The burden also shifts to the defendants to prove that those assets were acquired with untainted funds.

In court documents Riza Aziz claimed that the millions he received from some unknown Arab was a gift. An incredulous assertion that even his accountant did not believe him; hence the attestation from his “donor.” If this be a trial by jury, it would be tricky to convince an American juror, as with Riza’s accountant, that receiving millions from a stranger is a “gift.” Besides, the image of an Arab in America these days is far from pristine.

With a trial the testimonies of those professionals who had advised the defendants would be scrutinized. The Watergate Hearings of the 1970s exposed the unsavory activities of the various advisors. Many prominent lawyers ended being disbarred, including the President’s Counsel as well as a former Attorney-General.

A trial would highlight an ugly truth that could prove explosive in race-sensitive Malaysia. That is, Riza Aziz excepted, those corrupt Malays got only the crumbs while the gravy flowed to that Wharton-trained Chinaman. That won’t sit well with UMNO Youth’s “Red Shirts” or PERKASA boys.

A trial would also showcase the professionalism and meticulousness of American prosecutors and investigators. That would not make the former failed UMNO operative and now Malaysia’s Attorney-General look good. The Malay image is already battered by the amateurs at 1MDB.

It took a Penang-born baby faced Chinaman to do the Malays in. We are not smart, only arrogant

From the perspective of international politics, it may be shrewd not to identify “Malaysian Official 1.” This forfeiture however, is not the only game. After all, Obama did not tee off with Najib that Christmas in Hawaii because he (Najib) was a Tiger Woods. It was part of Obama’s “Pivot to Asia” show, with Najib the prop.

There are other actors in this new shadow play. China is asserting itself, most visibly through military exercises in the South China Sea but more effectively elsewhere. Note the abrupt change of face at the recent ASEAN conference that had initially condemned China, and ASEAN’s collective silence on the International Court’s decision on the South China Sea dispute.

China too could play the Obama game, not on the green of Hawaii’s golf course but FELDA’s oil palm oil plantation. China could buy palm oil from Africa, and not offer inflated prices for those rusty 1MDB assets.

Malay FELDA Global Ventures Directors –Foxes in charge of the Hen House headed by Chairman Isa Samad

Najib now has to balance the interests of his stepson and former Beverly Hills real estate tycoon Rza Aziz versus that of FELDA settlers and their wooden huts. Not an easy choice! The kampung boy in me longs to see a good fight by our modern-day Hang Tuah. Thus I challenge Riza to be jantan (man) enough to fight this US forfeiture.

Back to reality, the winners in this 1MDB shadow play are many and obvious. Riza is one, though not as big as he was before the forfeiture; so too Malaysian Official 1 as well as IMDB Officials 1 and 2. As for that Wharton MBA character, he could still savor his shark’s fin soup in Taiwan. The US DOJ too is a winner, and a very big one.

As for the losers, 1MDB is the obvious. Its current management should sue the previous board and management for incompetence as well as breach of fiduciary duties to recover some of the losses. Current management owes the company and Malaysians that much.

The other victims are less obvious. They include FELDA settlers now deprived of better schools, smart young Malays who excelled on their IB tests but now cannot go abroad, and those dedicated GLC Malay executives whose reputations are now tainted because of the shenanigans of those monkeys at 1MDB.

Those Malaysian officials who responded last Wednesday to the DOJ’s lawsuit and those Malays who still strenuously defend Malaysian Official 1 have yet to recognize these victims. That’s the terrible shame and great Malay tragedy.



Racial and Religious Politics prevalent in Malaysia

July 31, 2016

Racial and Religious Politics prevalent in Malaysia

by Farouk A. Peru

The Model Malay Muslim

The quality of a people’s consciousness determines its political discourse. In Malaysia, we do not lack intelligent people at all. We have many blogs which showcase their thinking and they have many followers. The only thing is that racial and religious politics are still prevalent.

Barisan Nasional, along with PAS, dominates at least 70 per cent of the popular votes. The voters of BN and PAS tend to ignore the actual issues of the day, preferring instead to dwell on Malay supremacist rhetoric.

PAS dwells on the ancient Arabic tribal law known as hudud and neither of them actually contemplate socio-political systems through dialectics. This is why our national political consciousness remains abysmal.

An enormous tidal wave which washed over Malaysian political discussions last week was the announcement by the American Department of Justice.

In the midst of this tidal wave, the Malay-Muslims rightly look to their ulama, the Islamic priestly class. Muslims often proudly declare that Islam does not have a priesthood but in truth, our priests are more blindly followed than those of any religion on Earth.

We have not yet had the reformation which returned the power of interpretation to the Muslim individual, where it should have always remained.

Well, the ulamas were preoccupied with something way more “important” ― Pokemon Go! Pokemon Go is the current reality-based game which has taken the world by storm. It is similar to the adventure games I played when I was growing up except it is enhanced by the power of smartphones and GPS.

At the risk of Pokemon fans lynching me, verbally or otherwise, I would like to say that I find this game to be unproductive and a waste of time to boot. People may argue that one needs to walk around to find stuff but I would say one needs to be careful not to trip or bump into something.

Perak’s Islamic Pope–Harussani Zakaria

Having said that, should it be made haram (forbidden)? Two muftis apparently think so. Harussani Zakaria and Wan Salim Wan Mohd Noor, the Muftis of Perak and Penang respectively.

The former is notorious  for declaring things haram. The latter is less known but in his report, unleashed a flurry of Arabic phrases to prove this point. He cited sadd al dharar (blocking the means to evil), dar’ul mafasid (closing off the means that can lead to evil), maslahah ‘ammah (for public interest)’. These Arabic terms are nothing more than English words related to social laws but they certainly inspire reverence from the enthusiast.

At this point, we need to ask the question, would the muftis say the same about football? Football can be quite addictive. Diehard fans often confront one another. They wear T-shirts which say unislamic things (like Red Devil).

Worst of all, the players’ aurat (shameful parts) are exposed! Football seems to be far worse than Pokemon Go but I doubt any mufti would dare say much lest they lose Malay-Muslim support. Harussani tried that a number of years ago with Red Devils but was laughed off by the Malays.

Speaking of aurat, another female (never male, it’s always female) artiste received flak for her dressing and sexy performance ― Selena Gomez. Selena was in Malaysia for a concert.

Of course, our religious squad would have none of it. This time it was PAS Youth who spoke up. They claimed that Gomez’s performance would lead to lewd behaviour. Be that as it may, I wonder if these folks know about YouTube?

One can find far more suggestive performances there and yet Malaysians have remained at the same level of morality. In any case, there is the moral police who go around catching young people being affectionate in public while videoing them and uploading the videos to YouTube! Is that moral policing or voyeurism, I wonder?

PAS members of the state exco then organised a sembahyang hajat (special supererogatory prayers) to cancel Gomez’s performance. Unfortunately, those prayers were not answered for some reason and the concert went ahead. Perhaps God wants PAS to help Kelantan’s flood victims first?

What concerns me here though is their attempt to take away the rights of citizens. We must remember that citizens are given full freedom of religion. This should (but usually does not) entail that whatever their religion does not forbid should be allowable to them.

People of other religions and indeed liberal Muslims do not consider such concerts haram. Why are PAS and their ilk forcing their interpretation upon us? If they see it as haram, don’t attend the concert.

These were the diversions of the previous week which kept us from the most important matter of all. I have not detected any statement from our 15 muftis regarding the gravity of that civil lawsuit in the US. The issue of aurat is far more important, it seems.

There were two Islamic priests from PAS who did make statements though. One was Ibrahim Man who asked for ulama trained in finance to be included in the 1MDB investigation. I understand the need for the ulama to stay relevant but credibility must be something earned. Islamic finance is irrelevant to this case.

Furthermore, Ibrahim Man’s boss, the pro-UMNO and Najib fawning Hadi Awang claimed some months before, that we require four witnesses in order to accuse anyone. With this claim, Hadi has demonstrated his ignorance about the global financial system.

Malaysia is currently declining in terms of our political discourse. One major reason behind this is the Islamic priesthood and their sphere of concerns.

Added to that are their puerile statements about the big issues. Unless we raise our level of consciousness, we will never raise the level of political discourse and bring better conditions to the nation.


For our sakes–Dump crackpot Trump

July 31, 2016

For our sakes–Dump crackpot Trump

by Dean Johns

what Donald Trump imagines he means when he claims to want to make America great again, it is anybody’s guess. Certainly the US can proudly proclaim its tremendous wealth, technological leadership, military might and democratic institutions.

But even an admirer of America on balance, as I am, has to have doubts about whether it has ever been truly great. Its tremendous wealth is accompanied by appalling poverty; too much of its technology is for military purposes; its military might too frequently misdirected, as during the Bush Administration in Iraq and Afghanistan, and before that in Vietnam; and its democratic institutions grotesquely skewed in favour of big business.–Dean Johns

Nothing grates on me more than the word great, as in the deranged Donald Trump’s urging to US voters to elect him president and “make America great again” or acts of terror committed in the cause of an allegedly ‘great’ God.

Such claims to greatness are cover-ups for at best great self-deceptions, and at worst great lies.No God that was truly great would need supporters to commit killings and other crimes in His (or Her or Its) names. And no country with any genuine claim to greatness would seriously countenance a crackpot like Donald Trump as a candidate for any public office whatever, let alone its presidency.

Let’s face it, however sincerely we may aspire to greatness, human imperfection decrees that none of us or the countries we create or the divinities we invent are truly great all the way through or all the time.

So rather than shoot for ‘great’ and thus inevitably and often disastrously fail to achieve it, or to give up and go for the opposite extreme as some do, it seems to make sense to settle for ‘good’.

Or, as the eminent British pediatrician and psychoanalyst David Winnicott (1896-1971) famously proposed for parents, especially mothers, plagued by perceptions that they were falling short of perfection in rearing their children, good-enough.

The ‘good-enough’ mother, Winnicott claimed, in doing her best despite falling short of maternal perfection, let alone greatness, gives her children sufficient nurturing, support and encouragement to happily grow up to be their ‘true selves’, or at least their best possible ‘false selves’.

This relaxed, realistic and above all achievable ‘good-enough’ rather than impossibly great approach to seems to make sense to me, and better yet appears to work. For example, while neither I nor either of the mothers of my children would claim to have been paragons of parental perfection, our offspring, now aged 51 and 21, have both apparently turned out much better than ‘good-enough’ people.

And professionally, while I’ve never kidded myself that I could ever aspire to be a ‘great’ writer, I’m perfectly content to be good-enough to keep typing, and even to attract if not necessarily interest or entertain the odd reader.

Often proving to be the unholy grail

And just as the good-enough concept works for me, it also clearly does so, even if they’re not consciously aware of it, for the vast majority of my fellow humans who are sufficiently sensible to see ‘greatness’ for the unholy grail it so often proves to be.

For countries as well as for individuals, as witnessed perhaps most vividly by the tragic case of North Korea, cursed as it has been for decades by the self-styled ‘great’ leadership of its Kim dynasty.

And as for what Donald Trump imagines he means when he claims to want to make America great again, it is anybody’s guess. Certainly the US can proudly proclaim its tremendous wealth, technological leadership, military might and democratic institutions.

But even an admirer of America on balance, as I am, has to have doubts about whether it has ever been truly great. Its tremendous wealth is accompanied by appalling poverty; too much of its technology is for military purposes; its military might too frequently misdirected, as during the Bush Administration in Iraq and Afghanistan, and before that in Vietnam; and its democratic institutions grotesquely skewed in favour of big business.

Then there is the fact that this self-proclaimed ‘land of the free’ was founded on slavery, has long had by far the biggest per-capita prison population in the world, maintains a rate of death by gunfire far higher than many of the world’s most murderous dictatorships, a still retains a shocking record of racial injustice.

Not to mention an apparently incurable fancy that God is great, and on its side, in every whit as fundamentalist a Christian fashion as Donald Trump demonises Muslims for having faith in Allah.

Hillary Clinton –Making America Beautiful, Wholesome and Humane

In short, what the US needs right now is not a president determined to make America great again, whatever that might mean, but another good-enough President like Barack Obama, with the determination to make it better.

And as for Malaysia, which I suppose I might as well mention as long as I’m writing this for Malaysiakini, it is high time this country got itself a government that’s any good at all, instead of the UMNO-BN one that it has, which is no good whatever.

Or, to put it another way, it is a great disgrace that this gang of crooks has been systematically robbing Malaysia of its natural resources, and the Malaysian people of their funds, freedoms, rights and protections, ever since power was handed to it on a plate by the departing British colonisers.

And despite international action in the case of its latest massive crime against the nation, the 1MDB swindle, the chances of its reforming itself and doing something, anything good, let alone anything like good-enough, seems to remain a distant dream.

Read more:


Jazz Time from Phnom Penh

July 30, 2015

Jazz Time in Phnom Time

It is the  time of the week (Saturday) for us to get away from it all–the cares and woes, the hustle and bustle,  the noise from angry voices, and politics– and just relax.

Phnom Penh is  a unique city. There are plenty of places to go for a good meal with friends and enjoy the music. The FCC (Foreign Correspondents Club) by the Riverside, for example, is a popular spot for the curious and adventurous. If you come to Phnom Penh, go there and listen to jazz, enjoy a great meal, and meet tourists, journalists,  and the English speaking educated locals who frequent the FCC to sit back and relax.

So in that spirit, Dr. Kamsiah who is in Kuala Lumpur where she is attending her nephew’s marriage dinner at The Tropicana Golf Club and Din Merican  who is blogging in Phnom Penh present The Dave Brubeck  Quartet .

Jazz Pianist Dave Brubeck and his colleagues (Paul Desmond on Alto, Joe Morello on Drums and Eugene Wright on Bass) need no introduction. Din is proud to say that  David “Dave” Warren Brubeck (December 6, 1920 – December 5, 2012) was äwarded an Honorary Doctorate in Music in May, 2010 for his contributions to American music and culture by his alma mater, The George Washington University. Listen to The Quartet and you know why Dr. Dave Brubeck deserved to be remembered.–Din Merican

1MDB: The Scandal that shamed Malaysia and Malaysians

July 30, 2016

The Guardian Editorial on Malaysian Politics

Investigations into the 1MDB development fund and a new security law are both cause for concern

Najib Razak needs additional powers for political survival

Malaysia’s new security law, due to come into force on Monday, would be alarming at any time. Its sweeping powers permit authorities to declare national security areas which are off-limits to protests, where individuals and premises can be searched without a warrant, and where killings by security forces need not result in formal inquests. Changes to the country’s criminal code, undermining the rights of suspects, are similarly concerning. Human rights groups warn that existing laws, including the colonial-era Sedition Act – which Prime Minister Najib Razak once vowed to repeal – have been used to detain and muzzle critics. The country’s Police Chief recently warned that protests by electoral reform group Bersih would be permitted only if participants avoided calling for Mr Najib’s resignation.

Mahathir thinks the West is out to wreck Malaysia's economy. Can he save it-or only make things worse?

2016–Can he save Malaysia from the Najib Curse?

The government says the National Security Council Act is needed to protect the public from a mounting global terrorism threat. It is striking, however, that it becomes law as the Prime  Minister faces growing pressure and planned protests over the multi-billion-dollar 1MDB development fund scandal, which has snowballed since emerging a year ago. Even his erstwhile patron, former premier Mahathir Mohamad, has joined forces with the opposition in an attempt to oust him.

Mr Najib has denied wrongdoing throughout and Malaysia’s Attorney-General cleared him over allegations that $681m was siphoned from the development fund to his personal bank account, explaining that the cash was a political donation from the Saudi Royal family. That explanation was itself striking, even given the Saudi Foreign Minister’s assurances that it was a genuine gift “with nothing expected in return”, and promises that most of it had been returned.

This month the US Justice Department filed civil lawsuits seeking to seize $1bn in assets, part of the $3.5bn it alleges high-level figures and their associates stole from the fund which Mr Najib founded and, as Chairman of its Advisory board, oversaw. (He is not named in the documents, which refer to him as “Malaysian Official 1”.) It alleges that money intended for the wellbeing of Malaysians was diverted to luxury properties, works by Monet and Van Gogh and even the making of The Wolf of Wall Street, though the movie’s production firm has denied any impropriety.

US Attorney-General Loretta Lynch told a press conference that misappropriated funds were laundered through a complex web of transactions and fraudulent shell companies with bank accounts in countries around the world; “We cannot allow the massive, brazen and blatant diversion of billions of dollars to be laundered through US financial institutions without consequences,” a colleague declared. One important question is how well such entities performed their duties. The US investigation – like the research of Clare Rewcastle Brown, whose London-based Sarawak Report has doggedly pursued concerns about 1MDB – is to be commended. This case concerns assets that rightfully belong to Malaysia’s 30 million citizens, but what has happened to them, and how, should concern the rest of us, too.

1MDB: The Scandal that shamed Malaysia and Malaysians

How a jailed former banker and a lone and dedicated British journalist broke a story that shook the world and shamed Malaysia and Malaysians

by Randeep Ramesh

On 22 June 2015, Xavier Justo, a 48-year-old retired Swiss banker, walked towards the front door of his brand new boutique hotel on Koh Samui, a tropical Thai island. He had spent the past three years building the luxurious white-stone complex of chalets and apartments overlooking the shimmering sea and was almost ready to open for business. All he needed was a licence.

Malaysia’s No 1 Rouge and Corrupter still still in power

Justo had arrived in Thailand four years earlier, having fled the drab world of finance in London. In 2011, he and his girlfriend Laura toured the country on a motorbike and, two years later, they got married on a secluded beach. The couple eventually settled down in Koh Samui, a tourist hotspot, just an hour’s flight south of Bangkok. After trying out a couple of entrepreneurial ventures, Justo eventually decided that he would go into the hotel business. He bought a plot with an imposing house and began building: adding a gym, villas and a tennis court.

That June afternoon, he was expecting a visit from the tourism authorities to sign off on the paperwork. Instead, a squad of armed Thai police burst through the unlocked door, bundling Justo to the ground. The officers tied their plastic cuffs so tightly around Justo’s wrists that he bled on the dark tiled floor. The police quickly moved into his office, ripping out the computers and emptying the filing cabinets.

After two days in a ramshackle local jail, Justo was flown to Bangkok and paraded before the media, in a press conference befitting a mafia kingpin. Still wearing shorts and flip-flops, he was flanked by four commandos holding machine guns, while a quartet of senior Royal Thai Police officers briefed the assembled reporters on the charges against him.

Justo was charged with an attempt to blackmail his former employer, a little-known London-based oil-services company named PetroSaudi. But behind this seemingly mundane charge lay a much bigger story.

Six months earlier, Justo had handed a British journalist named Clare Rewcastle Brown thousands of documents, including 227,000 emails, from the servers of his former employer, PetroSaudi, which appeared to shed light on the alleged theft of hundreds of millions of dollars from a state-owned Malaysian investment fund known as 1MDB (1Malaysia Development Berhad).

The documents that Justo leaked have set off a chain reaction of investigations in at least half a dozen countries, and led to what Loretta Lynch, the US attorney general, described last week as “the largest kleptocracy case” in US history.

According to lawsuits filed last week by the United States Department of Justice (DoJ), at least $3.5bn has been stolen from 1MDB. The purpose of the fund, which was set up by Malaysia’s Prime Minister, Najib Razak, in 2009, was to promote economic development in a country where the median income stands at approximately £300 per month. Instead, the DoJ alleged that stolen money from 1MDB found its way to numerous associates of Prime Minister Najib, who subsequently went on a lavish spending spree across the world. It also accused Najib of receiving $681m of cash from 1MDB – a claim he denied. Money from 1MDB, the US also claimed, helped to purchase luxury apartments in Manhattan, mansions in Los Angeles, paintings by Monet and Vincent van Hogh, a corporate jet, and even financed a major Hollywood movie.

The US Justice Department breaks the alleged theft down into three distinct phases: the first $1bn defrauded under the “pretence of investing in a joint venture between 1MDB and PetroSaudi”; another $1.4bn, raised by Goldman Sachs in a bond issue, misappropriated and fraudulently diverted to a Swiss offshore company; and $1.3bn, also from money Goldman Sachs raised on the market, which was diverted to a Singapore account.

“A number of corrupt 1MDB officials treated this public trust as a personal bank account,” Lynch told the press last week. “The co-conspirators laundered their stolen funds through a complex web of opaque transactions and fraudulent shell companies, with bank accounts in countries around the world, including Switzerland, Singapore and the United States.” PetroSaudi, which is not a party to the lawsuit, denied the US allegations and said that the DoJ’s asset-forfeiture claims are “no more than untested allegations”.

United States Department of Justice alleges that money from 1MDB was used to buy Claude Monet’s Nymphéas Avec Reflets de Hautes Herbes, valued at $57.5m. Photograph: David Levene for the Guardian

Najib, who has used every ounce of his power to obstruct investigations into the scandal – a charge he denies – is not mentioned by name in the US lawsuits, which refer to him as “Malaysian Official 1”. But the man at the centre of the intricate swindle depicted in the US lawsuits is an adviser to Najib: Jho Low, a Harrow-educated 29-year-old friend of the Prime Minister’s stepson. Low, a babyfaced young man who likes to party with Lindsay Lohan and Paris Hilton – and calls his Goldman Sachs banker “bro”, according to the DoJ – is accused by the US of masterminding the theft of $2bn from 1MDB, which was sent to bank accounts in Switzerland, Singapore and the Virgin Islands. Low has said that he has not broken any laws and was not being investigated.

Jho Low (pic right) and his sidekick Riza Aziz, who is the son of Rosmah Mansor, Malaysia’s notorious First Lady and wife of Prime Minister Najib Razak

Low’s sidekick is Riza Aziz, Najib’s stepson. Riza produced The Wolf of Wall Street – Martin Scorsese’s tale of corruption, decadence and greed – and both he and Low were thanked by name in Leonardo DiCaprio’s Golden Globes acceptance speech for best actor. In 2011, Low took a 20% stake in EMI, the world’s largest music-publishing company, for $106m – in the same year, he bought a $30m penthouse for his father at the Time Warner Center in Manhattan, overlooking Central Park. Riza’s Hollywood production company has said: “There has never been anything inappropriate about any of Red Granite Pictures or Riza Aziz’s business activities.”

All this and more is laid out in the US filing, which details claims of an amazing heist, carried out by conspirators who rinsed billions from the people of Malaysia through offshore accounts and shell companies in tax havens such as the Seychelles and British Virgin Islands. The scale of the enterprise echoes Balzac’s maxim that behind every great fortune lies a great crime.

Jho Low with Paris Hilton at an event in Paris. Photograph:

The global effort to uncover Malaysia’s missing billions began with Xavier Justo. He leaked 90GB of data, including 227,000 emails, from his former employer PetroSaudi, an oil services company that had signed the first major deal with 1MDB. (PetroSaudi denies any wrongdoing.) Without these files, there would have been no reckoning.

Justo’s connection to PetroSaudi was his long friendship with one of the company’s two founders, a Saudi national named Tarek Obaid. The two men had met back in the late 1990s, when they both partied regularly in the nightclubs of Geneva. By 2006, the two men were inseparable: Justo had become an established businessman, running a large financial services firm, Fininfor, and the owner of a Geneva nightspot named the Platinum Club. Justo regarded Obaid as a “younger brother”, and in 2008, lent him $30,000 and a desk in the Fininfor offices to help start up PetroSaudi.

Obaid and Justo were an unlikely pair, brought together by a love of the high life. Justo, the son of Spanish immigrants to Switzerland, did not go to university. Obaid is a graduate of Georgetown University’s prestigious  Walsh School of Foreign Service. His brother, Nawaf, served as a special adviser to the Saudi ambassador to the UK. Obaid’s PetroSaudi co-founder, Prince Turki bin Abdullah, is the seventh son of the late King Abdullah bin Abdulaziz, who ruled Saudi Arabia from 2005 until his death in 2015.

When Justo left Geneva in 2009, PetroSaudi was little more than a name on a calling card, formally incorporated in London with an address at an anonymous business unit near Victoria. Two years later, it had taken in $1.83bn.

PetroSaudi’s business was access capitalism: opening doors with the help of friends in high places. The basic idea was to capture a piece of the huge oil revenues being generated by state-owned firms in developing countries – treasure chests waiting to be unlocked by a firm that was a “vehicle of the Saudi royal family”, which could count on the “full support from the kingdom’s diplomatic corps”. PetroSaudi told potential partners that it controlled oil fields in central Asia, which it would put up as collateral to secure cash from state investors.

This was the pitch that landed PetroSaudi’s founders a meeting with the Malaysian Prime Minister in August 2009. Aboard a 92m megayacht off the coast of Monaco, Obaid and Prince Turki spent the day with Najib, his adviser Jho Low, and other members of the prime minister’s family. Snapshots taken at the meeting have the look of a holiday cruise – baseball caps and shorts – but their discussion was serious business. What resulted was a decision for Low and Obaid to work together on a deal that would allow them both to control mind-boggling sums of money.

Although Low held no formal position in the Malaysian government, he had become a trusted confidant to the Prime Minister. Despite his youth, Low had been instrumental in working with Goldman Sachs to set up a sovereign wealth fund to invest the revenues of an oil-rich Malaysian state.

Around the time that Low and Najib went boating with the PetroSaudi founders, the Malaysian central government took control of the wealth fund – which was soon renamed as 1Malaysia Development Berhad (1MDB) and given a mandate to promote economic development in Malaysia. The fund had more than $1bn to spend, and Prime Minister Najib had the sole power to approve investments and to hire and fire board members and managers. Low appeared to facilitate transactions – according to the DoJ, he even attended board meetings of 1MDB and acted as a link with the PM.

But, according to the US Justice Department, the deal was merely a “pretence” for “the fraudulent transfer of more than $1bn from 1MDB to a Swiss bank account” controlled by Low – “a 29-year-old with no official position with 1MDB or PetroSaudi”. PetroSaudi has always maintained that all 1MDB funds were paid to entities owned by its shareholders.

The multibillion-dollar joint venture deal was completed with extraordinary speed – in less than a month. Shortly after the yacht meeting, on 28 August 2009, Obaid had introduced Low to Patrick Mahony – the company director who handled PetroSaudi’s business affairs. According to documents seen by the Guardian, Low and Mahony met for lunch in New York on 9 September to discuss the joint venture.

After dining at Masa – a sushi restaurant where the set menu costs $540 a head – Mahony emailed Low the next day with an offer: “We know there are deals you are looking at where you may want to use PSI [PetroSaudi] … we would be happy to do that. You need to let us know where.” PetroSaudi said the documents seen by the Guardian are unreliable, stolen, fake and that they have been selectively quoted.

Less than three weeks later, the deal was done. PetroSaudi would contribute $1.5bn in oil and gas assets to the joint venture, while 1MDB would inject $1bn in cash.

This drawing by Vincent Van Gogh, worth $5.5m, was allegedly bought with money from 1MDB, according to the US authorities. Photograph: Frank Baron for the Guardian

According to the US court filing, 1MDB transferred $300m into an account belonging to the PetroSaudi joint venture, but the remaining $700m was sent to a Swiss account at RBS Coutts, controlled by a Seychelles-registered shell company named Good Star. The US justice department complaint alleges that Jho Low, and not PetroSaudi, was the beneficial owner and sole authorised signatory of Good Star. US authorities claim that officials at 1MDB provided false information to banks about the ownership of the Good Star account in order to divert the $700m.

In documents seen by the Guardian, on 30 September 2009 PetroSaudi appears to direct that the $700m be paid into an account controlled by the company – but three days later, when the compliance department at RBS Coutts requested further details about the name of the beneficiary account, the address given by 1MDB was the Good Star account. On the same day, 2 October, Low emailed Mahony to say “Shld be cleared soon”. PetroSaudi told the Guardian: “No money put into the joint venture by 1MDB was misappropriated or is missing. Its investment was repaid with profit … All transfers from 1MDB were paid with the full approval of the 1MDB board.”

According to documents seen by the Guardian, the Good Star transaction made Obaid, then 32, and Mahony, then 33, very rich men. Records indicate that on 30 September 2009, Good Star agreed to pay $85m to Obaid, which the Seychelles company described as a fee for “brokering services”. The money was deposited into Obaid’s Swiss JP Morgan account. At the same time, emails and legal documents indicate that Mahony was given a contract as “investment manager” for Good Star. On 20 October, Obaid emailed his contact at JP Morgan to request that $33m be transferred into an account belonging to Mahony.

Four days later, Mahony began discussions to set up an offshore company to buy a £6.7m townhouse in Notting Hill – and by 12 November, contracts for the house had been exchanged. The former banker created a numbered bank account in Switzerland, and all payments for the purchase were made from this account, via a British Virgin Islands company that Mahony had set up.

In response to questions from the Guardian, PetroSaudi said the payment to Obaid was not a brokerage fee and that the transfer of $33m to Mahony had nothing to do with the PetroSaudi-1MDB joint venture.

Laura and Xavier Justo were blissfully unaware of their friend Obaid’s changing fortunes. The couple were sunning themselves on Thailand’s Andaman coast in December 2009 when Obaid rang Justo offering him a director’s position in London with PetroSaudi. He told Justo the company had become an overnight success, but it needed someone who could help it grow.

Justo rejected Obaid’s initial offer, but he was eventually persuaded by the temptation of a well-paid “adventure”. According to Justo, Obaid promised him a salary of £400,000, “millions in bonuses” and the perk of a £10,000-a-week flat in Mayfair, central London. Justo pitched up in London in spring 2010, and by June was a PetroSaudi director. But he was kept out of the lucrative Asian business. Instead, Justo, a native Spanish speaker, was tasked with launching a new operation in Venezuela, and spent much of 2011 flying between London and Caracas.

Laura and Xavier Justo in Siem Reap, Cambodia.

Between September 2010 and May 2011, 1MDB agreed to lend an additional $830m to the joint venture with PetroSaudi – bringing 1MDB’s total investment to $1.83bn. Of these new payments, US officials allege, $330m was paid into the Swiss account they say was controlled by Low, on the basis of a request by Obaid – who is identified in the US legal complaint as “PetroSaudi CEO”.

Emails and bank records seen by the Guardian suggest that in the nine months from September 2010, Obaid transferred $77m from his Swiss JP Morgan account to his PetroSaudi co-founder, Prince Turki bin Abdullah. According to the US authorities, banking records show that in the spring of 2011, Prince Turki also received $24m from the Good Star account controlled by Low – and that “within days”, $20m from these funds was transferred to an account belonging to the Malaysian Prime Minister, Najib Razak.

Meanwhile, Low was becoming known on the New York club scene as a fixer for the global super-rich – snapped by paparazzi swigging magnums of Cristal with R&B singers and Hollywood stars. According to US authorities, Low spent $100m from the joint venture transactions on properties in Hollywood and $40m on New York apartments. The funding for The Wolf of Wall Street, the US complaint alleges, can be directly traced to the billion dollars diverted from the PetroSaudi joint venture.

In the meantime, Justo was growing disaffected with working conditions at PetroSaudi. According to his wife, Laura, the first sign of discontent was his discovery that his salary payments were only about half of what Justo said Obaid had offered him – a slight that was compounded when he learned that the promised multimillion-pound bonus would be considerably less than that – more like six figures than seven.

There were other niggles, too. He complained to Laura that he was often paid late, and sometimes not at all. He claimed that he ended up paying rent on the flat in Mayfair that was supposed to be covered by his employers.

Leonardo DiCaprio in The Wolf of Wall Street. Photograph: Allstar/Paramount Pictures

At first, Justo told Laura, he thought these were just mishaps – nothing malicious, just poor corporate bookkeeping. But he became increasingly dismayed by Obaid’s behaviour. Justo told friends that Obaid had become “arrogant” after striking it rich. Justo was especially disturbed by what he described as changes in his younger Saudi friend – telling other people that Obaid had become irrational, and displayed “uncontrollable” rage.

Justo and Obaid’s long friendship, stretched to breaking point over 12 months of highly charged corporate life, finally snapped. At the end of 2010, Justo missed a flight for an important meeting. He apologised to Obaid, but according to Justo, his friend “went mad”, sending him a stream of abuse, via text messages and emails.

Sick with worry, Justo decided to resign in March 2011. In the angry email exchanges that followed, Obaid called Justo “arrogant” and a “smart ass”. In April, things came to a head in Mayfair. Amid the marble, dark leather and metal art deco detailing of the exclusive Connaught hotel bar, Mahony and Justo hammered out the terms of his departure. According to Justo, Mahony had agreed to pay him about 6.5m Swiss francs (£5m) in severance. However, in the midst of a heated conversation, Mahony’s phone rang. It was Obaid, who apparently told Mahony to settle on 5m Swiss francs (£3.85m). Justo, who had poured his heart out to Mahony, telling him he was at his “lowest point emotionally”, shed tears. A day later, Justo claims that he was told his severance package would, in fact, be 4m Swiss francs (£3m).

As the rancour set in, Justo took a copy of the data on the PetroSaudi servers. In September 2013, a little more than two years after he had left PetroSaudi, Justo sent a fateful email to Mahony. Justo was insistent that he be paid what was owed to him, warning that he had a file of information on PetroSaudi. “The official side paints a nice picture but the reality is commissions, commissions, commissions,” he wrote.

In the furious exchanges that followed, Mahony accused Justo of blackmail. Mahony presciently told his former colleague: “What troubles me so much is the way in which I see this situation ending – with the destruction of you.”

A few months later, over a Chinese meal in London, the journalist who would break open the 1MDB scandal first heard rumours about an extraordinary heist in Malaysia. Clare Rewcastle Brown met a contact at a restaurant in Bayswater who showed her screen grabs of internal documents from PetroSaudi: on a single printed page, there were highlights of PetroSaudi’s dealings with 1MDB, under the heading “Thousands of documents related to the deal (emails, faxes and transcripts)”. She recognised the names and the deal. Her heart skipped a beat. “A bomb went off in my head,” Brown recalled. She knew right away that this was a huge story.

Ms. Clare Rewcastle Brown

Rewcastle Brown is a classic British rebel at the heart of the establishment. She was born on the island of Borneo – part of which now belongs to Malaysia – when it was still part of the British empire, where her father was a colonial policeman and head of the local intelligence service. Her brother-in-law is the former British prime minister Gordon Brown. After working as a reporter for the BBC, in 2010 Rewcastle Brown set up Sarawak Report, a website dedicated to uncovering corruption in the place of her birth.

Working out of her tiny kitchen in central London, she published story after story exposing corruption in the timber and oil industries that were despoiling the country’s rainforests for profit. Her email was hacked and she received death threats, but she carried on, regardless. Early in 2013, Malaysian politicians labelled her an “enemy of the state”. Rather than be cowed, she considered this a badge of honour. In person, Rewcastle Brown is a curious mix of the bawdy and the brave, almost to the point of recklessness. Her mantra: “I just want the story.”

After the meeting in Bayswater, Rewcastle Brown knew she needed to get the 1MDB documents. The first hurdle was that the source of the PetroSaudi papers apparently wanted millions for the information. It was money she did not have.

Another stumbling block was that no journalist in Malaysia wanted to touch the story. In Malaysia, Prime Minister Najib had just won a tightly contested election, and was flush with power. Rumours were swirling around the cache of PetroSaudi documents – some said the Russian mafia was behind the data dump, while others speculated that it might be an elaborate trap, set by the Prime Minister to ensnare his critics.

Undeterred, Rewcastle Brown arranged with her contact to meet the source in Thailand. In October 2014, she pitched up at the lobby of the Plaza Athénée hotel, in Bangkok. She had told her husband she was hoping to meet a “balding bespectacled short Swiss guy”. Instead, into the foyer stepped Xavier Justo – muscular and 6ft 6in tall. Rewcastle Brown was faced with a “physically imposing, extremely elegant” man. “Oh my God,” she thought. “This guy is going to duff me up.”

But Justo admitted that he was just as scared as she was. According to Rewcastle Brown, he seemed “very, very nervous” and repeatedly warned her that “the people we were dealing with were ruthless, had huge amounts of money and were very, very powerful – and they could do what they liked to us”.

Justo told Rewcastle Brown that he wanted $2m in exchange for the PetroSaudi-1MDB documents. It was, he said, the money he should have been paid when he left PetroSaudi.

Although he shared a few documents at the meeting, Justo was adamant: no cash, no data. Rewcastle Brown needed to find a rich person prepared to pay for the papers.

At around this time, concerns about 1MDB had begun to spread in Malaysia. Financial analysts pointed out that the fund was not generating enough cash to cover interest payments on the billions of dollars of debt it had acquired. The hundreds of millions that had been spent on art work, jewellery, real estate, gambling and parties did not realise any return on the “investment”. By 2014, Prime Minister Najib’s political opponents had taken to taunting him with the accusation that the wealth fund should be renamed “1Malaysia’s Debt of Billions”.

In August 2014, Najib received another political blow. Mahathir Mohamad, the towering figure of modern Malaysian politics who served as Prime Minister from 1981 to 2003, announced that he was withdrawing support for Najib, his former protege. In the weeks that followed, Mahathir became more vocal in his criticism, warning that 1MDB was adding to Malaysia’s dangerously high debt levels.

This warning went unheeded. The fund’s debt swelled. By November 2014, 1MDB owed almost $11bn. Najib, who chaired the fund’s advisory board, appeared unconcerned, telling the state news agency that the government was not liable for the debt if the fund went bankrupt.

As the crisis deepened, Rewcastle Brown continued her quest for a person willing to pay Justo for the PetroSaudi-1MDB documents. She noticed that some of the most searching reporting on the scandal had appeared in Malaysia’s best-selling business weekly, the Edge. Sensing that she may have found a wealthy ally, Rewcastle Brown contacted the Edge’s owner, Tong Kooi Ong, a former banker turned media tycoon, who owned a number of business publications.

In January 2015, Tong, Rewcastle Brown and Justo met in a five-star Singapore hotel, the Fullerton. Tong booked a conference room, and brought a number of IT experts, as well as the editor of the Edge, Kay Tat. At the meeting, Justo laid out the 1MDB joint venture, making the same claims that the US Department of Justice would set out 18 months later: namely that hundreds of millions of dollars that were intended for economic development in Malaysia had instead been diverted into a Seychelles-based company. The man at the centre of the transaction was alleged to be Najib’s adviser and family friend, Jho Low.

It was a potentially huge scoop. Tong agreed to pay Justo $2m. Tong and Rewcastle Brown were immediately handed disk drives with the data. But the payment was never made. Justo did not want the money in cash, and he worried that a large transfer of funds into his account would look suspicious. Tong offered Justo one of his Monets as collateral – but Justo declined, and said “no, I trust you”. Rewcastle Brown finally had the documents she had been chasing for 18 months.

On 28 February 2015, Rewcastle Brown posted the first big story online – under a typically unrestrained headline: “HEIST OF THE CENTURY!” The article claimed to show how $700m had disappeared from the 1MDB joint venture and found its way into various offshore companies and Swiss bank accounts.

The impact of the article was felt around the world. In the US, law enforcement officials who had been alerted to reports that Low was spending huge amounts on New York apartments now had a fix on the possible source of his wealth.

While researching the story, Rewcastle Brown had teamed up with the Sunday Times, which helped her decrypt the files Justo had given to her. The paper ran an interview with Mahathir, the former Malaysian Prime Minister, who called for an immediate investigation and a full audit. “Somebody must be doing something stupid to part with $700m for no very good reason as far as I can see,” he said.

In Malaysia, the response was immediate. On 1 March 2015, 1MDB’s management claimed that it had exited the joint venture in 2012, and that it had received back its investment in full, with an additional profit of $488m. PetroSaudi claimed that the $700m had all gone to “PetroSaudi-owned entities” – denying, in other words, that companies controlled by Jho Low had received payments in the deal.

Not long before Rewcastle Brown’s story broke, 1MDB’s bonds had been effectively downgraded to junk. After another £200m of Malaysian government funds were required to plug a hole in 1MDB’s finances, Najib bowed to the inevitable and ordered investigations by the country’s auditor general and the parliamentary accounts committee. Soon, the country’s central bank and anti-corruption agency were also looking at 1MDB. Malaysia’s top policeman was reported as saying that the prime minister would also be investigated.

Najib tightened his grip on power. As prime minister and finance minister, he wielded enormous authority: in April, the government pushed through harsh penalties and restrictions on free speech, particularly on social media. Five executives of Tong’s The Edge Media Group – which had also published details of the PetroSaudi deal – were arrested for sedition. The government also introduced a new law, ostensibly aimed at terrorists, which allowed suspects to be detained indefinitely. In July 2015, the Edge weekly was banned from publishing.

Although the scandal only seemed to be getting bigger, it had not ensnared Prime Minister Najib personally. Then, on 2 July, Rewcastle Brown and the Wall Street Journal reported that Malaysian government investigators had discovered that $681m from banks, agencies and companies with ties to 1MDB had been deposited in Najib’s private accounts in 2013. A few days later, investigators raided the offices of 1MDB.

Najib was now at the centre of a corruption probe relating to allegations that billions of dollars had disappeared from a Malaysian investment fund he controlled. Deputy Prime Minister Muhyiddin Yassin, once a supporter of Najib, publicly called on him to answer questions about the fund. It seemed that Najib was cornered.

Malaysian Prime Minister Najib Razak–Malaysia’s No 1. Crook

On the morning of Monday 28 July, the Attorney-General, Abdul Gani Patail – a party loyalist who had previously gone after the Prime Minister’s opponents – arrived at his office expecting to finalise corruption charges against Najib. The indictment, which Rewcastle Brown later obtained and published, would have charged the Prime Minister with corruption resulting from the investigations into 1MDB.

The Attorney -General (Gani Patail) never got to press those charges. On reaching his office, he was summarily dismissed by a civil servant. In a public statement, Najib said the country’s top legal officer was too ill to continue in the role. Also relieved of their posts were the Head of Special Branch and the Deputy Prime Minister. Meanwhile, four members of the investigating parliamentary accounts committee were promoted, without any choice, to cabinet positions, which left them with no power to continue investigating, and the committee’s work was declared suspended. The next day, a mysterious fire swept through police headquarters, where records of white-collar crimes were kept. It seemed that Najib was in control again.

The crackdown revealed a ruthless side to Najib. However, there was a loose end that could unravel everything: Xavier Justo. Not only had Justo leaked information about 1MDB’s dealings with PetroSaudi, he was also a potential star witness in any future court proceedings about the financial scandal.

After Justo was arrested for blackmail and flown to Bangkok in June 2015, he was placed in a cell with 70 other prisoners. The floor was covered with sweat and urine, and the room was so tightly packed that prisoners could not sleep on their backs. According to Justo’s wife Laura, her husband’s first foreign visitor was his former friend, colleague and PetroSaudi director, Patrick Mahony. Smooth and charming, Mahony flashed a smile and said he was there to help.

Laura says that Mahony offered Justo a deal: confess and plead guilty, and PetroSaudi will get you out of here by the end of the year. Justo reluctantly agreed. He signed a confession – without a lawyer present – which claimed that he had attempted to blackmail his former employers, and apologised to Mahony and Obaid “for the harm stress and anxiety I caused them”. According to Laura, a man who claimed to be a Scotland Yard detective – and later told her he had been hired by PetroSaudi – took down Justo’s confession. (PetroSaudi told the Guardian that Justo had “illegally obtained commercially sensitive, confidential and private documentation” and was in prison for “blackmail and extortion”.)

Justo was sentenced on 17 August 2015 at Southern Bangkok criminal court. At the trial he was granted a translator, but his lawyer did not turn up, sending an assistant instead. The trial and sentencing took 15 minutes. Justo got three years in a Thai jail for attempting to blackmail a UK company out of $2m.

Life behind bars in Klong Prem Central prison, where Justo is incarcerated, is not for the fainthearted. In a city where temperatures rarely drop below 26C, Justo shares a cramped “VIP” cell with 25 other prisoners. Breakfast is at 7am. Water is rationed. Prisoners have no food after 3pm. There is a small bathroom area at the rear of the cell, which consists of a tap and a hole in the floor for a lavatory.

As 2015 wore on and it became clear that her husband was not going to be out of jail by the end of the year, Laura grew increasingly suspicious of her contacts at PetroSaudi. A series of stories in the Swiss and Malaysian press purporting to tell Justo’s side of the story depicted him as an unwitting pawn in a political plot against the Malaysian prime minister. Things were not getting better for Justo – they were getting worse. In his prison cell, Justo was now sleeping on a thin blanket – his mattress was withdrawn a few months after he arrived, as was his exercise hour.

Laura came to believe that Justo was a victim of a deceit by his former friends, who tricked him into confessing and handing over copies of PetroSaudi’s servers, in an attempt to protect themselves and their Malaysian associates by burying the case. In May 2016, in a last-gasp effort to save her husband, Laura turned to the one person who she knew Justo trusted: Rewcastle Brown, who brought her to the Guardian.

When I met Laura in June 2016, she was at first calm and composed, but broke into tears when speaking about her husband, her voice cracking with emotion. Justo has not seen their son since he was eight months old. “I only want justice to be done,” Laura recently wrote in an email. “Xavier was no thief, he was only asking for what he had been promised. Even through this darkest and most difficult time of his life, which is right now, he writes to me that he is keeping strong for our son and I – that he will fight for us whatever it takes.”

Since reaching out to Rewcastle Brown and the Guardian, Laura has handed over notes smuggled out of prison in which Justo says he has been framed. Laura believes that Patrick Mahony of PetroSaudi has controlled Justo’s life behind bars, deciding how comfortable his living space would be and who could visit him. (Foreign prisoners have a list posted outside the prison of permitted visitors. Mahony is listed as number two. Laura is number five.)

Laura says she has emails and WhatsApp messages, as well as recordings of phone calls from last year that suggest that Mahony is under increasing pressure from Najib, on one hand, and from US and Swiss investigators combing through 1MDB’s deals, on the other.

In taped telephone conversations with Laura, Mahony appears obsessed with Rewcastle Brown, whom he refers to as a “bitch”. In a recorded conversation with Laura from November 2015, Mahony refers obliquely to a powerful person whom he claims could help reduce Justo’s sentence: “I told you the other evening, who the ultimate person is controlling this, and I am due to have another meeting with him soon … This guy is still stressed because it’s his political career on the line. He’s in deep shit and that’s all he cares about, nothing else.”

Patrick Mahony of PetroSaudi

When Laura asks what she should tell her husband, Mahony says: “The only way that you can show that you’re on his side – to be a team player – is if you’re ready to put yourself out in the media. You are ready to denounce all the people who are conspiring against him … I am not going to lie to you … You can help the situation or you cannot help the situation.”

When Laura presses for Justo’s release, Mahony snaps. “I’m still dealing with this shit every day. You need to remember we are all in the shit. I know he’s in prison and you are alone with the baby. And I looked at you the other day and I told you I feel for you. But me, I’m also in the shit. And a lot of other people are in the shit. A prime minister of a country is in deep shit because he has been put in this shit.”

By December, Mahony admits in another phone call that he had been to the US, where “the FBI is looking at all this shit” and that he had been pulled in by the Swiss Attorney-General’s office. “The Swiss are continuing to really give us shit … They know they have nothing … But they say they are fearful of being accused of not doing anything.” PetroSaudi said that it will cooperate with any official authority in any jurisdiction and added that it is not the subject of any investigation in any jurisdiction. Mahony has not been interviewed by US or Swiss officials.

Xavier Justo leaves court in Bangkok on August 17, 2015. He was jailed for three years and remains in prison. Photograph: Pornchai Kittiwongsakul/AFP

The consequences of Justo’s leaks are still reverberating around the world. When the US Department of Justice laid out the case against 1MDB last week, it pulled no punches. “The Malaysian people were defrauded on an enormous scale,” said Andrew McCabe, the FBI’s Deputy Director. US officials told the Guardian that any party who wanted to contest the Attorney-General’s claim must file a response in a federal court within 60 days to answer the factual allegations.

In a separate case, the DoJ is also investigating whether Goldman Sachs violated US banking law in its handling of $6.5bn in bond offerings that it carried out for 1MDB. The Wall Street behemoth earned $593m in fees for the issue. Goldman Sachs denied any wrongdoing. The bank told the Guardian: “We helped raise money for a sovereign wealth fund that was designed to invest in Malaysia. We had no visibility into whether some of those funds may have been subsequently diverted to other purposes.”

Malaysian Official 1?

Most important was that the DoJ allegations directly contradicted repeated assertions by Prime Minister Najib about the origins and purpose of hundreds of millions of dollars that ended up in his personal bank accounts – which he had claimed was a gift from a Saudi benefactor.

The DoJ filing was released at a critical moment for democracy in Malaysia. On 1 August, a draconian national security act introduced by Najib comes into force – allowing the Malaysian government to establish martial law in any designated geographic area. The law will dramatically expand the powers of Malaysia’s security forces – allowing for arrests, searches and seizures without warrants and the bulldozing of buildings.

But in the rest of the world, investigations into the sprawling corruption scandal are continuing to expand. In Switzerland, the US justice department identified RBS Coutts and Rothschild Bank as conduits for transactions in the corruption complaint. The Swiss Attorney-General is probing the billion-dollar fraud. The banks declined to comment when contacted by the Guardian.

Singapore found “lapses and weaknesses” in anti-money-laundering controls at major banks. For the first time in the island state’s history, the authorities shut down a merchant bank. In April the United Arab Emirates froze hundreds of millions of dollars in accounts held by alleged conspirators in the 1MDB fraud and banned the account holders from travelling abroad.

The board of 1MDB said that it was “confident that no wrongdoing had been committed” but as a “precautionary measure”, its accounts for 2013 and 2014 should no longer be “relied on by any party”. Najib has said that he did not commit “any offence or malpractice”. His attorney general cleared him of corruption earlier this year.

For now, the man whose revelations enabled the exposure of this vast fraud remains in a Bangkok prison. Xavier Justo was motivated by a mixture of morality and revenge – the desire to settle scores with a friend who betrayed him. To get even, he chose to blow the whistle, for a price. He may not go down in history as a hero who selflessly risked ruin to expose the truth. But in doing so, he did unwittingly sacrifice himself.

Managing Big Power Relations: The Case of Cambodia

July 30, 2016

Managing Big Power Relations: The Case of Cambodia

by  Veasna Var, University of New South Wales at ADFA, Canberra.

Security and stability in the Asia Pacific in the 21st century is being affected by strategic competition for influence over a wide range of vital interests in the region between China and the United States. It is clear that China’s aspiration to predominance, as a strategic equal to the U.S., has created a rivalry in the relationship between the two great powers. This competition significantly impacts on Southeast Asia in general and Cambodia in particular. Southeast Asian countries, including Cambodia, face tough decisions regarding their involvement with the two superpowers; balancing their relationship with them so that their own interests are not compromised but advanced, and the greatest benefit gained.

Cambodia consequently finds itself in a challenging strategic environment. US − China competition in Southeast Asia presents Cambodia both with dangers and opportunities. Given that both countries have played, and continue to play, an important role in boosting Cambodia’s economic and security development, Cambodia should carefully balance relations between China and the US.

Superpowers’ Strategic Interests and Cambodia’s Response

The US and China have different motivations, policy characteristics and interests in relations with Cambodia, in particular in providing aid assistance. As such, they not only compete for, but sometimes conflict in their influence. Whereas the US has been the strongest supporter of democratisation, social, economic, and political development, trade, investment, regional security, civil society, and most importantly human rights, China has taken the lead in developing infrastructure such as roads, bridges and public buildings. The key strategic interest of the US in Cambodia is to strengthen democracy and the rule of law, whereas China places greater focus on the exploitation of natural resources, furthering business ties and gaining political advantage.

The two countries also have different approaches to achieve their goals in Cambodia. While US aid is tied to strict conditions, Chinese aid has a “no strings attached” approach, leading to conflicting interests. The “no strings attached” policy of China − meaning that China does not require documented proof of the appropriate use of funds − can have the consequence of the funds at times being implicated in corruption, poor governance or human rights issues. This differs from the US policy of requiring proof of the use of funds, and conflicts with its valuing of democratic accountability. At the same time, China’s policy of non-interference in internal affairs, which differs from US interference, can in contrast be seen to promote Cambodia’s own efforts for good governance and democracy.

Most American assistance to Cambodia has not been directly provided to the government. Rather, it has been made available through USAID to local and international NGOs operating in Cambodia, and has focused on democracy and good governance. USAID has also provided for social, health care, education and economic development. The US has also provided support directly to the Cambodian government in a wide range of military cooperation areas, such as humanitarian assistance, promotion of peacekeeping, increasing maritime security and broadening Cambodia’s counter-terrorism strategy. However, assistance is subject to strict conditions and if it is assessed that democratic principles are violated, its provision could immediately cease. This was evident following the internal political turmoil in Cambodia in July 1997, when the US suspended all aid programs, including military assistance, because it considered the actions of the government to go against the principles of democracy and human rights. The diplomatic relationship between the US and Cambodia subsequently declined.

By comparison, China’s policy of ‘non-interference in domestic affairs’ means that China offers assistance without conditions being placed on democratic reform, human rights, or environmental protection. China has never addressed or criticised human rights or electoral issues in Cambodia. For example, while the U.S. and the international community overwhelmingly condemned Hun Sen’s seizure of power in July 1997, China let the domestic process reach its own conclusion.iv While this gesture garnered appreciation from the Cambodian government which regarded it as respectful of Cambodian sovereignty, it may also be considered to be potentially detrimental to ‘ordinary people’, the farmers and the workers, with the potential to result in unchecked oppression, leading to social unrest and violence as can be seen today.

Chinese aid is primarily allocated directly to the Cambodian government, usually without requirements to report development results. It has been argued that Chinese aid is not transparent, and there is no standard operating procedure regarding its disbursement. In a country where the standards of government accountability are at times questionable, there may be inefficiencies or corruption with senior government officials siphoning these funds off for personal gain. While Chinese aid does not directly impact upon Cambodian internal affairs, it does have the potential to do so indirectly, either positively, by benefiting all people, or, negatively, by enriching the few.

Prime Minister Hun Sen-The Strategic Pragmatist

China has become the largest donor and provider of foreign investment in Cambodia, greatly benefiting Cambodian development. However, China’s national interests in Cambodia are extensive. China’s cultivation of closer ties with Cambodia is primarily motivated by hard-nosed economic self-interest and the pursuit of wider strategic goals in Southeast Asia. Economically, China is thirsty for natural resources and China is heavily investing in Cambodia’s natural resources such as timber, gas, oil, rubber, fertile crop land, and minerals (gold, silver, and iron ore). It provides enhanced security for the supply of vital natural commodities.

In return for Chinese “unconditional” aid, one of China’s most important strategies is to garner support for the One China policy, of which Cambodia is one of the most loyal proponents. As a result, the Cambodian government decided to expel Taiwan’s liaison office in 1997 and declined a request from Taiwan to re-establish an economic office in Cambodia in 1998, despite the incentive of millions of dollars of Taiwanese investment that were offered. Cambodia also provides support to China regarding regional issues. For example, the Cambodian government has supported China’s opposition to multilateral negotiations regarding the South China Sea dispute. During its 2012 chairmanship of ASEAN, Cambodia backed the Chinese interest regarding the South China Sea dispute with some ASEAN member states, which resulted in the failure to issue a joint communiqué for the first time in ASEAN’s 45-year history. This has resulted in suspicion towards Cambodia by some ASEAN members. Similarly, Cambodia is reluctant to strongly criticise or protest environmental issues resulting from Chinese policies. This is best demonstrated by Chinese dam building on the Mekong, which is being tolerated despite potential environmental devastation affecting millions of Cambodians who depend on this water for drinking, irrigation, fishing, and sediments that naturally fertilise the land, in short for their food, their water, their sanitation and, in many instances, their income.

The recent U.S. intervention in the Mekong River region, the Lower Mekong Initiative (L.M.I.) launched in 2009, has clearly shown that the U.S. is counterbalancing China’s rising influence in Southeast Asia. Yet, disagreement on democratic practice and human rights issues has posed significant challenges for the U.S. in wishing to broaden its bilateral relationship with Cambodia. Cambodia – U.S. relations, although considerably improved since 2007 when the U.S. government lifted a ten-year ban on direct bilateral aid to Cambodia, in response to Prime Minister Hun Sen’s U.S. alleged unlawful seizure of power in 1997, are usually strained whenever there have been serious human rights violations or contested elections in Cambodia. Despite the U.S. being committed to deepening relations with Cambodia as part of its “pivot” strategy in the region, respecting human rights is still a condition of involvement.

This was evident during the 2012 meeting between U.S. Secretary of Defense Leon E. Panetta and Cambodian Minister of National Defense General Tea Banh, when the U.S., though committing to military ties, strongly emphasised democracy and human rights protection. During President Obama’s visit to Cambodia for the 2012 East Asian Summit, talks with Hun Sen, on human rights, fundamental political freedoms and elections in Cambodia, were tense. According to then U.S. Ambassador to Cambodia William E. Todd, “As President Obama made clear in his meeting with Prime Minister Hun Sen on the margins of the EAS, lack of progress on issues related to democracy and human rights is an impediment to the United States and Cambodia developing a deeper bilateral relationship.”

The Cambodian government faces a strategic dilemma in weighing the trade-off between the value of economic infrastructure and its impact on the ecology and the livelihood of the people; between unconditional Chinese aid and investment and between the U.S. effort to promote a stable Cambodia by improving democracy, good governance, human rights and political freedoms. These are challenging issues, as both models contain clear benefits as well as evident limitations.

China’s policy of non-interference is appreciated by the Cambodian government which regards it as respectful of Cambodian sovereignty. However, it can be seen to provide an opportunity for Cambodia to have a “free ride” on the efforts of the international community, in particular the U.S., to get Cambodia on the right track for democracy, good governance and human rights, since Cambodia can ultimately turn to China when it disagrees with these. As Sophal Ear pointedly puts it: “When Cambodia falls under pressure from international bodies to reform its human rights abuses, corruption, oppression of its people, or misuse of power, it turns to China for financial support.”xiii This dynamic was evident when in 2011 the World Bank suspended lending over mass forced eviction of villagers from Phnom Penh’s Boueng Kak Lake development area: Cambodia simply turned to China for financial support.

Excessive dependence on China has placed Cambodian foreign policy firmly under China’s influence. As noted, this was clearly seen when Cambodia used its 2012 Chairmanship of ASEAN to back China in the South China Sea dispute, an action with potential to seriously affect ASEAN’s unity. During her visit to Cambodia in November 2010, Secretary of State Hillary Clinton made an insightful comment warning Cambodia from depending only on China with the words: “you don’t want to get too dependent on any one country.”

It is good for Cambodia to have foreign investment to develop its economy independently and with ownership. However, the lack of transparency of Chinese investment can prove problematic. It seems that Chinese firms have pursued their own benefits and interests without considering the long-term environmental impact on local communities. For example, Chinese-built hydro-electric dams in Cambodia’s Mekong mainstream and tributaries seriously affect the hydrological system and thereby the communities who heavily depend on the river for their livelihoods.

Like that of China, U.S. assistance makes significant contributions to Cambodia’s development in all fields. Since renewing relations with Cambodia in 1993, U.S. involvement focuses on the upholding of democratic development, the protection of human rights, the practice of good governance, the rule of law, reducing the threat of terrorism, and bringing the country’s former Khmer Rouge leaders to justice. Cambodia’s democracy is still not yet mature; therefore, the U.S. has played an important role in building a sustainable democracy by supporting civic participation, the respect for human rights, the rule of law, and accountable governance. The U.S. has actively supported Cambodia’s political development through programs that foster democratisation and political accountability. However, the strict conditions attached to American aid have sometimes caused troubled relations.

The Way Ahead for Cambodia

Cambodia’s strategic environment continues to present a dilemma because of competition between China and the U.S. for regional and Cambodian influence. Cambodia has a tough choice of how and under what conditions to interact with the two superpowers, which requires a thoughtful and careful response to balance the two.

It seems that there are three options for Cambodia: 1) Cambodia walks a tightrope – treading a clear and wisely crafted path, balancing China and the U.S. simultaneously; 2) Cambodia aligns more closely with China at the expense of relations with the U.S. and regional partners; and 3) Cambodia aligns more closely with the U.S. at the expense of its relationship with China.

The first option arguably promises to deliver the best outcome for Cambodia. It is possible for Cambodia to benefit from both superpowers to create a better future for itself and its people. The U.S. wants Cambodia to be democratic, a free market economy committed to the rule of law which supports international norms of human rights, good governance etc. The assumption is that this will create a stable and secure Cambodia. The U.S. would expect Cambodia’s policies to be consistent with its national interests and those of other close U.S. allies, such as South Korea and Japan, also key players in boosting Cambodia’s development.

For China, the goal is to be a legitimate power in the world and to be free to establish relations with countries as it sees fit. It does not want to be told by the U.S. what it can and cannot do in its neighbourhood. Moreover, China wants to influence Cambodia to support its policies and projects within the region. In addition, China wants access to Cambodian air and sea facilities if needed. China’s desire is to invest in Cambodia. It has no desire to change the political system, nor does it support democratisation, human rights etc. which, it views as internal matters rather than international norms.

If Cambodia aligns itself more closely with China, this may offset U.S. efforts to turn Cambodia into a democratic society. It may deter respect for the principle of human rights, and the practice of good governance, and could result in the disappearance of democracy in Cambodia. It could threaten investment by and trade with the U.S. and other Western countries, including the garment sector which exports around 70 percent of its goods to the U.S. market. Cambodia would also be at risk of losing valuable anti-China allies within ASEAN and the alliance of the U.S. such as South Korea and Japan, key investors and donors in Cambodia. Also, there is the overhanging spectre of aid reduction from the international community, including the World Bank, the U.N. and Western countries.

If Cambodia aligns itself more closely with the U.S., it risks aggravating China and potentially jeopardising the projects, aid and grants which China currently provides, risking a significant development dilemma. It would likely affect respect between Cambodians and Chinese business persons, who play an important role in contributing economic development in Cambodia. At the same time, Cambodia will continue to face pressure from the U.S. for political reforms, to end corruption, and to respect human rights and the freedom of expression.

In sum, it seems unwise to align only with China or the U.S. Taking sides with either of these two superpowers presents significant risks for Cambodia. Therefore, what Cambodia must do is to tread a carefully and wisely crafted path that balances relations with China and the U.S. simultaneously. Cambodia could be a friend of both China and the U.S. and benefit from its relationship with both countries. The key strategic interest for Cambodia is that new infrastructure and the ensuring of human rights will lead to a prosperous and secure country. Both superpowers’ approaches have their benefits and Cambodia’s task is therefore to balance the needs of both and to offend neither. Cambodia must resolve its own domestic priorities, such as the elimination of corruption, cronyism, forced evictions, land evictions, the protection of human rights, the integrity of elections, etc. Separately, Cambodia must determine whether it benefits or loses from Chinese and American investment and involvement in economic, military and political affairs. Cambodia could introduce its own democratic and electoral reforms to satisfy U.S. conditions. It will benefit from acting in accordance with international commercial norms in dealing with China.

Arguably, Cambodia can be in an effective position to play the role of honest broker in reducing ongoing tensions between China and the United States, fulfilling the former Cambodian Foreign Minister (now Deputy Prime Minister) Hor Namhong’s recent aspiration to play a more active regional foreign policy role. The United States is shifting its priorities to the Asia Pacific Region, making China nervous. This provides an ideal opportunity to upgrade Cambodia’s influence. Cambodia has particularly good strategic relations with both nations, which each has actively courted Cambodia in many areas, especially in economic and military relations.

It would be wise for Cambodia to use this opportunity to reduce tension between the two superpowers and enhance international order. By fulfilling this important task, Cambodia would be seen as role model contributing to peace and stability in the region. At the same time, Cambodia could benefit from harmony and peaceful cooperation between the two superpowers. Cambodia’s ambitious foreign policy would also play a more active role if Cambodia was to mediate in regional disputes, between China and ASEAN South China Sea claimant countries, mainly Vietnam. However, this may not come to pass unless Cambodia strictly adheres to the first proposed option: that is, to tread a clear line striking balance between China and the U.S. simultaneously. Choosing the second or third option poses a potential threat to Cambodia’s foreign policy and development strategy.

It is far better for Cambodia to have two friends rather than one ally and one enemy. Cambodia should steer a clear path in its partnership with both nations. Maybe this path is not as fraught with danger as it might appear. An environment of mutual respect for independence and for common interests between Cambodia, the U.S. and China will support reaching the very best outcomes for all involved parties. Cambodia’s best long term interests lie in regional initiatives, ASEAN, Mekong regional development, and working to harmonise foreign relations as far as possible with countries in the region. China and the U.S. are both key players in the region and key observers at ASEAN. Thus, picking the U.S. or China to the exclusion of the other is not the best option for Cambodia. Cambodia’s history has shown that choosing sides may lead to disaster.

Holding Balance Between Two Superpowers: Cambodia’s Strategic Choices For Foreign And Development Policy – Analysis


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i. Veasna Var, “Cambodia’s Strategic Relationship with China and the United States: Implications for Cambodia’s Development Aid,” European Academic Research 5, no. 2 (May 2016): 1721-1722.

ii. Ibid.

iii. Ibid.

iv. See for example, Kosal Long, “Cambodia- China Relations,” Cambodia Institute for Cooperation and Peace (CICP) Working Paper no. 28 (July 2009): 6-7, accessed June 13, 2016, ; Kheang Un, “China’s Foreign Investment and Assistance:
Implications for Cambodia’s Development and Democratization,” Peace and Conflict Studies 16, no. 2 (2009): 67-68, accessed June 13, 2016,

v. See for example, “China-built dam in Cambodia set to destroy livelihoods of 45,000,” South China Morning Post, September 20, 2015, accessed June 12, 2016,; Milton Osborne, “The Mekong: River Under Threat,” Lowy Institute for International Policy, Lowy Institute Paper no. 27 (2009): 13-15, accessed June 13, 2016,,_The_Mekong_WEB.pdf
vi. See for example, John D. Ciorciari, “China and Cambodia: Patron and Client,” International Policy Center (IPC),
Gerald R. Ford School of Public Policy University of Michigan, IPC Working Paper no. 121 (June 14, 2013): 11-17, accessed June 13, 2016,

vii. Sigfrido Burgos and Sophal Ear, “China’s Strategic Interests in Cambodia: Influence and Resources,” Asian Survey 50, no. 3 (May/June 2010): 615.
viii. Marks Paul, “China’s Cambodia Strategy,” Parameters 30, no.3 (Autumn 2000): 95-6.

ix. Alvin Cheng-Hin Lim, “ Sino-Cambodian Relations: Recent Economic And Military Cooperation,” Eurasia Review, June 30, 2015, accessed June 12, 2016,
x. See for example, Evelyn Goh, “China in the Mekong River Basin: The Regional Security Implications of Resources Development on the Lancange Jiang,” Institute of Defense and Strategic Studies Singapore no. 69 (July 2004): 11, accessed June 12, 2016,

xi. Ernest Z. Bower, “U.S. Moves to Strengthen ASEAN by Boosting the Lower Mekong Initiative,” Center for Strategic and International Studies (CSIS), July 24, 2012, accessed June 12, 2016,

xii. William E. Todd, “The US-Cambodia Relationship: A Work in Progress,” The Ambassadors Review (Spring 2013): 6, accessed June 11, 2016,
xiii. Sophal Ear, Aid Dependence in Cambodia: How Foreign Assistance Undermines Democracy (New York: Columbia University Press, 2013), 29-30.
xiv. Mark Tran, “World Bank suspends new lending to Cambodia over eviction of landowners,” The Guardian, August 11, 2011, accessed 13, 2016,

xv. Alvin Cheng-Hin Lim, “ Sino-Cambodian Relations: Recent Economic And Military Cooperation,”

xvi. John Pomfret, “Clinton Urges Cambodia to Strike a Balance with China,” The Washington Post, November 1, 2010, accessed June 13, 2016,

xvii. See for example, Mervyn Piesse, “Livelihoods and Food Security on the Mekong River,” Future Direction International, Strategic Analysis Paper, (May 26, 2016): 6, accessed June 13, 2016,