DOJ ANNOUNCES "SIGNIFICANT KLEPTOCRACY ENFORCEMENT ACTION TO RECOVER MORE THAN $1 BILLION"

FROM:  U.S. JUSTICE DEPARTMENT  

Assistant Attorney General Leslie R. Caldwell Delivers Remarks at Press Conference Announcing Significant Kleptocracy Enforcement Action to Recover More Than $1 Billion Obtained from Corruption Involving Malaysian Sovereign Wealth Fund

Washington, DC United States ~ Wednesday, July 20, 2016

Remarks as prepared for delivery

Thank you, Attorney General [Loretta E.] Lynch.

This is the largest single action ever brought by the Kleptocracy Initiative, and a significant milestone in the department’s ongoing fight against global corruption.  The complaint filed today in federal court details the complex web of transactions these co-conspirators used to launder billions of dollars that they stole from the people of Malaysia.  We have several speakers today who will describe various aspects of this matter.

My remarks will focus on the allegations in the complaint involving two bond offerings in 2012 through which 1MDB (1Malaysia Development Berhad) raised money that was siphoned off by the corrupt officials and their associates.  The stated purpose of the 2012 bond offerings was to allow 1MDB to invest, for the benefit of the Malaysian government, in certain energy assets.  But almost immediately after receiving the proceeds of these two bond issues, roughly 40 percent of the funds raised—approximately $1.37 billion—was transferred out of 1MDB’s accounts.  The money went into the Swiss bank account of a shell company incorporated in the British Virgin Islands.  The complaint alleges that the name of this shell company was intended to suggest an affiliation with a legitimate company involved in the bond offering but, in fact, the Swiss bank account was controlled by corrupt officials.

From Switzerland, the corrupt officials and their associates transferred money using a complex series of transactions that involved still more shell companies and bank accounts across the globe.  Eventually, more than $230 million found its way into accounts controlled by shell companies whose beneficial owner was a close relative of a senior 1MDB official.  That individual used the stolen funds to buy luxury real estate in the United States and other assets, including funding a California-based motion picture company, Red Granite Pictures.

Red Granite Pictures, in turn, used more than $100 million involved in the theft from 1MDB to finance the award-winning 2013 film The Wolf of Wall Street.  Of course, neither 1MDB nor the people of Malaysia ever saw a penny of profit from the film, or from any other investments made with money diverted from 1MDB.  Instead, that money went to a relative and associates of the corrupt officials.  Because the assets used to finance the film were, as alleged, laundered money, future rights to that film are subject to the forfeiture complaint filed today.  According to the allegations in the complaint, this is a case where life imitated art.  The associates of these corrupt 1MDB officials are alleged to have used illicit proceeds of their fraud scheme to fund the production of The Wolf of Wall Street, a movie about a corrupt stockbroker who tried to hide his own illicit profits in a perceived foreign safe haven.  But whether corrupt officials try to hide stolen assets across international borders—or behind the silver screen—the Department of Justice is committed to ensuring that there is no safe haven.

This case is yet another example of what happens when individuals and criminal organizations are able to use shell companies to move, and ultimately conceal, the proceeds of crime and kleptocracy.  Gaps in the legal regimes across the globe—including in the United States—allowed these criminals to avoid disclosing the ultimate beneficial owners of the accounts to which 1MDB funds were diverted.  Stronger laws and more effective frameworks for international cooperation are needed to close these gaps and overcome the challenges faced by law enforcement when we investigate international corruption, money laundering and other cross-border crimes.

In this case, the significant assistance we received from our international partners was critical in identifying and restraining assets.  That cooperation and the action we are taking today should send a message to kleptocrats and other criminals that the United States is not a safe haven for their stolen money, and that they cannot evade law enforcement authorities simply by laundering money through multiple jurisdictions and through a web of nominees, shell corporations and other legal structures designed to frustrate justice.  The department will continue to work to track and seize U.S. and other assets of these corruption schemes wherever they arise, no matter how secretive, no matter how sophisticated and no matter how sprawling.

Criminal Division
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Updated July 20, 2016