18 Sep 2020
The US Department of Justice (DoJ) has moved to seize $330m (£256m) held in the bank account of a major London law firm which prosecutors allege is derived from the proceeds of one of the world’s largest financial frauds.
The DoJ has filed civil forfeiture proceedings against funds held by City firm Clyde & Co, which prosecutors said they have traced to an “international conspiracy” that allegedly laundered money stolen from the Malaysian state investment fund 1MDB.
In a 300-page complaint filed in a California court, specialist DoJ anti-money laundering prosecutors alleged that the $330m in a Clyde & Co escrow account is linked to a failed oil project in Venezuela financed by money misappropriated from 1MDB.
The 1MDB fund is at the heart of a sprawling corruption scandal that has shaken Malaysian politics in recent years and sparked multiple cross-border investigations.
According to US and Malaysian prosecutors, around $4.5bn (£3.5bn) was siphoned from the state fund and laundered through an elaborate network of offshore bank accounts and shell companies to pay bribes, purchase luxury properties, and fund Hollywood movies including The Wolf of Wall Street.
The civil forfeiture case targeting the $330m held by Clyde & Co is the latest development in the US investigation into the 1MDB affair and has shed light on how money allegedly linked to the fraud came to be held by a top London law firm.
US prosecutors allege that the money held by the firm is derived from a failed project involving Venezuela’s state-owned oil company, PDVSA, and a joint venture company between 1MDB and PetroSaudi, a firm established by Saudi businessman Tarek Obaid with a member of the Saudi royal family.
Earlier this year, Malaysian prosecutors charged Obaid with money laundering and engaging in a criminal conspiracy allegedly involving Malaysia’s former prime minister Najib Razak. Obaid has consistently denied any wrongdoing.
US prosecutors have previously alleged that Obaid and the 1MDB-PetroSaudi joint venture was involved in the first phase of the multibillion-dollar fraud and have already filed civil asset seizure proceedings against assets connected to Obaid in 2017, which the businessman has challenged in court.
According to court papers, US prosecutors claim the joint venture misappropriated hundreds of millions of dollars from the state fund to purchase two “secondhand and aging” drilling ships before securing the Venezualan contract.
As part of the deal with PDVSA, the joint venture secured a line of credit of around $300m from the state-owned company, prosecutors said. However, a dispute subsequently arose between PetroSaudi and PDVSA, leading to a long-running arbitration case. Earlier this year, an arbitration tribunal made an award in PetroSaudi’s favour.
During the arbitration proceedings, the tribunal ordered around $300m to be placed in an escrow account at Clyde & Co – the firm representing PetroSaudi – to be paid out in the event of an award.
The DoJ’s forfeiture proceedings have placed further scrutiny on the origins of the funds. The money has also attracted the attention of Malaysian prosecutors, who applied to restrain the funds held by Clyde & Co shortly before the arbitration award was made in July.
By Harry Davies, The Guardian, 18 September 2020
Read more at The Guardian
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