Billion-dollar whales fill #1MDB’s wide net | Reuters

Billion-dollar whales fill 1MDB’s wide net | Reuters

Malaysia is steadily making good on its 1Malaysia Development Berhad disaster. The Southeast Asian country has so far clawed back $4.3 billion. That’s close to the base headline amount U.S. prosecutors indicated had been misappropriated from the sovereign fund originally set up by disgraced former Prime Minister Najib Razak to buy power plants and fund a new financial district. Now the current government may even be able to recoup enough to cover some $5.4 billion of remaining unfunded dues. Goldman Sachs was the first major player to cough up, with Malaysia extracting a $2.5 billion cash settlement one year ago. The Wall Street firm pocketed lucrative fees helping the fund issue bonds up until 2013, proceeds of which were allegedly misused. Other settlements followed with Deloitte and Malaysian lender AmBank. The U.S. Department of Justice also handed over $1 billion it had recouped, including some from selling assets like a super-yacht, Van Gogh and Monet paintings and a stake in the Park Lane Hotel in New York - all allegedly obtained using stolen funds. The balance left in the pot of money covers the fund’s obligations through 2022, but not the more than $5 billion Malaysia is on the hook for through 2039; that includes $3 billion of principal repayment in 2023. The gap explains why it continues to aggressively pursue claims. The country is targeting Deutsche Bank, JPMorgan and others in some 22 civil lawsuits seeking around $23 billion. This month it confirmed filing suits against 44 current and former partners of KPMG linked to its audit of 1MDB’s financial statements between 2010 and 2012, which Reuters reported are worth $5.6 billion. Companies have refuted the claims or refused to comment. The total owed might shrink, too, depending on the outcome of a dispute with Abu Dhabi: One of the emirate’s sovereign investment vehicles originally co-guaranteed 1MDB bonds but Malaysia has been trying to wriggle out of a related settlement agreement it says is worth $5.8 billion and which was agreed by Najib’s administration before he was ousted. The standoff in arbitration between the two countries may even fizzle out if enough funds are recouped elsewhere. Malaysia needs to secure a fifth or less of its claims to turn its highly embarrassing 1MDB shortfall into a surplus. Its close enough to that milestone for some of its targets to complain about the government’s overreach. The lawyers, at least, will have a field day.