Executives Convicted for Embezzling $1.8 Billion from 1MDB

By John Revill
BELLINZONA, Switzerland (Reuters) – The Swiss Federal Criminal Court convicted two executives at an oil exploration company for embezzling over $1.8 billion from Malaysia’s state investment fund, 1MDB.

Swiss-British national Patrick Mahony and Swiss-Saudi Tarek Obaid were ordered to repay more than $1.75 billion to the fund, which is at the center of an international kleptocracy scandal. The difference in amounts reflects interest payments made during the scam.

This verdict is part of the ongoing 1MDB scandal, a complex international corruption case that has impacted numerous financial institutions since the allegations emerged in 2015. Prosecutors claimed Mahony and Obaid created a false impression that their company, PetroSaudi, was backed by the Saudi government, convincing the 1MDB board to sign a joint venture in 2009 before defrauding the fund.

The court stated, “The accused deceived the members of the 1MDB board of directors into believing that PetroSaudi had links with the Saudi Arabian government and would contribute significant oil assets to the joint venture. These statements were false, and the accused knew this very well.”

Prosecutors allege that the two executives defrauded the fund to enrich themselves, with Obaid receiving at least $805 million and Mahony at least $37 million. They were convicted of fraud, criminal mismanagement, and money laundering, with Obaid sentenced to seven years and Mahony to six years in prison due to the differing levels of enrichment.

Both men denied wrongdoing, with Obaid’s lawyer filing an appeal against the verdict, arguing that many factual and legal aspects went unconsidered by the court. Mahony’s lawyer did not comment.

The fraudulent scheme was allegedly orchestrated with Jho Low, a fugitive financier associated with former Malaysian Prime Minister Najib Razak, who is already serving time for related offenses. Prosecutors reported that between 2009 and 2015, they fraudulently arranged for $1.8 billion to be extracted from 1MDB, using it for real estate, jewelry, private equity, and maintaining a lavish lifestyle.

Estimates from Malaysian and U.S. investigators suggest that a total of $4.5 billion was misappropriated from 1MDB since its inception in 2009, involving high-profile figures like Razak and Goldman Sachs employees.

1MDB, now attempting to recover stolen assets, welcomed the judgment, stating, “We welcome today’s verdict…. which means that Patrick Mahony and Tarek Obaid will face justice for their role in embezzling and defrauding the people of Malaysia.”