Swiss court convicts 2 executives for embezzling S$1.8 billion from 1MDB

SWITZERLAND: On Wednesday (28 August), the Swiss Federal Criminal Court convicted two top executives involved in one of the world’s largest financial scandals, linked to 1Malaysia Development Bhd (1MDB).

As reported by Swiss local media, Saudi-Swiss businessman Tarek Obaid and his Swiss-British business partner, Patrick Mahony, were found guilty of embezzling over US$1.8 billion from the sovereign wealth fund.

The court, located in the southern Swiss city of Bellinzona, sentenced Obaid to seven years in prison and Mahony to six years.

The differing sentences reflected the extent to which each had enriched themselves, with Obaid receiving at least US$805 million and Mahony US$37 million.

“The court took into account the very high amounts involved, the intensity of the criminal activity, (and) the selfish motive,” it said.

Both men were convicted of fraud, criminal mismanagement, and money laundering.

Additionally, they were ordered to repay more than US$1.75 billion to 1MDB.

Prosecutors outlined a complex scheme orchestrated by Obaid and Mahony in collaboration with fugitive Malaysian financier Jho Low, an advisor to former Malaysian Prime Minister Najib Razak, who is currently serving a prison sentence for his role in the broader 1MDB scandal.

The fraudulent activities centered around PetroSaudi, a company the two men established to create the impression of a joint venture with 1MDB, backed by the Saudi government—an impression that was entirely false.

According to the indictment, the accused misled 1MDB’s board of directors in 2009 into believing that PetroSaudi would contribute significant oil assets to the joint venture.

Using this deception, they initially extracted US$1 billion from 1MDB to purchase a stake in the venture. Subsequently, between 2010 and 2011, they secured an additional US$830 million from the fund through an Islamic loan linked to their partnership.

Prosecutors revealed that between September 2009 and July 2015, Obaid and Mahony laundered the embezzled funds through Swiss bank accounts, which were used to purchase real estate in Switzerland and London, jewelry, private equity, and to maintain a lavish lifestyle.

The stolen funds also fueled the development of PetroSaudi, from which the duo continued to draw significant income.

The case is a pivotal moment in the international efforts to recover the estimated US$4.5 billion siphoned from 1MDB, with the involvement of high-profile figures, including Najib Razak and employees of Goldman Sachs.

Despite the convictions, both men have denied any wrongdoing.

Obaid’s lawyer, Daniel Zappelli, announced that his client had already filed an appeal against the verdict, arguing that the court had overlooked crucial factual and legal arguments presented in Obaid’s defense.

Meanwhile, 1MDB, which is actively working to recover its stolen assets, welcomed the court’s decision.

“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,” a spokesperson said.

1MDB scandal led to the downfall of the Najib-led Barisan National Govt in 2018

The sprawling 1MDB financial scandal has spurred criminal investigations worldwide, with probes underway in the United States, Switzerland, and Singapore.

Billions of dollars are alleged to have been siphoned from the fund, officially known as 1Malaysia Development Berhad, by multiple individuals, funding extravagant purchases from artwork to a luxury yacht.

Najib has been imprisoned since 23 August 2022, following the Federal Court’s confirmation of his convictions for criminal breach of trust, abuse of power, and money laundering related to the misappropriation of SRC International Sdn Bhd’s funds, accompanied by an RM210 million (approximately US$44.5 million) fine.

On 2 February, the Pardon’s Board reduced Najib’s sentence from 12 to six years for misappropriating funds amounting to RM50 million (approximately US$10.6 million), potentially enabling his release on 23 August 2028.

Najib is also the former president of UMNO, having led both the party and the ruling coalition Barisan Nasional.

However, he faced defeat in the 2018 Malaysian General Election primarily due to the 1MDB scandal.