Malaysia’s sovereign wealth fund, 1MDB, has filed a lawsuit seeking US$1.83 billion against PetroSaudi International’s Patrick Mahony, accusing him of being involved in a “sham” joint venture that led to misappropriation of state finances. The lawsuit also implicates former prime minister Najib Razak in one of the world’s biggest financial scandals that came to light in 2015.
According to the lawsuit, 1MDB was misled into believing that a Saudi king owned PetroSaudi, leading to the 2009 joint venture that resulted in a complete loss of investment. Mahony, who was the chief investment officer of Petrosaudi at the time, is accused of dishonest assistance and aiding individuals, including Najib and fugitive businessman Jho Low, in defrauding 1MDB.
The lawsuit also names UK-based law firm White & Case LLP as a defendant, alleging that it acted on Mahony’s instructions to prepare agreements to deceive 1MDB. Mahony and PSI director Tarek Obaid are currently on trial in Switzerland for embezzlement, with prosecutors seeking lengthy jail terms for both individuals. The trial is expected to last until the end of May.
During the Swiss trial, Mahony reportedly struggled to recall details about dealings between PSI and 1MDB, including a fake US$700 million loan that was generated into the joint venture company. The loan was allegedly “repaid” into an account belonging to Low, who was purportedly controlling decisions at 1MDB at the direction of Najib. The 1MDB scandal resulted in an estimated loss of US$4.5 billion for Malaysia.
Former prime minister Najib has been sentenced to 12 years in jail for his involvement in the saga, including charges related to the laundering of funds from SRC International, a former 1MDB subsidiary. In January, his sentence was halved to six years by the Pardons Board, and in April, he made a bid to serve the remainder under house arrest. The legal proceedings surrounding the 1MDB scandal continue to unfold as the full extent of the financial mismanagement and corruption is revealed.
