Switzerland’s federal criminal court has convicted two top managers of a Saudi oil company on charges of fraud and money laundering in connection with a scam that defrauded at least $1.8 billion from Malaysia’s state-owned investment fund. Tarek Obaid, a Saudi-Swiss dual national, was sentenced to seven years in prison, while British-Swiss associate Patrick Mahony received a six-year sentence. Prosecutors had requested longer prison terms for both men, but the court also ordered them to pay $2 billion plus interest to the 1 Malaysia Development Berhad (1MDB) sovereign wealth fund.
The executives, along with an adviser to Malaysia’s then-Prime Minister Najib Razak, were accused of creating a joint venture with 1MDB based on false claims about PetroSaudi’s access to oil fields in Argentina and Turkmenistan. This led to significant investments in the project by the fund. During the trial, prosecutors called the activities “the fraud of the century” and described the defendants as “calculating and arrogant manipulators.” The defense lawyers have expressed confidence in appealing the verdict, arguing that the charges were not warranted.
The court found that the defendants misled 1MDB directors by falsely claiming ties to the Saudi government and promising assets for the joint venture that were never delivered. They collected large sums of money through various schemes, including fictitious investment opportunities and drilling projects that never materialized. The sentences were linked to the embezzlement of $1 billion from 1MDB. The Malaysian wealth fund welcomed the verdict as a step towards recovering the stolen assets, but much of the money remains unaccounted for.
The 1MDB scandal had wide-ranging consequences, leading to the downfall of Malaysia’s government and resulting in the imprisonment of former Prime Minister Najib Razak on corruption charges. The scandal also had connections to Hollywood, where stolen funds were used to finance luxury items and even a major film. One of the defendants, Tarek Obaid, donated a significant amount to the Mayo Clinic in Minnesota using the ill-gotten money. Another key figure in the scheme, Malaysian financier Low Taek Jho, remains a fugitive.
The Swiss attorney general’s office praised the verdict as an important result in a complex international criminal case. The investigation involved extensive analysis of financial transfers and hundreds of thousands of documents. Economic crimes were prosecuted without regard to complexity or sophistication. The case underscored the global reach of financial fraud and the cooperation needed among countries to combat such illegal activities. The defendants also face prosecution in Malaysia for their role in the embezzlement scheme.
