Settlement Applies to $700 Million in Luxury Assets; Law Firms Obtain a Carve-Out
Last week, the Justice Department announced a massive settlement in the 1Malaysia Development Berhad (“1MDB”) case, a matter implicating numerous money laundering and FCPA concerns and one about which we previously blogged here.
The DOJ announced a blanket settlement of all pending civil forfeiture cases against assets acquired by fugitive Malaysian financier Low Taek Jho (“Jho Low”) and various members of his family. The assets, consisting of both cash and real property, are currently located in the United States, United Kingdom, and Switzerland, and exceed $700 million. When combined with prior dispositions, this means the United States government has now recovered over $1 billion associated with the 1MDB scheme. The current settlement constitutes not only the largest recovery by the Department’s recently formed “Kleptocracy Asset Recovery Initiative,” but the largest DOJ civil forfeiture on record.
The assets subject to the agreement represent an eye-catching list of high-end baubles, including a jet aircraft; luxurious properties in New York, Los Angeles, Beverly Hills, and London; stock; and rights to music royalties. The agreement further notes that, although not specifically part of the settlement because they already have been resolved, other related forfeiture cases – including the forfeiture of a gigantic yacht – have been “considered” as part of this global resolution.
1MDB was a development fund originally set up by the Malaysian government and closely associated with its former prime minister, who has faced a series of political and legal consequences for his involvement with the fund. The aim of the fund was to promote economic development in Malaysia through global partnerships and foreign direct investment. Between 2009 and 2015, however, more than $4.5 billion of fund assets allegedly was misappropriated by high-level officials of the fund and their associates, including Jho Low.
According to the terms of the proposed Consent Judgment, filed in federal court in the Central District of California, Jho Low, his family, and an affiliated Cayman Islands entity (“FFP”) are required to forfeit all assets subject to pending civil forfeiture, and to assist the U.S. Department of Justice in the transfer and disposition of those assets.
In an attached Stipulation to the proposed Consent Judgment, the United States has agreed to release $15 million of the over $700 million in forfeited assets back to Jho Low’s U.S.-based legal counsel. These funds will be derived from Low’s liquidated stake in music publishing giant EMI Music Publishing. This appears to constitute resolution of an issue we blogged about last year – namely, that the DOJ had been investigating allegations that Low had been paying his U.S.-based attorneys with allegedly tainted funds without their knowledge. The firms are to receive the funds to cover legal fees and costs, with explicit instructions not to remit any portion of it to Jho Low or his family, and the government agrees not to institute any action against them for recovery or forfeiture of assets connected with Low’s crimes. The firms in question are Kobre & Kim LLP, Lowenstein Sandler LLP, and, notably, the Christie Law Firm LLC – the practice started by former New Jersey governor Chris Christie.
The settlement agreement does not include an admission of wrongdoing – a key element, as Low is still facing charges in two different federal courts: in the Eastern District of New York, for conspiracy to commit money laundering and conspiracy to violate the Foreign Corrupt Practices Act; and in the District of D.C., for conspiracy to make and conceal foreign campaign contributions in the 2012 United States presidential election. More specifically, the Eastern District of New York indictment charges Low and former banker Ng Chong Hwa, also known as “Roger Ng,” with conspiring to launder billions of dollars embezzled from 1MDB, and conspiring to violate the FCPA by paying bribes to various Malaysian and Abu Dhabi officials. As part of the alleged scheme, Ng is charged with conspiring to violate the FCPA by circumventing the internal accounting controls of the financial institution which underwrote more than $6 billion in bonds issued by 1MDB while he was employed at the financial institution. In connection with this case, Tim Leissner, the former Southeast Asia Chairman and participating managing director of the financial institution, also pleaded guilty to a two-count criminal information charging Leissner with conspiring to launder money and conspiring to violate the FCPA by both paying bribes to various Malaysian and Abu Dhabi officials and circumventing the internal accounting controls of the financial institution while he was employed by it.