1MDB, Malaysia’s insolvent sovereign wealth fund, is pursuing a lawsuit against senior oil executive Patrick Mahony for US$1.83 billion over a joint venture it claims was a “sham”. The fund alleges Mahony aided in the misappropriation of state finances in a scandal involving former prime minister Najib Razak. 1MDB claimed it was deceived into believing a Saudi king owned PetroSaudi, leading to the investment of US$1.83 billion in the joint venture, which resulted in a complete loss.
Mahony, who was the chief investment officer of PetroSaudi at the time, is accused of “dishonest assistance” in defrauding 1MDB, along with Najib, PSI director Tarek Obaid, 1MDB executive director Casey Tang Keng Chee, and businessman Jho Low. The lawsuit also names UK-based law firm White & Case LLP as a defendant for allegedly preparing agreements to deceive 1MDB on Mahony’s instructions. Mahony and Obaid were also on trial at Switzerland’s Federal Criminal Court for embezzlement.
During the Swiss trial, Mahony reportedly struggled to remember details concerning PSI’s dealings with 1MDB, including a US$700 million fake loan that was generated into the joint venture company. The loan was supposedly repaid into an account owned by PSI but actually belonged to Low, who controlled decisions at 1MDB at Najib’s behest. The 1MDB scandal led to Malaysia losing an estimated US$4.5 billion, with Najib being sentenced to 12 years in jail for his involvement, including money laundering charges related to SRC International.
In January, Najib’s jail sentence was halved to six years following a Pardons Board meeting. In April, he requested to serve the remainder of his sentence under house arrest. The trial in Switzerland, which began in April, is expected to last until the end of May. The lawsuit filed by 1MDB in Kuala Lumpur alleges various individuals, including Mahony and Najib, played a role in the misappropriation of state finances, resulting in significant losses for the fund. The scandal, which emerged in 2015, has had far-reaching implications and legal consequences for those involved.
