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Najib and Goldman 1MDB twists pose risks and rewards for Muhyiddin

Landmark Verdict And Settlement Flip Narrative Surrounding Malaysia's PM


Former Malaysian Prime Minister Najib Razak speaks to reporters after being convicted on seven charges and sentenced to 12 years in prison on July 28.   © Reuters

SINGAPORE -- When Muhyiddin Yassin became Malaysia's prime minister in March, many saw it as a step backward in the fight against corruption. After all, his fledgling government was dependent on parliamentary support from the party tarnished by one of the world's biggest financial scandals, Najib Razak's United Malays National Organization.

What a difference $3.9 billion and the conviction of a former prime minister make.

The Muhyiddin government's success in extracting that enormous sum from Goldman Sachs last week, and Tuesday's High Court verdicts against former Prime Minister Najib on charges related to defunct state fund 1Malaysia Development Berhad, have altered the narrative in dramatic fashion.

Suddenly, Muhyiddin may have a chance to wrest the graft-fighting mantle away from the man he pushed out of office, Mahathir Mohamad. But the path forward remains dicey, given his government's razor-thin majority, uncertainty over the UMNO's next move and the opposition's determination to retake the reins.

"The government respects court decisions and urges all parties to continue to place their trust in the country's legal and judicial system as an independent and impartial institution," Muhyiddin said after Najib was found guilty of abuse of power, criminal breach of trust and money laundering -- seven counts in all.

The former leader intends to appeal but is facing 12 years in prison, a 210 million ringgit ($49 million) fine, and numerous other charges still pending.

Some analysts expressed amazement that the hammer came down so hard on Tuesday.

"Before the verdict, many people's opinion was that the verdict would be split -- some of the charges would be guilty, some not guilty," said James Chin, director of the Asia Institute at the University of Tasmania. "So many people are surprised that they found [Najib] guilty for all the charges."

Chin emphasized the gravity of the ruling.

"The verdict is historic. This is the first time in the Malaysian court system where a former prime minister has been charged and found guilty for abuse of power and corruption."

Malaysian Prime Minister Muhyiddin Yassin smiles on July 13 in parliament, where he has a fragile support base. © Reuters

It was certainly not an outcome many would have predicted based on the prevailing opinion in the months after Muhyiddin took power. Observers warned that the prime minister's weak support in parliament left him no choice but to pay consideration to Najib, the UMNO and other powerful forces, suggesting any anti-corruption efforts would be halfhearted at best.

Recent developments in corruption cases pushed forward under Mahathir only seemed to bolster that argument.

In May, a charge against Riza Aziz, Najib's son-in-law and one of the key figures in the 1MDB scandal, was dropped because he agreed to a confiscation of assets. Riza had been accused of laundering $248 million from the fund -- from which at least $4.5 billion is believed to have been stolen.

In June, prosecutors withdrew all charges against Musa Aman, former chief minister of the eastern state of Sabah, citing a lack of evidence. Musa, who had faced nearly four dozen charges unrelated to 1MDB, was a powerful regional figure during Najib's tenure.

But then came last Friday's deal with Goldman Sachs. The settlement -- in which Malaysia agreed to drop charges against the U.S. investment bank for allegedly misleading investors about 1MDB bond issuances -- means the government will recoup nearly all the money U.S. and Malaysian authorities say was taken from the sovereign fund.

Officials seemed keen to emphasize that they drove a harder bargain than the Mahathir government. "This settlement represents a significant increase compared to the previous offer of $1.75 billion made by Goldman Sachs to the previous administration in 2019," Finance Minister Tengku Zafrul Aziz said in a statement. Mahathir himself had once complained that Goldman offered only $239 million in compensation, an amount he described as "little" compared to the "huge killing" the bank had made.

To be sure, it was the Mahathir government that paved the way for the settlement. It was Mahathir who, after ousting Najib in the 2018 election, ensured the 1MDB investigations moved forward and stressed that Goldman Sachs should be held accountable for its fundraising.

It also helped that Goldman wanted an early settlement, and Muhyiddin did not have to worry about domestic foes when negotiating with a foreign entity. Nevertheless, his government gets the credit.

Muhyiddin on Friday vowed to keep the pressure on. "The government will continue its efforts to recoup assets that had been misappropriated in relation to 1MDB and demand compensations from individuals and groups that had been involved in the corruption," he said.

But how far will he go? Will he make additional claims for damages against individuals and entities implicated in the scandal?

A key piece of the puzzle remains the elusive fugitive Low TaekJho, known as Jho Low. The businessman, who had close ties to Najib and allegedly played an integral role in the 1MDB affair, is on the run overseas but is believed to know as-yet-unrevealed details of the scandal. Apprehending him could lead to additional charges against Najib and other powerful figures.

If Muhyiddin could pull this off, it would prove his words were not just lip service, but it would also further alienate the pro-Najib forces his government depends on.

How those forces will respond to Najib's conviction might well be the hottest topic in Malaysia right now. After the verdict, UMNO President Ahmad Zahid Hamidi wrote on Facebook that he was "saddened" by the outcome but said party members should stay "calm," noting that Najib still had avenues for "justice."

Defying coronavirus warnings, a crowd of supporters gathers outside the Kuala Lumpur courthouse where Najib learned his fate on July 28. © Getty Images

The UMNO response poses a risk to Muhyiddin. But not only would an acquittal have cast public suspicion on the prime minister, it likely would have strengthened Najib's political influence.

Some analysts are saying the verdict has neutralized that threat for now.

Liew WuiChern, a politics and media lecturer at Universiti Tunku Abdul Rahman, said not letting Najib off the hook keeps the UMNO stuck in the "status quo," rather than becoming "too strong and powerful."

Oh Ei Sun, a senior fellow at the Singapore Institute of International Affairs, suggested that the conviction will "intensify the factional fight within UMNO itself, because it looks like Najib will be temporarily incapacitated from active politics."

Najib "will go for appeal, which is a long process. ... He can stay on as an MP during the process. But during that time, he will be politically incapacitated," Oh said, adding that he will be watching "the fight to fill Najib's space."

While political fortunes in Malaysia have turned on a dime of late, there is at least a scenario in which Najib's loss is Muhyiddin's gain -- burnishing the prime minister's image in the eyes of the public while weakening potential rivals on all sides.

Oh highlighted a coincidental but remarkable tidbit of symbolism: Yesterday's verdict came exactly five years, to the day, after Najib fired Muhyiddin as deputy prime minister for questioning 1MDB.

"What a twist of fate," Oh said.

Additional reporting by P Prem Kumar.