Tom Wright writes: Malaysian Prime Minister Najib Razakwas fighting for his political life this summer after revelations that almost $700 million from an undisclosed source had entered his personal bank accounts.
Under pressure within his party to resign, he called together a group of senior leaders in July to remind them everyone had benefited from the money.
The funds, Mr. Najib said, weren’t used for his personal enrichment. Instead, they were channeled to politicians or into spending on projects aimed at helping the ruling party win elections in 2013, he said, according to a cabinet minister who was present.
It still isn’t clear where the $700 million came from or where it went. But a six-month Wall Street Journal examination revealed that public entities spent hundreds of millions of dollars on a massive patronage machine to help ensure Mr. Najib’s United Malays National Organization stayed in power.
The UMNO has led every Malaysian government since the country’s independence from Britain in 1957, making it one of the world’s longest-ruling political parties. Its extraordinary grip on power has delivered economically for Malaysia, boosting living standards and establishing the country as a fast-growing emerging market and U.S. ally in Asia.
But its dominance of the vote, its critics contend, has prevented Malaysia’s democracy from maturing in a similar fashion, instead leaving a system riven by patronage and vote-buying that analysts say has consistently skewed results in UMNO’s favor.
The effort relied heavily on the state investment fund Mr. Najib controlled, 1Malaysia Development Bhd., according to minutes from 1MDB board meetings seen by The Wall Street Journal and interviews with people who worked there.
The prime minister, who is chairman of 1MDB’s board of advisers, promised repeatedly that the fund would boost Malaysia’s economy by attracting foreign capital. It rolled up more than $11 billion in debt without luring major investments.
Yet Mr. Najib used the fund to funnel at least $140 million to charity projects such as schools and low-cost housing in ways that boosted UMNO’s election chances, the Journal investigation found.
Board members wondered aloud if they would get in trouble. In a meeting on Dec. 20, 2014, they discussed what to do about police who came to investigate allegations of financial irregularities, according to the minutes.
The 1MDB fund also transferred hundreds of millions of dollars to politicians through Ihsan Perdana Bhd., a company formed in 2011 to carry out 1MDB’s corporate social responsibility programs, said a person involved with setting up the fund. Ihsan Perdana is exempt from filing financial statements, according to Malaysian company records.
Malaysian investigators believe the cash that ended up in Mr. Najib’s personal accounts moved through government agencies, banks and companies linked to 1MDB. At least $14 million flowed into his accounts via Ihsan Perdana, according to documents from a Malaysian government investigation.
The source of that $14 million was SRC International Bhd., a company controlled by Malaysia’s finance ministry, which Mr. Najib also heads, the documents show.
The prime minister signed checks from his personal accounts to lawmakers, who used the money as they saw fit, according to the Malaysian cabinet member interviewed by the Journal and another lawmaker who said he accepted the money.
Mr. Najib declined multiple interview requests. He has denied wrongdoing or taking money for personal gain, while defending 1MDB spending as good for Malaysia. He hasn’t explained where the $700 million in his accounts came from or how it was used.. Money Flows in Malayasia
