Two former managers of PetroSaudi, a Saudi oil exploration company, are currently facing trial in Switzerland for allegedly committing fraud and money laundering in connection to a scandal involving 1Malaysia Development Berhad (1MDB). The US Justice Department once referred to this scandal as the “biggest kleptocracy case” in history.
The defendants, who are a Swiss Saudi citizen and a Swiss British national, are accused of orchestrating a scheme in 2009 that involved setting up a joint venture with 1MDB based on false pretenses. Malaysian investigators believe that over US$4.5 billion was embezzled from the fund, which was established in 2009, and subsequently laundered through various bank accounts in the US and other countries.
Swiss prosecutors have charged the PetroSaudi managers with commercial fraud, aggravated criminal mismanagement, and aggravated money laundering, citing incidents that occurred over a span of at least six years. The attorney general’s office asserted in a filing last year that the managers aimed to enrich themselves and others by diverting at least US$1.8 billion that was transferred to the state-owned investment fund.
These indictments mark the first of their kind in Switzerland, where certain financial institutions were implicated in the extensive scandal. The joint-venture agreement between 1MDB and PetroSaudi involved a US$1 billion investment from 1MDB and assets from PetroSaudi, supposedly worth US$2.7 billion, which included oil fields in Turkmenistan and Argentina – assets that the oil company did not actually possess.
Following the signing of the deal, approximately US$700 million from 1MDB was transferred to a Swiss bank account linked to a Malaysian investor associated with the defendants, with millions ending up in the defendants and PetroSaudi’s possession without benefiting the joint venture. Swiss prosecutors allege that the defendants also devised schemes that led to the transfer of an additional US$830 million from 1MDB to the 1MDB board, which was also diverted.
It is believed that some of the stolen funds were used to purchase luxury items such as jewelry, hotels, art, and a yacht, as well as to finance Hollywood films like “The Wolf of Wall Street.” More than US$700 million was traced to Najib’s bank accounts. In August 2022, Najib was sentenced to 12 years in prison for corruption. He established 1MDB shortly after assuming power in 2009.
Last year, the Swiss attorney general’s office highlighted that the US Department of Justice characterized this scandal as “the largest kleptocracy case to date.” The trial in Bellinzona, where the Swiss federal criminal court is located, is expected to last until the end of April, with a three-judge panel presiding over the proceedings.
