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Malaysia's utterly bonkers corruption scandal, explained

Najib Razak, accused scumbag.
Najib Razak, accused scumbag.
(Mohd Rasfan/AFP/Getty Images)
Zack Beauchamp is a senior correspondent at Vox, where he covers ideology and challenges to democracy, both at home and abroad. Before coming to Vox in 2014, he edited TP Ideas, a section of Think Progress devoted to the ideas shaping our political world.

If your neighbor told you that the Saudi royal family had wired $681 million to his personal bank account and that they expected nothing in return, you'd probably conclude that was not the full story and be left a bit baffled.

This is something like what Malaysians are going through now, after revelations that Saudi royals wired Malaysian Prime Minister Najib Razak $681 million — with Najib citing the Saudi "donation" as part of his defense in a corruption inquiry.

Sure enough, on Tuesday morning Malaysia's attorney general cleared Najib of any wrongdoing in accepting the funds.

To even begin to follow this saga, you need to see the history of Malaysia's truly strange corruption scandal — which remains very far from resolved. So here's a brief, simple guide to one of the world's wackiest scandals: how it began, what we know, and how it ties into some bigger global issues.

The origins of the scandal: a shady sovereign wealth fund called 1MDB

Malaysians Hold Mass Rally To Demand Resignation Of Prime Minister Najib Razak
An anti-Najib rally last August.
(Charles Pertwee/Getty Images)

The story begins in 2009, with a sovereign wealth in Malaysia fund called 1Malaysia Development Berhad (1MDB). Najib, who had just taken office as prime minister, created the fund to "borrow money so it could attract investment and stimulate Malaysia’s economy," according to the Wall Street Journal.

But while 1MDB was good at borrowing money, it wasn't so good at actually investing it. According to the Journal (the outlet that has broken almost all of the big news on 1MDB), "some of its projects, including plans to develop oil fields overseas and a mine in Mongolia, haven’t panned out." In early 2015, it skipped payments on the roughly $11 billion it owed in debt to foreign investors.

This is what initially kicked off investigations into 1MDB. Last year, the attorney general's office convened a task force — including the national police, the central bank, and Malaysia's specialized anticorruption body — to investigate 1MDB's finances.

In early July of 2015, Attorney General Abdul Gani Patail announced something big: The probe had uncovered paperwork suggesting that $681 million had been transferred from 1MDB's coffers to Najib's accounts between March and May of 2013.

The investigation also uncovered evidence that Najib had received a smaller sum — $14 million — from a government-owned company called SRC International. SRC was a subsidiary of 1MDB until 2012, which is why the investigation stumbled upon evidence of corruption in what's now a separate company.

Najib denied stealing any money — but he did some things that sure made him look guilty. In late July, he fired the attorney general for "health reasons." Najib also canned the deputy prime minister, Muhyiddin Yassin, who had criticized his handling of the crisis.

Malaysians were furious. In the last weekend of August, somewhere between 50,000 and 80,000 people took to the streets in Kuala Lumpur, the country's capital, in anger over the alleged corruption.

That same August, the national anticorruption body announced yet another surprising finding: evidence that Najib's mysterious $681 million cash infusion hadn't come from 1MDB. Instead, it came from an unnamed Middle Eastern monarchy, later revealed to be Saudi Arabia.

The biggest question, then, became the following: Did Najib's massive cash infusion come from robbing the taxpayers blind via stealing from 1MDB — or from a mysterious, though not necessarily illegal, gift from foreign monarchs?

The main scandal has been officially resolved — but nothing has really been cleared up

Malaysian Prime Minsister Visits MH370 Search Headquarters In Perth (Paul Kane/Pool/Getty Images)

The Tuesday announcement, from the Najib-approved attorney general, Mohamed Apandi Ali, represents the conclusion of official government investigations into the issue of the $681 million.

At a press conference, Apandi said that the $681 million "was a personal donation" from the Saudis to Najib. Moreover, Najib reportedly gave $620 million of it back, which demonstrated to Apandi that everything was aboveboard.

"I am satisfied that there was no evidence to show that the donation was a form of gratification given corruptly," Apandi said in an official statement, as reported by the New York Times. He failed, however, to explain why the Saudis decided to give Najib so much money.

Apandi also concluded that Najib had not done anything improper with SRC, finding that although SRC funds had been transferred to Najib's accounts, Najib hadn't known about the transfer — and any money he personally spent came from the Saudis.

Yes, that is a very strange explanation.

How could it be okay for the prime minister of Malaysia to get $681 million for no reason he's willing to state publicly? Why on earth would he give back most of the money? What happened to the remaining $61 million? And how could he not even notice $14 million appearing in his account from SRC?

These questions remain unanswered. According to the BBC, Apandi announced that "no further action would be taken" against Najib. "This decision effectively clears him," the BBC's Frank Gardner writes.

But while Najib may be out of the woods on formal prosecution, he's hardly clear on everything. For one thing, the opposition doesn't believe the prosecutor's conclusion, and won't be letting the $681 million issue go. "This can only happen in fairy tales," Rafizi Ramli, an opposition party politician, said of the attorney general's story in the Malaysian site Malaysiakini.

According to the BBC, four different countries — including the United States — have investigated 1MDB (in some cases freezing assets) on corruption and money laundering charges. The fund is also still deeply in the red, with some of its money still unaccounted for by investigators. It's selling off assets to try to solve its debt problem.

And 1MDB isn't Najib's only corruption problem. He and his family have long drawn criticism for their extravagant lifestyles. The New York Times reports that the Najibs, according to American investigators, may have conducted potentially illegal real estate dealings in the US that helped bolster their wealth. The investigation focuses on Najib's stepson, Riza Aziz, a movie producer whose company is behind films such as The Wolf of Wall Street:

The inquiry, being run by a unit of the Justice Department that investigates international corruption, was said to be focused on properties in the United States purchased in recent years by shell companies belonging to [Najib's] stepson, as well as other real estate connected to a close family friend.

The bottom line, then, is that 1MDB and Najib are both still deeply troubled — even if the immediate risk of Najib's prosecution on corruption charges has receded.

What are the Saudis doing with this apparent "donation"?

saudi king abdullah
Now-deceased King Abdullah of Saudi Arabia, who allegedly provided the funds to Najib directly from his own pockets.
Brendan Smialowski/AFP/Getty Images

Here's perhaps the strangest outstanding question in this whole strange affair: If Najib did get $681 million from Saudi Arabia, what the hell did he get it for?

The Saudis certainly aren't telling anyone. They refused to confirm Apandi's account of what happened, saying on Tuesday that they would launch their own investigation into the matter.

The most likely theory, according to the BBC's Gardner, is that the Saudis were attempting to help Najib win the 2013 election. At the time, the Malaysian opposition included the Pan-Malaysian Islamic Party (PAS), an Islamist party with links to the Muslim Brotherhood.

"PAS is held up by the Muslim Brotherhood as a model of a successful Islamic party that can win elections and rule," Wan Saiful Wan Jan, chief executive officer of the Institute of Democracy and Economic Affairs, told Al Jazeera in 2013.

Between March and May 2013, when the money went into Najib's accounts, the Muslim Brotherhood looked like an ascendant revolutionary force — it had won elections in Egypt and governed after the 2011 revolution, which the Saudis worried might encourage further Islamist insurrections throughout the Middle East, especially in Saudi Arabia itself.

Moreover, Malaysia has longstanding trade ties with Saudi Arabia, and has been a recipient of a great deal of Saudi economic investment, so the Saudis have a special interest in preserving a friendly regime there.

A "high-placed Saudi source" told Gardner that Saudi Arabia saw PAS as a Brotherhood front, and thus wanted to help Najib stop it. "The purpose of the donation was simple, said the Saudi source — it was to help Mr Najib and his coalition win the election, employing a strategic communications team with international experience, focusing on the province of Sarawak, and funding social programmes through party campaigning," Gardner reports.

If true, this theory would help explain one of the weirdest parts of Najib's story: the idea that he gave $620 million back. If the Saudi donation was essentially designed to create a campaign war chest, and Najib only needed to spend $61 million to win reelection, then it could plausibly explain why he would return the remaining $620 million.

But while that may not be illegal under Malaysian law (according to Malaysia's attorney general, at least), it's still pretty troubling. When reporters at the Washington Post and Wall Street Journal found, last year, that the Clinton Global Initiative had received donations from a number of foreign nations, it created a major controversy for Hillary Clinton's campaign. The fear was that either she or her husband was being improperly influenced by foreign nations.

Now imagine that instead of smaller donations to a charity, the money was $681 million directly to Clinton's personal accounts, meant to fund her campaign. Imagine again that the money came from Saudi Arabia, a dictatorship with one of the world's worst human rights records. People would lose it, and rightly so.

That's what appears to have possibly happened in Malaysia. It suggests that Saudi interference with foreign powers isn't just limited to funding rebels in conflicts like Syria or helping out fellow autocrats like the king of Jordan. The Saudis are perfectly willing, it would seem, if this theory of the money is correct, to help buy elections to prop up a friend.