A Swiss court finds two executives guilty of defrauding 1MDB of $1.8 billion

Two executives at an oil exploration company were convicted by the Swiss Federal Criminal Court on Wednesday for embezzling over $1.8 billion from Malaysia’s state investment fund 1MDB.

Patrick Mahony, a Swiss-British national, along with Tarek Obaid from Switzerland and Saudi Arabia, have been instructed to repay over $1.75 billion to the fund. This fund was involved in a major international scandal related to corruption.

During the scam, the fraudsters made interest payments back to 1MDB, resulting in a difference between the two amounts.

The verdict marked the most recent development in the 1MDB affair, a convoluted story of global corruption that has impacted numerous financial institutions and individuals worldwide since allegations of misconduct emerged in 2015.

Prosecutors claimed that Mahony and Obaid were involved in establishing a joint venture with 1MDB, giving the false impression that their company, PetroSaudi, had the support of the Saudi government.

Contrary to the truth, the accused successfully convinced 1MDB’s board to participate in the scheme back in 2009, only to later deceive the fund, according to prosecutors.

“The court stated that the accused misled the members of the 1MDB board of directors by creating a false belief that Petrosaudi had connections with the Saudi Arabian government and that PetroSaudi would provide valuable oil assets for the joint venture,” the court explained.

“The accused was fully aware that these statements were false.”

Based on the indictment, the two executives allegedly deceived the wealth fund, resulting in a loss of $1.8 billion. Obaid is said to have received a substantial sum of at least $805 million, while Mahony received at least $37 million.

Both individuals were found guilty of fraud, criminal mismanagement, and money laundering by the court in Bellinzona, Switzerland.

Obaid was given a prison sentence of seven years, while Mahony received a sentence of six years. The court stated that the sentences varied due to the difference in the extent of enrichment between Obaid and Mahony.

“The court considered the significant sums at stake, the severity of the criminal behavior, and the self-centered intent,” it stated.

The two men vehemently denied any wrongdoing. Obaid’s lawyer stated that his client promptly submitted an appeal in response to the verdict.

“Mr. Obaid has consistently denied any wrongdoing,” stated Daniel Zappelli. “The court’s reasoning seems to have overlooked several important factual and legal aspects that we had presented.”

The lawyer representing Mahony did not provide a response to the request for comment.

The prosecutors alleged that the two individuals were involved in a fraudulent scheme alongside Jho Low, a fugitive Malaysian financier and former adviser to ex-Malaysian prime minister Najib Razak. Razak is currently serving time in prison for his part in the massive scandal.

According to prosecutors, the accused initially obtained $1 billion from 1MDB in order to purchase a stake in their joint venture. They then proceeded to take an additional $830 million from the fund between 2010 and 2011 through an Islamic loan related to their partnership.

According to prosecutors, the accused allegedly orchestrated the opening of bank accounts in Switzerland between September 2009 and at least July 2015, with the intention of facilitating the laundering of millions of dollars.

According to prosecutors, the funds were utilized for various purposes such as purchasing real estate in Switzerland and London, acquiring jewelry and private equity, expanding the PetroSaudi business, and sustaining a luxurious lifestyle.

According to Malaysian and U.S. investigators, approximately $4.5 billion was diverted from 1MDB after it was established in 2009. This has implicated various individuals, including Razak, Goldman Sachs staff, and other high-ranking officials.

1MDB, the former sovereign wealth fund currently working to reclaim its stolen assets, expressed satisfaction with the judgment.

“Today’s verdict is a welcome development, as it ensures that Patrick Mahony and Tarek Obaid will be held accountable for their actions of embezzlement and fraud against the people of Malaysia,” stated a spokesperson.