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Warrant served on UK law firm over alleged 1MDB assets

08/02/2021

The US Department of Justice (DoJ) has served an arrest warrant on a top London law firm in an effort to seize hundreds of millions of dollars – alleged to be the proceeds of a major international fraud – which it is holding on behalf of a client.

According to court records reviewed by the Guardian, the UK’s National Crime Agency (NCA) served the warrant at the central London offices of the elite firm Clyde & Co, on behalf of the DoJ.

The warrant, signed by a US federal judge, identified the “defendant” as the $330m (£243m) held by Clyde & Co in a bank account at a NatWest branch in the City.

DoJ filings state that “an arrest warrant in rem” – a type of order used to seize property or assets – was served on the law firm on 29 October in an attempt to secure the funds.

The DoJ alleges the money is derived from a complex fraud against the Malaysian state investment fund 1MDB, which embezzled more than $4bn from the fund and laundered money to pay bribes and finance lavish lifestyles of its alleged perpetrators.

US and Malaysian authorities are continuing to recover money connected to the fraud, large sums of which were used to fund Hollywood movies and pay for items including a $250m superyacht and paintings by Van Gogh and Monet.

Specialist DoJ anti-money-laundering prosecutors allege the money held by Clyde & Co is “about all that is left of the proceeds” of the first phase of the 1MDB fraud, which allegedly misappropriated $1bn of 1MDB funds.

According to prosecutors,

  • $700m of the money was used for the “personal gratification of 1MDB conspirators”
  • While $300m was diverted to a joint venture between 1MDB and PetroSaudi, a little-known oil company established by the Saudi businessman Tarek Obaid with a member of the Saudi royal family.

The DoJ first accused PetroSaudi of participating in the fraud in 2016 and later alleged Obaid was “a key member in orchestrating and profiting” from this phase of the scheme.

Obaid, who was charged last year in Malaysia in connection with the alleged fraud, has consistently denied any wrongdoing.

Last year, US and Malaysian prosecutors began focusing their attention on the money held by Clyde & Co which they allege is the proceeds of the 1MDB-PetroSaudi joint venture. The DoJ filed civil forfeiture proceedings in an effort to seize the funds, triggering legal disputes in the US and UK.

Documents from the litigation have shed light on the convoluted route the alleged 1MDB fraud proceeds took before arriving in the custody of a top London law firm.

Clyde & Co’s relationship with PetroSaudi appears to have begun around 2015, when the law firm began representing PetroSaudi in a dispute over unpaid invoices with Venezuela’s state-owned oil company, PDVSA.

According to the DoJ, PetroSaudi won a contract with PDVSA in 2010 for offshore drilling operations after using the 1MDB funds to purchase “two second-hand and ageing drill ships”.

But when PDVSA refused to pay PetroSaudi’s invoices for the drilling in Venezuela, PetroSaudi sought payment through a standby letter of credit from a Portuguese bank. In 2015, PDVSA challenged PetroSaudi’s entitlement to this bank guarantee at an arbitration tribunal.

PetroSaudi ultimately prevailed in the case and last year was awarded about $380m, the majority of which had been placed in Clyde & Co’s escrow account.

https://www.theguardian.com/world/2021/feb/07/arrest-warrant-served-on-uk-law-firm-over-alleged-1mdb-assets

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