Judge denies Low family bid to intervene in 1MDB forfeiture case
13 December 2016. By Joshua Sisco.
A federal judge denied a bid by family members of an individual at the center of the global 1MDB money laundering investigation to intervene in a group of related asset forfeiture cases.
The ruling from US District Judge Dale Fischer came late Monday, after a hearing earlier that day in Los Angeles federal court.
At the hearing, an attorney for the family of Low Taek Jho, told her that they are taking steps to replace trustees for the contested assets to fight the forfeitures, while a federal prosecutor questioned the motives of a new trustee who is willing to litigate.
At the hearing, Christen Sproule told US District Judge Dale Fischer that if the current trustees of assets controlled by Malaysian businessman Low Taek Jho — known as Jho Low — and his family are not willing to contest the forfeitures out of fear of criminal prosecution, “why is the [new possible trustee] willing to do this?”
“There is no funny business going on here,” Robin Rathmell, an
attorney for family members of Jho Low countered. The new trustee will
be fully independent, and “will fight it out with the government on the
The new trustee, however, has been “handpicked” by the Low family, Sproule said, questioning the family’s motives.
“The motions to intervene are [denied] because the [Low family members] are claimants and are already participants” in the cases, Fischer wrote in her brief, two-page order. The Low family members have filed claims on assets the DOJ is attempting to seize, but have acknowledged they likely lack standing to do so.
In July, the Department of Justice filed 16 civil forfeiture lawsuits seeking to return some $1 billion to Malaysia by seizing real estate, business interests, art and other assets allegedly purchased with funds misappropriated from Malaysian development fund 1MDB.
The Low family is attempting to intervene in eight of the lawsuits to claim ownership of the assets. The family will unlikely be able to file a claim on the assets directly because independent trusts have actual control over the assets, giving the trustees legal standing to challenge the forfeiture actions in court. The current trustees have refused to do so, however, citing fear of criminal prosecution under US anti-money laundering laws.
The Low family is attempting to intervene to contest the forfeitures as a way around the standing hurdle.
Simultaneously, the family is attempting to switch the current trustees to one willing to litigate. However, the trusts were set up in the Cayman Islands and New Zealand, and any new trustee must be appointed under the laws of those countries.
A New Zealand Court has set a Jan. 20 hearing date for replacing the trustees, and the Low family is hoping for a similar date in the Cayman Islands, Rathmell told the court. If the trustees are switched out, the family’s bid to intervene is moot, and the new trustees can simply contest the forfeitures, Rathmell said.
For the DOJ it’s not so simple. If new trustees are appointed in foreign jurisdictions, the DOJ contends, that adversely affects the government’s case. The new trustees may not have materials possessed by the current trustees that the prosecutors will seek in discovery, and the DOJ doubts the new trustees will be independent. The “new trustee will only know what Low family tells it,” Sproule said.
Fischer, who remained largely silent throughout the hearing, told Sproule that if the Low family switches the trustees in a timely fashion, the court and government will be “stuck with this”.
The only reason the issue is even before the court at this moment is the Low family is asking the court to let it switch the trustees and for an extension of time to do so.
Last week, Fischer denied a bid by the Low family to push back Monday’s hearing until late January in order to switch out the trustees.
In Monday’s order, Fischer also denied another pending motion to delay a decision on the intervention while they sort through the trustee issue.
The asset seizure actions, which were filed in US District Court for the Central District of California, lay out in great detail the allegations of how some $3.5 billion was misappropriated by 1MDB officials working with politically connected Malaysians.
The forfeiture complaints cite violation of several laws as the basis for the asset seizures: misappropriation of funds by a public official, receipt of stolen property and money laundering. And they lay out in detail how the conspirators allegedly used “fraudulent documents and representations” to launder funds through shell companies with bank accounts located in Singapore, Switzerland, Luxembourg and the United States, allegedly to conceal the origin, source and ownership of the funds.
Over $2 billion of the allegedly laundered money came from bond issuances run by Goldman Sachs.
No criminal charges have been publicly filed, but the DOJ has multiple criminal investigations underway, it is understood. It is understood that the US Attorneys’ office in Brooklyn, NY, is taking the lead on the Goldman Sachs angle, while the US Attorneys’ office in Los Angeles, which is handling the forfeiture cases, is also investigating overseas activity.
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