Swiss Court Convicts PetroSaudi Executives in $1.8 Billion 1MDB Embezzlement Scandal

Switzerland's Federal Criminal Court has convicted two top executives of PetroSaudi, an oil exploration company, for embezzling over $1.8 billion from Malaysia’s state investment fund, 1Malaysia Development Berhad (1MDB). The convictions of Swiss-British national Patrick Mahony and Swiss-Saudi Tarek Obaid mark a significant development in the 1MDB scandal, a sprawling case of international corruption that has implicated financial institutions and high-profile individuals worldwide since it first came to light in 2015.

The Fraudulent Scheme

Prosecutors alleged that Mahony and Obaid orchestrated a fraudulent scheme in collaboration with Jho Low, the fugitive Malaysian financier and advisor to former Malaysian Prime Minister Najib Razak. The executives were accused of creating a deceptive joint venture between 1MDB and their company, PetroSaudi, which falsely claimed to have the backing of the Saudi Arabian government. The scheme, launched in 2009, persuaded 1MDB’s board to commit to the venture, ultimately leading to the misappropriation of $1.8 billion from the fund.

According to the court, Mahony and Obaid laundered the embezzled funds through numerous transactions, including the opening of bank accounts in Switzerland, to obfuscate the origins of the money. These funds were then used to finance a lavish lifestyle, with purchases including real estate in Switzerland and London, private equity investments, and luxury goods such as jewelry and private jets.

Sentencing and Restitution

Tarek Obaid, PetroSaudi’s chief executive, received a seven-year prison sentence, while Patrick Mahony was sentenced to six years. The prosecution had requested their immediate detention, but the court rejected this motion, allowing the sentences to be challenged on appeal. In addition to prison time, the court ordered the two executives to return the embezzled funds to 1MDB and mandated the forfeiture of a portion of their seized assets.

In setting the sentences, the court highlighted the enormous sums involved, the intricate and persistent nature of the criminal activities, and the self-serving motives of the defendants. It noted that the duo’s actions not only defrauded 1MDB but also significantly hindered efforts to trace and reclaim the stolen funds.

Global Fallout and Ongoing Investigations

The 1MDB scandal has reverberated globally, prompting investigations in multiple countries, including the United States, Switzerland, and Singapore. The scandal, described by Prosecutor Alice de Chambrier as the "scam of the century," has implicated several high-profile figures and institutions. It contributed to the downfall of Najib Razak’s government in Malaysia in 2018 and led to Najib’s conviction and imprisonment in Malaysia for offenses related to the misuse of public funds.

In its statement, 1MDB welcomed the Swiss court’s verdict, emphasizing the significance of the ruling in their ongoing efforts to recover misappropriated funds. “We welcome today’s verdict in Switzerland’s Federal Criminal Court, which means that Patrick Mahony and Tarek Obaid will face justice for their role in embezzling and defrauding the people of Malaysia,” a 1MDB spokesperson said.

“Today's judgement is a further step towards recovering the harm done to the people of Malaysia. We will continue to pursue those responsible for the looting of 1MDB and recover our nation’s rightful assets, wherever they may be.”

The 1MDB board has initiated a lawsuit against Mahony, seeking the return of $1.83 billion, signaling that the pursuit of justice and recovery of funds is far from over. As the legal battles continue, the case serves as a stark reminder of the consequences of high-level corporate fraud and the relentless pursuit of accountability in international financial crimes.