Swiss court convicts executives in $1.8 billion 1MDB scandal

By John Revill

BELLINZONA, Switzerland (Reuters) – The Swiss Federal Criminal Court on Wednesday found two executives of an oil exploration company guilty of embezzling more than $1.8 billion from Malaysia's state investment fund 1MDB.

The verdict was the latest episode in the 1MDB scandal, a complex story of international corruption that has rocked numerous financial institutions and individuals around the world since allegations of criminal conduct first emerged in 2015.

Prosecutors allege that Swiss-British national Patrick Mahony and Swiss-Saudi national Tarek Obaid helped set up a joint venture with 1MDB by creating the impression that their company, PetroSaudi, was backed by the Saudi government.

Although this was not the case, the defendant managed to convince the board of 1MDB to participate in the scheme in 2009 before subsequently defrauding the fund, according to the prosecution.

According to the indictment, the two managers defrauded the sovereign wealth fund of $1.8 billion to enrich themselves; Obaid received at least $805 million and Mahony at least $37 million.

Obaid was sentenced by the court to seven years in prison, while Mahony received a six-year prison sentence.

Prosecutors said the two men hatched the fraudulent scheme together with fugitive Malaysian financier Jho Low, an adviser to former Malaysian Prime Minister Najib Razak who is already in prison for his role in the billion-dollar scandal.

The defendants initially withdrew $1 billion from 1MDB to buy a stake in the company. Between 2010 and 2011, they withdrew another $830 million from the fund as part of an Islamic loan resulting from their connection, prosecutors said.

Malaysian and US investigators believe that a total of $4.5 billion has been diverted since the bank was founded in 2009. Those affected include Razak, Goldman Sachs employees and high-ranking officials from other agencies.

(Reporting by John Revill; Editing by Dave Graham)