Mahathir's Test in Najib Trial: Prove It's Not a Political Stunt

(Bloomberg) -- Malaysia sent a strong message to its public stewards when it charged Najib Razak, its first former premier to be indicted, with several counts of criminal breach of trust and corruption.

The real test now lies in the nation’s pursuit of lesser-known figures as Prime Minister Mahathir Mohamad works to prove that his return to power, after toppling one-time protege Najib in May, is also the return to rule of law. Najib has consistently denied any wrongdoing and on Wednesday entered a not guilty plea on all charges.

The 92-year-old has said that he isn’t seeking revenge, even as he appoints those who were dismissed under Najib’s administration over the handling of the 1MDB scandal. That includes former Attorney-General Abdul Gani Patail, who now leads the task force heading an investigation into the troubled state fund.

“Pursuing criminal charges against Najib is a low hanging fruit,” said Hugo Brennan, an Asia analyst at Verisk Maplecroft in Singapore. “It is less clear that Mahathir has the political will to pursue root and branch reform.”

The revived investigation into the troubled 1MDB state fund has also revealed other cases of potential corruption that Daim Zainuddin, an adviser to Mahathir, called “mini 1MDBs.”

“Najib’s case in itself is significant for its symbolism,” said Yang Razali Kassim, a senior fellow at the S. Rajaratnam School of International Studies, Nanyang Technological University in Singapore. “It is the beginning of what could be a drawn-out struggle between the new regime in power led by Mahathir Mohamad against the old regime it overthrew on May 9, of which Najib has come to represent."

‘Politically Motivated’

Najib, 64, has called the renewed probe into the multibillion-dollar 1MDB scandal a “politically motivated” move. His supporters drew parallels between his plight and that of Anwar Ibrahim, de facto leader of the ruling coalition, who fell out with Mahathir in the 1990s and was subsequently fired as his deputy then jailed for sodomy and abuse of power. In response, Anwar called on the public to follow the probe and decide whether the comparison is fair.

Najib’s lawyers are considering whether to seek to disqualify Attorney-General Tommy Thomas, who was appointed by Mahathir in June, saying that Thomas had made a prejudgment before being named to the post.

The charges leveled against Najib involve 42 million ringgit ($10.4 million) that he allegedly siphoned from SRC International Sdn., a former unit of 1MDB, and a fraction of the $4.5 billion of funds that Mahathir seeks to recoup. Najib, who said as recently as April that he was confident there was no movement for a change in government, now faces three counts of criminal breach of trust and one corruption charge, which carry punishments of up to 20 years in prison each and a fine.

The court will convene on Aug. 8 to decide on a trial date, which is expected in February next year at the earliest.

‘Fall From Grace’

“This is a major reset of expectations for Malaysia at all levels and the wider region,” said Khor Yu Leng, an independent economist with Segi Enam Advisors Pte who has published papers on Malaysia’s political-economy. “Society has been empowered and this could have ripple-effects outside the country to inspire others feeling oppressed by plutocratic status quo. Also notable, it takes an older elite to charge the newer one that stepped out of line.”

One key step Mahathir’s administration has taken is to place institutions -- including the Malaysian Anti-Corruption Commission directly under the parliament -- instead of the Prime Minister’s Department as it was previously. The move allows them to be truly independent by reporting directly to lawmakers, said The Coalition for Clean and Fair Election, a civil rights group, who’ve proposed that laws be amended to reflect the changes.

Mahathir’s government has sought out a number of other names linked to 1MDB. The MACC has summoned financier Low Taek Jho, former 1MDB officials Tang Keng Chee, Geh Choh Heng, Loo Ai Swan and Nik Faisal Ariff Kamil, and were preparing warrants for the fund’s ex-chief Shahrol Halmi and former Goldman Sachs Group Inc. banker Roger Ng. A day before Najib’s arrest, his stepson and “The Wolf of Wall Street” producer Riza Aziz arrived at the MACC for a hearing.

Police raids have focused on sites linked to Najib, including his family’s residences and his former office. The authorities seized cash and objects worth about 1.1 billion ringgit as part of their investigation into SRC International, and questioned about 30 people.

Najib calmly addressed reporters after being charged and dubbed the legal proceeding his “best chance” at clearing his name. Hours after he was arrested on Tuesday, he apologized to the nation in a video posted to his Twitter account, and said that not all of the accusations against him are true.

"This is a very powerful precedent," said Clive Kessler, a sociology professor at the University of New South Wales who has studied Malaysian politics for almost 60 years. "The case will become a semi-permanent feature of the legal and judicial scene in Malaysia."

--With assistance from Fathiya Dahrul.

To contact the reporters on this story: Anuradha Raghu in Kuala Lumpur at araghu3@bloomberg.net;Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net

To contact the editors responsible for this story: Yudith Ho at yho35@bloomberg.net, Ruth Pollard, Daniel Ten Kate

©2018 Bloomberg L.P.