Former PM Mahathir in the Hunt for Najib's Head

The resignation by Malaysia’s parliamentary speaker Amin Mulia, followed almost immediately by its withdrawal, is nonetheless an indication that unprecedented pressure is growing on Prime Minister Najib Tun Razak for an accounting on what appears to be disastrous mismanagement of a state investment fund and the eight-year-old mystery of the murdered Mongolian translator Altantuya Shaariibuu.

It is unsure what pressure was on Amin himself to withdraw his resignation, which he apparently tendered after meeting with former Prime Minister Mahathir Mohamad, who is leading an increasingly bitter crusade to drive Najib from power. Nonetheless, it illustrates a growing lack of awe at the prime minister's power. One report said Amin wasmerely seeking to blackmail the premier into giving him more office perks. An unknown number of the United Malays National Organization’s 88 members of parliament [of the ruling coalition’s 133 total] are said to be growing restive over the scandals.

Many, including Deputy Prime Minister and Party Vice President Muhyiddin Yassin, have voiced concern that the scandals will end the 58-year reign of the ruling Barisan Nasional and UMNO, the longest continuing rule in the democratic world, in elections due in 2018. Mahathir has led the charge. Muhyiddin himself on March 20 called for the sacking of the entire board of the fund, 1Malaysia Development Bhd., and a police investigation onto their activities

In March, Najib pulled 160 of the 191 UMNO division leaders into a conclave in Kuala Lumpur to get them to swear fealty and ordered the Barisan press and public relations machinery into action to protect his flanks. He is aided by an extensive PR operation headed by Paul Stadlin, an American publicity agent.

Najib is partly protected by the fact that politically it would be almost unthinkable for a prime minister to come from any other party than UMNO, since a midseason poll that might bring the opposition to power is deeply unlikely, and there is no one in the party that would make a viable candidate. Muhyiddin reportedly made a run at Najib but backed off when he saw the prime minister was politically unassailable.

Some voices have been raised in favor of the 78-year-old Tengku Razaleigh Hamzah, who has been lost in the wilderness for nearly 30 years after he challenged Mahathir for the premiership in 1987 and lost. He remains an UMNO backbencher and occasionally makes speeches demanding reform of the party and Malaysia’s disastrous racial relations, but is largely ignored, even as a temporary unity candidate.

Nonetheless, unease has spread well outside of political circles into the general public. Najib and government officials have raised the ante with a string of arrests for sedition and violations of the Official Secrets Act, among others.

It is growing difficult, if not impossible, to contain the government’s presumed liability over 1MDB, the brainchild of Najib and his family friend, a young Penang-born Chinese named Taek Jho Low. The fund has a pretzel palace of RM42 million in liabilities and appears to be in deep trouble in meeting its obligations, selling off bits of property and other assets to meet debt repayment. There is widespread concern that the fund’s debts to government-owned and domestic banks are so big that they could threaten Malaysia’s entire financial system.

The original capital raising by Goldman Sachs for 1MDB was at rates that make other investment bankers gasp with envy. The bonds were sold at 5.9 percent interest although government loans usually attract interest about half that. Goldman also charged a 10 percent commission to set up the capital raising, far in excess of what investment banks usually charge.

The 10 percent commission meant that 1MDB gets only 90 percent of the money borrowed but must pay the interest on the full amount, raising the interest rate to 6.6 percent, resulting in an average yearly interest of RM 2.5 billion. Since 2009 there has been no income from all the assets.

With no income, 1MDB has been scrambling to sell off overpriced assets it acquired at the beginning of its operations, mostly in independent power operators. In a controversial sale, it divested a plot of land to the Lembaga Tabung Haji, a government-operated fund to send pilgrims to Mecca, at a price far in excess of its worth, raising concerns that it was a sweetheart sale to find a temporary solution to 1MDB’s payment problems.

At the same time, the Sydney Morning Herald, in an extensive story in early May, detailed its reporter’s meetings with Sirul Azhar Umar, a former Najib bodyguard sitting in a Sydney detention center in limbo after he was declared guilty in Malaysia of acting with another bodyguard in the 2006 murder of Altantuya, a 28-year-old international party girl who had a peripheral role in a billion-dollar scandal involving the purchase of French submarines by the Malaysian Ministry of Defense when Najib was defense minister. Sirul told the Herald he was acting under orders when he killed the woman, but that he would not reveal the name.

“The complex web of the 1MDB scandal has placed it as one of Malaysia’s biggest financial catastrophes. The money trail has been a maze, keeping the scandal snowballing beyond control, much to Prime Minister Najib Razak’s great peril,” wrote Cynthia Gabriel, Executive Director of the Kuala Lumpur-based Center to Combat Corruption & Cronyism. “Surely we recall with the same fervor, the Scorpene submarine Deal that was another multi-billion dollar purchase, reeking of corruption that scandalized the nation just prior to the last General Elections.”

Najib has been at the center of both scandals, Gabriel wrote.

Mahathir and the opposition, particularly Parti Keadilan Rakyat Secretary-General Rafizi Ramli and Democratic Action Party shadow minister for education, have been aided in their campaign against 1MDB and Najib with a sensational series of revelations by Clare Rewcastle Brown, the crusading blogger who runs the Sarawak Report.

According to those revelations, backed up by scores of emails that Brown somehow liberated from 1MB servers, hundreds of millions of US dollars were steered out of the fund for the personal use of Jho Low, as he is known. That allegedly included an insider trading conspiracy in which Low, with Najib’s backing, sought to flip the sale of shares of Malaysia’s RHB Bank owned by the Abu Dhabi Commercial Bank (ADCB), although two of Malaysia’s own banks CIMB and Maybank were in the process of seeking a merger with RHB. According to the emails, “Jho Low and his business partners, who were the UK based investor Robert Tchenguiz and the then Chairman of Abu Dhabi’s Aabar fund, Khadem Al Qubaisi, expected to profit by at least half a billion US dollars. This was to be at the expense of the Abu Dhabi public bank and the two Malaysian banks, expected to eventually buy the 25 percent share of RHB."

As a result of another batch of emails released earlier, Brown alleged that in 2011 1MDB steered another US$330 million to a company known as Good Star Ltd, controlled by Jho Low. In all, the Sarawak Report alleged, of US$1.5 billion already invested by 1MDB in in a shadowy oil exploration firm in the Middle East called PetroSaudi a total of US$860 million was secretly siphoned into Good Star’s RBS Coutts account in Zurich. Jho Low has repeatedly maintained that he has held no role in 1MDB and made no profit from its investment dealings, a statement that appears to be at odds with the facts.

Mahathir has been having his own field day, saying that “in the case of 1MDB the presentation to the Cabinet and approval by it seems to be unclear. There seem to be attempts to hide behind official secrecy. What we do know is that 1MDB has as its advisor the Prime Minister and Minister of Finance.”

He pointed out that three 1MDB CEOs have resigned without explanation.

“The government invested RM1 million [US$276,000] in 1MDB,” he continued. “According to known records 1MDB then borrowed from various sources RM42 billion. A company with RM1 million capital with no assets cannot borrow 42,000 times its capital with no collateral. That 1MDB is able to do so is because of government guarantees. In other words it is government which is borrowing the money. If 1MDB loses money, the government will bear the loss.” Yet 1MDB’s operations are not overseen by the government, he noted. He finished up by asking: “So where did the money go?”