8:26am PT by Eriq Gardner
'Wolf of Wall Street' Financier Challenges U.S. Government's 1MDB Seizures
In court papers quietly filed this past week, various entities connected to Red Granite Pictures co-founder Riza Aziz are attacking the U.S. government's attempt to seize real estate properties in the huge $1 billion action targeting alleged corruption of Malaysian public funds.
The Justice Department has touted the 1MDB case as its biggest kleptocracy case to date, but Aziz's lawyer, Matthew Schwartz, a former assistant U.S. attorney who once prosecuted Bernie Madoff, slams the U.S. government for failing to include "essential detail" about the supposed crimes. He's demanding a dismissal.
Aziz is the stepson of Malaysian Prime Minister Najib Razak and, along with Joey McFarland, founded Red Granite, which financed The Wolf of Wall Street, Dumb and Dumber To and Friends With Kids.
Back in July, the Justice Department made its big move by seeking the civil forfeiture of rights to Wolf of Wall Street, Martin Scorsese's Oscar-nominated film, as well as other assets allegedly traced to foreign corruption.
According to the government, high-level officials in Malaysia diverted assets into a fund called 1Malaysia Development Berhad (1MDB) and then into shell companies with the assistance of big banks, including Goldman Sachs. Some of the money, it' is asserted, went into Red Granite productions, and now the government is looking to claw proceeds.
Later this month, Red Granite is due to file its response to the government's attempt to seize rights to Wolf of Wall Street, and, in advance of this, Aziz's lawyers have foreshadowed the line of attack in motions to dismiss separate complaints filed over real estate property in Beverly Hills, New York and London.
Aziz, through his holdings, presents himself as an "innocent owner" of properties.
"The alleged beneficial owner of the Claimant (and therefore the defendant property), Riza Aziz, is neither alleged to have participated in any transactions involving 1MDB nor even to have knowledge of any transactions involving 1MDB — let alone knowledge of any supposed misappropriation," states his court papers (see here).
The motion continues, "Thus, even taking the Complaint’s allegations at face value, Mr. Aziz plainly did not engage in a money laundering transaction or any other offense. But without identifying the person or persons the Government believes to be culpable, it is impossible to test the adequacy of the Government's allegations..."
Schwartz is opening up several areas of attack besides asserting the government has failed to allege with specificity Aziz's involvement in transactions.
The attorney asserts the government has failed to allege that anyone committed a crime, comparing the 1MDB case unflatteringly to the way the U.S. once seized Michael Jackson memorabilia from the son of the president of Equatorial Guinea.
"To be sure, [the government's complaint] alleges an 'international conspiracy to launder money misappropriated' from 1MDB — but it fails to identify the alleged co-conspirators, or the allegedly criminal acts," states the motion in the case over Beverly Hills property. "At best, it at various points asserts that '1MDB officials and others misappropriated and fraudulently diverted' money. Given that the Complaint identifies multiple relevant 1MDB officials, however, this allegation (which is, of course, purely conclusory) provides no guidance."
Schwartz acknowledges the funds were plainly not used for the benefit of a public official in Malaysia, but asks which public official did the alleged misappropriation, who directed payments and how does it constitute wire fraud?
The government is also being attacked for not adequately alleging an offense against a foreign nation.
Separately, the judge is being asked to dismiss the government's complaint under the "act of state" doctrine, which stands for U.S. courts not questioning the validity of other sovereigns. It's noted that the Malaysian attorney general has closed an investigation and concluded no criminal conduct occurred. That public official may have not wanted to do anything embarrassing to Prime Minister Razak. Nevertheless, Aziz is using it.
"[T]he Government's entire theory of the case presupposes that the Malaysia Attorney General's findings are factually and legally invalid," states the court papers. "There is therefore no way for this litigation to proceed without a ruling from this Court on whether the Malaysian Attorney General's sovereign functions were illegitimate."
Finally, in an effort to protect assets allegedly intended to conceal embezzlement, Schwartz is faulting the U.S. government with failing to come forth with allegations of knowledge of wrongdoing.
"According to the Complaint, Mr. Aziz was not involved in any transaction with 1MDB and was not involved in any conversation or written exchange concerning 1MDB whatsoever," writes Schwartz. "Indeed, the face of the Complaint offers no basis to infer that Mr. Aziz had even heard of 1MDB at the time of these transactions."