‘Obscenely greedy’ oil executives handed Swiss jail terms for role in 1MDB fraud

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

A Swiss court has sentenced two former PetroSaudi executives to lengthy jail terms for their roles in the collapse of Malaysia’s sovereign fund 1MDB, in one of the biggest frauds of all time. 

Tarek Obaid, the ex-chief executive of Geneva-based oil production company PetroSaudi, and his right-hand man Patrick Mahony were found on Wednesday to have been responsible for embezzling more than $1.8bn from 1MDB.

They were also found guilty of almost 600 acts of money laundering, in which they sought to disguise the stolen origins of more than $12bn for the fraud’s alleged mastermind Jho Low and accomplices.

Under Swiss law, the judgment from the country’s central criminal court will not have full legal force until the defendants have exhausted their rights of appeal.

The court in Bellinzona found that the pair used their leadership positions at PetroSaudi to execute three of the most brazen thefts in the long-running plunder of 1MDB, acting in concert with Low in his position as an unofficial but powerful adviser to the sovereign fund. 

Low, a close confidant of former Malaysian prime minister Najib Razak and the alleged mastermind of the 1MDB fraud — described by the US Department of Justice in 2016 as the world’s biggest ever kleptocracy case — is still on the run. 

Najib was jailed by Malaysian authorities for his role in the scandal in 2020.

Obaid, a dual Swiss-Saudi national, and Swiss-Briton Mahony helped steal vast sums from 1MDB between 2009 and 2011, Swiss prosecutors said. They were indicted in April last year.

The two were said to have used the stolen money to fund ultra-luxurious lifestyles, buying gemstones and properties in London and Geneva, and splashing huge sums on private jets and high-end yachts.

It was the “scam of the century”, said lead prosecutor Alice de Chambrier. Obaid and Mahony were “calculative, manipulative and obscenely greedy”, she told the court earlier this year, according to Swiss national press agency Keystone-ATS.

Judges heard how the two, together with Low, misled 1MDB fiduciaries in 2009 so that the fund invested $1bn in what it thought was a legitimate joint venture with PetroSaudi.

A meeting was even brokered in August that year on a super yacht, the Alfa Nero, off the coast at Cannes with PetroSaudi’s founder, Prince Turki bin Abdullah al Saud — who was not aware of the true nature of the transaction — to lend the deal an air of legitimacy, according to the prosecutors’ indictment.

In a second theft, Obaid and Mahony drew down a further $500mn from 1MDB in 2010 for what they claimed was an Islamic loan.

In a third, in May 2011, they took $330mn to finance a “non-existent drilling project in eastern Saudi Arabia”, the indictment claimed.

Judges handed down sentences of seven years to Obaid and six years to Mahoney.

“The court found that a custodial sentence was required . . . taking into account the very high amounts involved, the intensity of the criminal activity [and] the selfish motive,” the court said in a statement.

Daniel Zappelli, Obaid’s lawyer, said his client had “always contested the commission of any offence and will plead for a full acquittal before the Court of Appeal”.

Mahony’s lawyer did not immediately respond to a request for comment.

The board of 1MDB said: “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, and we commend the Swiss authorities for their work securing these convictions.”