Najib lawyers challenge journal on Malaysia money trail reports

[KUALA LUMPUR] Lawyers for Malaysian Prime Minister Najib Razak sent a letter to the Wall Street Journal as police announced an investigation over the newspaper's reports that public funds allegedly ended up in the premier's bank accounts.

The legal letter relates to two reports by the newspaper this month that about US$700 million may have moved through government agencies and companies linked to debt-ridden state investment company 1Malaysia Development Bhd before apparently appearing in Mr Najib's personal accounts.

The legal letter criticizes the Wall Street Journal's reports and asks the newspaper to clarify if it is alleging Mr Najib was involved in the misappropriation of funds related to 1MDB, according to a copy obtained by Bloomberg News. The letter is from law firm Hafarizam Wan & Aisha Mubarak.

"This is not a straightforward legal case due to national and international imputations," Wan Azmir Wan Majid, a partner at the law firm, said in a statement. "We have been instructed to identify facts and lay full facts before our client is able to proceed with further instructions."

"Once our client has obtained all the necessary facts and the position of the WSJ is ascertained, we have strict instructions to immediately exhaust all legal revenues and remedies."

As a result of the WSJ reports, police are separately starting a probe under the computer crimes act over the possible release of details related to the alleged fund transfers, police chief Khalid Abu Bakar said on Wednesday in a mobile phone text message.

"We stand behind our fair and accurate coverage of this evolving story," Wall Street Journal publisher Dow Jones & Co said in an e-mailed response.

A task force said on Tuesday it ordered a freeze on six bank accounts believed linked to the money trail. The team obtained documents related to 17 accounts from two banks, the attorney general's office said in a statement issued jointly with the central bank, police and anti-corruption commission. The statement didn't name the banks or say who the accounts belong to.

The crisis is the biggest to hit Mr Najib since he came to power in 2009 and has contributed to a fall in the ringgit. His deputy has called for the claims against him to be fully investigated, and the allegations come as Najib's popularity with voters has declined amid concern over his handling of the economy.

The ringgit was little changed on Wednesday after it weakened below the 3.8 a dollar level this week at which it was pegged from 1998 to 2005. The benchmark FTSE Bursa Malaysia KLCI Index dropped 0.8 per cent, joining a slump in Asian stocks as Chinese shares extended a rout.

Mr Najib retains broad support among division heads alongside rank and file members of the ruling coalition, and some ministers have publicly backed him, saying the probe should be allowed to run its course. The task force has given no indication of how long its investigation will take. It conducted raids on July 3 on the premises of three companies linked to the funds.

Financial woes at 1MDB led it in February to announce plans to wind down much of its business. A month later the government ordered the Auditor-General to verify 1MDB's accounts, and Najib asked investigators to expedite the process in May. The Auditor- General said last week it completed an interim report and will submit it on July 9 to a parliamentary committee that's also probing 1MDB.

Najib has called the claims he received funds part of a campaign of political sabotage aimed at ousting him.

National Security

While Deputy Prime Minister Muhyiddin Yassin has called on Najib to give a convincing explanation or denial, Home Minister Ahmad Zahid Hamidi has said attempts to undermine a serving leader may be a risk to national security, while Defense Minister Hishammuddin Hussein said it's reckless to criticize Najib as the truth has not been determined.

Senior members of the government are united behind Najib, Youth and Sports Minister Khairy Jamaluddin told reporters on Wednesday in Putrajaya after the premier met with the Cabinet.

"Cabinet ministers were very united and want the due process to take place, which is currently being investigated by the task force," he said. "It's too premature to comment on stepping aside and there was no such calls from the ministers."

In other countries, political leaders would step down from their position and apologize for such a scandal, former premier Mahathir Mohamad, one of Mr Najib's most outspoken critics, said in a blog post Tuesday.

"Only in Malaysia there are people who defend their leader without reason, only to preserve their own position," he said. Mahathir, 89, who led the country for more than 20 years until 2003, has repeatedly called for Najib to resign in recent months, prompting a public rebuke from Najib.

BLOOMBERG