The banks knew. The auditors knew. Yet the dirty money continued to flow freely. And so over 4.5 billion dollars of government money was stolen from the Malaysian sovereign wealth fund 1Malaysia Development Bhd (1MDB). Originally established to fuel economic development projects for the betterment of Malaysian citizens, the fund was instead used to launder money that passed into the global financial system. The pilfered money was diverted for the benefit of a small circle of jet-setting, art-dealing, partygoing elites and their opulent lifestyle in what has been termed “the largest financial heist in history.”
“This is an incredible story. One that shouldn't have happened,” said Tom Wright, winner of the 2020 Shorenstein Journalism Award, opening his keynote address at the award ceremony. In his former role as the Asia economics editor for the Wall Street Journal, Wright led the multiyear reporting project that exposed the 1MDB scandal. The investigation shows the degree to which Western institutions and companies — from Goldman Sachs to Big Four auditors and Manhattan lawyers — will turn a blind eye to malfeasance in the pursuit of profit.
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Speaking at the Shorenstein Award’s nineteenth annual discussion, which was held virtually due to COVID-19, Wright detailed the 1MDB story and its beginning with an unknown Chinese-Malaysian Wharton graduate named Jho Low, who allegedly set in motion a fraud of unprecedented scope and magnitude. An epic true-tale of corruption and greed involving heads of state and Hollywood stars and enabled by a raft of Western institutions, the story is the subject of Wright’s coauthored bestseller Billion Dollar Whale, based on his years of reporting on the scandal for the Wall Street Journal. Mr. Low, who was indicted by U.S. authorities and by prosecutors in Malaysia, remains at large. He has denied any wrongdoing.
Wright’s exposure of the scandal has reverberated around the world. It was read by millions of people in Malaysia and sparked popular revulsion with the corrupt government of Prime Minister Najib Razak, leading to his shocking election loss in 2018. Wright’s revelations also shook the global financial system, underpinned investigations by law enforcement and regulators in six countries, and unveiled flaws of China’s Belt and Road signature program.
“Tom Wright’s work represents the essence of accountability journalism,” said Jay Hamilton, the Hearst Professor of Communication, Chair of the Department of Communication, and Director of the Journalism Program at Stanford, who also serves as a member of the selection committee for the Shorenstein Journalism Award. “Wright takes the time, often enumerated in months or years, to discover facts about how institutions are operating. When his work is published, the world changes, debates ensue, individuals lose jobs or an election, policies are corrected, and there are people, often in Asian governments and Western companies, who wish they had done a better job of keeping their corruption secret.”
Wright is honored with the Shorenstein Journalism Award for his stellar reporting done over 25 years, mainly in South and Southeast Asia. A theme running through Wright’s work is the blight of corruption in Asia, abetted by Western organizations. In 2008, his investigation revealed how Indian wind turbine producer Suzlon, backed by U.S. investors, was hiding technology defects that made its turbines unsafe, leading to a collapse in the company’s shares. In 2011, he broke new ground reporting about the Obama administration's multibillion-dollar civilian aid program in Pakistan. He was one of the first journalists to arrive at the scene of the raid in which Navy SEALs killed Osama bin Laden. And in 2013, Wright spearheaded the coverage of the Rana Plaza factory disaster in Bangladesh, which killed over 1,000 people, exposing how international garment manufacturers turned a blind eye to safety violations to keep costs down.
Five years after the 1MDB story came to light, however, almost no one has gone to jail. In Malaysia, Najib Razak was sentenced to 12 years in jail but is now in the process of appealing the case and continues to campaign in the meantime. In July 2020, Goldman Sachs reached a $2.5 billion settlement with the Malaysian government to resolve all criminal and regulatory proceedings in the country involving the firm, and on October 19, 2020, a day before the Journalism Award discussion, it was announced that the firm had reached a $2.2 billion settlement with the U.S. Department of Justice. While the penalties will cost the firm about two-thirds of a year’s profits, Goldman will avoid the harshest sanctions that prosecutors had sought. And while a Singapore-based Goldman subsidiary tied to the misconduct was expected to plead guilty, no one at the parent firm will face criminal charges.
“I don't think any of this is going to deter the kind of behavior that enabled this scandal,” said Wright. “Goldman just had a record-profit quarter and, astoundingly, in my view, there is no criminal liability […] We’re seeing democracy challenged around the world and, having spent so long on the 1MDB scandal, I feel very strongly that this kind of enabling behavior by Western institutions in foreign countries with poor rule of law is one of the reasons why democracy is so badly rooted in these places. Western institutions need to be held accountable for their actions in these countries.”
Wright’s discussion was followed by a conversation with Meredith Weiss, professor and chair of Political Science at the University at Albany, SUNY. Weiss has published widely on the politics of identity and development, electoral politics and parties, organizational reform, and subnational governance in Southeast Asia, with particular focus on Malaysia and Singapore. Her current research projects include studies focused on “money politics” and on democratic representation and political elites in Southeast Asia, as well as a monograph on Malaysian sociopolitical development.
In their conversation, Wright and Weiss addressed issues including the implications of current political trends in Southeast Asia for supporting or dismantling systems for accountability or anti-corruption, China's role in enabling corruption, how an international media outlet like the Wall Street Journal was able to carry forward the 1MDB story, the role of investigative journalism in battling endemic corrupt practice, and how the shifting media landscape — especially in the context of social media, changes in media freedom around the world, and the rise of “fake news” — affect this role in shedding light on corruption.
“It’s very important that journalists don't become pulled into the latest political trend,” said Wright. “And it's a very difficult fine line to balance. I think investigative journalism is in trouble. By the way, journalists don't call themselves ‘investigative journalists’ — we are just journalists who do our work, and if we're lucky enough to come across a big story, then so be it. But you need bosses [like I had at the Journal], who give you the space to do that kind of work, even though you don't necessarily sell more newspapers and more online subscriptions because of it.”
There have been some positive changes following the lessons learned from the IMDB scandal, such as pilot projects in the United States and in London to stop cash purchases from shell companies. Yet it is still too easy to get around such measures, said Wright. He concluded the discussion on a rather somber note, recognizing that the prospects for large-scale change are not bright. “If you've lived and worked in Asia, you know you can shake a stick in any direction and you’ll find corruption. What I learned through the process of working on the 1MDB story was just how complicit foreign institutions are in all of this. I guess I had a naive view, thinking that they had a higher standard of behavior. What I learned was that they only have a higher standard of behavior when there are rules in place to stop them from behaving badly. Maybe things can change, but I don't feel so optimistic about it.”
“This is an existential moment for global power structures, turned upside down by technology.