INDONESIA’S decision to give Malaysia the luxury yacht Equanimity, allegedly bought with funds embezzled from 1Malaysia Development Bhd, could complicate the US’ claims to assets bought in the fraud.

The Singapore Sunday Times reported that the yacht is due to be handed over to Malaysian officials near Batam Island tomorrow.

It said the proposed handover comes on the heels of the seizure of the US$260 million (RM1 billion) Cayman Island-registered vessel by a 13-member Indonesian police team and three Malaysian officials in Bali on Thursday.

A senior Malaysian government official, who insisted on anonymity, confirmed to Sunday Times that both governments had agreed to the handover of the vessel, which has won awards at the prestigious Monaco Yacht Show.

But, the official declined to comment when pressed whether the proposed handover would be in conflict with an earlier claim over the asset by the US Department of Justice.

Sources from among the yacht crew controlled by DoJ via international yacht management company Wilson Yacht Management (WYM) confirmed that they had lost control of the yacht when Malaysian authorities, accompanied by Indonesian authorities, gave instructions insisting that the vessel sail to Batam, contradicting US court rulings that control of the yacht is to be handed over to DoJ and the yacht sailed back to the US.

Since mid-2016, DoJ has filed civil suits to seize almost US$2 billion in assets allegedly bought with money stolen from 1MDB, including mansions, a Bombardier jet, and royalties from the film The Wolf of Wall Street.

Equanimity is the largest single asset in the DoJ list, and is allegedly owned by businessman Low Taek Jho, or Jho Low as he is known, whom DoJ and Dr Mahathir Mohamad’s government insist was highly instrumental in the money laundering scam at 1MDB that was allegedly sanctioned by the previous administration led by ousted prime minister Najib Razak.

The vessel was seized in Bali in February by Indonesian police on behalf of US regulatory authorities, prompting its official owner, Equanimity Cayman Ltd, to challenge the seizure.

In April, a Jakarta high court ruled that the widely publicised seizure of the 92m yacht was illegal and without merit.

DoJ contested the claim in a Los Angeles court and secured an order that Equanimity Cayman must hand control of yacht to the US agency, pending the sale of the contested asset.

All monies from the sale would then be deposited in an escrow account until the outcome of all civil cases in the US.

A spokesman for Low’s legal team told Sunday Times that the seizure was a “violation of the Indonesian law and court”.

The spokesman said the actions by Dr Mahathir’s administration also went against “recent US court orders”, and that DoJ has insisted it should have possession of Equanimity to ensure the “asset retains its value until a fair court hearing can determine final ownership and the rights of all parties involved”.

DoJ officials were not immediately available for comment.

Financial executives and senior government officials in Malaysia said Dr Mahathir made the request for the vessel’s handover in talks with Indonesian President Joko Widodo in Jakarta during the prime minister’s official visit last month. That led to the seizure of the vessel on Thursday.

At the time of the seizure, Equanimity was already under the control of DoJ, which had earlier replaced the crew employed by the official Cayman-registered owner with a specially appointed team from WYM, said financial executives close to the situation.

WYM’s office in the US did not respond to requests for comment.

Financial executives in the know said the company has been engaged by DoJ to handle the yacht’s running costs, estimated at US$1.15 million a month.

It is understood that any sale by Putrajaya still means the proceeds would have to go into the DoJ escrow account due to the agency’s claim over the yacht. Also, the legal owner of the yacht is a Cayman entity, and the island’s courts have ruled that only the US can determine the process of the sale.

Apart from that, Putrajaya will have to bear the cost of maintaining the yacht once the vessel comes into its possession, until any possible sale.

In a media statement, Low’s lawyer, James F. Haggerty, said the transfer of the yacht would be a violation of court rulings in both Indonesia and the US.

“The action of the Mahathir government in illegitimately taking this asset shows just how quickly the rule of law disappears in Mahathir’s regime.

“As he did in Malaysia’s 1988 judicial crisis, Dr Mahathir is showing the world that his new regime still has no interest in the rule of law.”

The crisis refers to the dismissal of then lord president Salleh Abbas during Dr Mahathir’s first tenure as prime minister.

Dr Mahathir has denied responsibility for the sacking, pushing the blame onto the Yang di-Pertuan Agong at the time.

Haggerty also said Low was compelled to issue a statement on the latest developments as he would “inevitably be drawn into the media coverage over this illegal seizure by the Malaysian government”. – August 5, 2018.