Net closes on Malaysia's Najib over 1MDB scandal after poll loss

The net tightened on toppled Malaysian prime minister Najib Razak as the new government on Monday placed on leave a controversial figure seen as his protector in a multi-billion-dollar graft scandal. Najib's Barisan Nasional (BN) coalition last week suffered a shock defeat to an alliance of parties headed by the elderly Mahathir Mohamad, ending the corruption-mired regime's six decades in power. Voters turned out en masse to oust Najib, angered at rising living costs, divisive racial politics in the Muslim-majority country and allegations of endemic graft among the country's ruling elite. The 92-year-old Mahathir -- who ruled Malaysia for two decades until 2003, and came out of retirement to take on Najib -- is now the world's oldest state leader. He officially got down to work as prime minister Monday, holding meetings with top civil servants and receiving his first official visitor, Brunei's Sultan Hassanal Bolkiah. Najib became a hugely unpopular figure over his alleged involvement in plundering huge sums from Malaysian sovereign fund 1MDB in a sophisticated fraud that is now being investigated in several countries. The US State Department alleges that at least $4.5 billion dollars were looted from the fund, and funnelled to the United States where it was used to buy everything from artwork to high-end real estate and a luxury yacht. Both Najib and 1MDB deny any wrongdoing. A total of $681 million also mysteriously appeared in Najib's personal bank accounts in 2013 just ahead of a hotly-contested election. He was later cleared by Attorney-General Mohamed Apandi Ali, who said the money was a personal donation from the Saudi royal family, and ordered the closure of domestic probes into the scandal. Mahathir, however, said in a press conference that the attorney-general was taking leave. "There have been lots of complaints against the attorney-general. On that basis we gave him a holiday," he said. "When he is on leave, the solicitor-general will cover his job as the attorney general." He added that once an investigation had been carried out, Apandi could be suspended and banned from leaving the country. - Markets shrug off result - Apandi -- who has ties to the United Malays National Organisation (UMNO), the main party in the BN coalition -- came to office after Najib sacked the previous attorney general, who was believed to be aggressively investigating the matter. Mahathir has vowed that "heads must fall" in government bodies suspected of colluding in corruption, and on Monday the head of the Malaysian Anti-Corruption Commission -- which had targeted critics of Najib -- resigned. A former intelligence and investigations director from the commission also lodged a report with the body, accusing Najib of seeking to prevent investigations into 1MDB. Markets opened Monday for the first time since last week's polls but did not fall as heavily as had been anticipated after Mahathir sought in a weekend speech to calm investors. Stocks initially lost 2.7 percent but quickly won back ground and closed 0.2 percent higher. Local currency the ringgit was steady against the dollar. - Travel ban - But it has not been all smooth sailing since the historic win, with concerns over the slow formation of the cabinet as different parties in the winning alliance jostle for positions. Mahathir appointed three ministers at the weekend despite previously having said he would name 10 cabinet members. Jailed politician Anwar Ibrahim, Mahathir's nemesis-turned-ally, issued a statement Sunday insisting his People's Justice Party (PKR) still supported the new premier after a senior figure from the group said the cabinet appointments were made without their consultation. Anwar, in jail on sodomy charges his supporters say are trumped up, had been widely expected to be freed on Tuesday, paving the way for him to eventually become premier. But his party said that the prime minister's office had informed them an official committee that issues pardons -- and would sign off on his release -- would now be meeting on Wednesday, without explaining why. Mahathir also faced criticism for saying that a controversial law passed before the election that punishes "fake news" with up to six years in jail would be reviewed rather than revoked. He said that it would be given a clear definition but that there was a "limit" to press freedom, despite having pledged during the election campaign to abolish it. -- Bloomberg News contributed to this report -- Najib Razak's Barisan National coalition suffered a shock defeat at the Malaysian elections Mahathir has vowed that "heads must fall" in government bodies suspected of colluding in corruption Malaysian voters turned out en masse to oust Najib, angered at rising living costs, divisive racial politics and allegations of widespread corruption