FATAL BOMBSHELL - CAN NAJIB SURVIVE THE WEEK AS PM? 1MDB MONEY CONFIRMED DIVERTED TO HELP SON RIZA AZIZ MAKE HOLLYWOOD MOVIE

LOS ANGELES - Despite the star power of Leonardo DiCaprio and director Martin Scorsese, the 2013 hit movie “The Wolf of Wall Street” took more than six years to get made because studios weren’t willing to invest in a risky R-rated project.

Help arrived from a virtually unknown production company called Red Granite Pictures. Though it had made just one movie, Red Granite came up with the more than $100 million needed to film the sex- and drug-fueled story of a penny-stock swindler.

Global investigators now believe much of the money to make the movie about a stock scam was diverted from a state fund 9,000 miles away in Malaysia, a fund that had been established to spur local economic development.

The investigators, said people familiar with their work, believe this financing was part of a wider scandal at the Malaysian fund, which has been detailed in Wall Street Journal articles over the past year.

The fund, 1Malaysia Development Bhd., or 1MDB, was set up seven years ago by the prime minister of Malaysia, Najib Razak. His stepson, Riza Aziz, is the chairman of Red Granite Pictures.

The 1MDB fund is now the focus of numerous investigations at home and abroad, which grew out of $11 billion of debt it ran up and questions raised in Malaysia about how some of its money was used.

Leonardo DiCaprio as a partying Jordan Belfort in a scene from the 2013 film ‘The Wolf of Wall Street.’ PHOTO: PARAMOUNT PICTURES/EVERETT COLLECTION

Investigators in two countries believe that $155 million originating with 1MDB moved into Red Granite in 2012 through a circuitous route involving offshore shell companies, said people familiar with the probes. This same money trail also is described by a person familiar with 1MDB’s dealings and supported by documents reviewed by the Journal.

The story of how “The Wolf of Wall Street” was financed brings together Hollywood celebrities with a cast of characters mostly known for their connections to the Malaysian prime minister. It detours through parties in Cannes and aboard a yacht, and spending on such embellishments as a rare, million-dollar movie poster and an original 1955 Academy Award statuette.

The U.S. Federal Bureau of Investigation has issued subpoenas to several current and former employees of Red Granite and to a bank and an accounting firm the company used, according to people familiar with the subpoenas.

“Red Granite is responding to all inquiries and cooperating fully,” said a spokesman for the company, based in West Hollywood, Calif. He said it had no reason to believe the source of its financing was irregular.

The 1MDB fund and Mr. Najib’s office didn’t respond to questions about Red Granite. In the past, both have denied any wrongdoing. Representatives of Messrs. DiCaprio and Scorsese didn’t respond to numerous requests for comment.

The film grossed about $400 million and was nominated for five Academy Awards, including best picture. There is no indication any profits from it flowed to 1MDB or Malaysia.

Producer Riza Aziz, left, and actors Leonardo DiCaprio and Margot Robbie arriving for the U.K. premiere of ‘The Wolf of Wall Street’ in London in 2014. PHOTO: PAUL HACKETT/REUTERS

The movie, heavy on depictions of Wall Street debauchery, wasn’t distributed in Malaysia after authorities there demanded more than 90 cuts to comply with local morality laws, a Malaysian official said.

Red Granite Pictures was set up in 2010 by Mr. Aziz, the Malaysian prime minister’s stepson, now 39 years old, and  Christopher McFarland, a Kentucky businessman who is 43.

Mr. Aziz had worked in finance in London, left to travel and ended up in the U.S., he once told the Hollywood Reporter. Mr. McFarland, called Joey, invested in various ventures and moved to Hollywood to try to make movies, people who know him say.

The two were introduced by a mutual friend: a peripatetic Malaysian businessman named Jho Low, who became a fixture on the party circuit in Los Angeles, Las Vegas and New York starting in 2009. Mr. Low gained media attention for a lavish lifestyle that brought him into the orbit of celebrities such as Paris Hilton and Lindsay Lohan.

Mr. Low knew Mr. Aziz from the U.K., where both had studied, and forged ties to Mr. Aziz’s family, including Prime Minister Najib. In Malaysia, Mr. Low, whose full name is Low Taek Jho and who is 34, played a role in setting up the fund that became 1MDB.

Messrs. Aziz and McFarland worked for a time out of L’Ermitage Beverly Hills, a luxury hotel owned by a company Mr. Low founded. The aspiring movie moguls later set up an office on Sunset Boulevard that they filled with Hollywood memorabilia.

These included a poster for the 1927 Fritz Lang science-fiction film “Metropolis,” a rare original that cost $1 million, said people familiar with it.

Red Granite burst on the scene in 2011 by throwing a million-dollar beach extravaganza at the Cannes film festival with fireworks and performances by Kanye West, dressed all in white, and Pharrell Williams. A few months later its first movie was released, “Friends With Kids,” starring Adam Scott and Kristen Wiig.

“They definitely came off as high rollers when they started,” said Howard Cohen, co-president of Roadside Attractions, the distributor of Red Granite’s first film.

Riza Aziz, Joey McFarland and Jho Low. PHOTO: MATTEO PRANDONI/BFA

In the insular movie business, many were surprised to find the high-energy but inexperienced Mr. McFarland overseeing dealings with filmmakers. “Joey is their mouthpiece, and Riza—he said maybe 20 words to me,” said Charles Wessler, a producer of a later Red Granite-backed film.

Messrs. Aziz and McFarland next turned their attention to “The Wolf of Wall Street.” Mr. Low, the Malaysian financier, made a key connection: He knew Mr. DiCaprio and introduced him to Red Granite, according to people familiar with the introduction.

Mr. DiCaprio had long been interested in a movie based on the memoirs of a penny-stock operator who went to prison for fraud, Jordan Belfort. But the actor and other boosters couldn’t find a studio that believed a film so expensive and potentially offensive would find a big enough audience.

Red Granite was willing to take the risk.

Shooting began in August 2012. Three months later, when Mr. DiCaprio had a birthday, the Red Granite principals forged a closer tie to him with an unusual gift: the Oscar statuette presented to Marlon Brando in 1955 for best actor in “On the Waterfront.” People who described the gift said the statuette had been acquired for around $600,000 through a New Jersey memorabilia dealer.

Marlon Brando’s 1955 Oscar for ‘On the Waterfront’ was presented as a gift to Leonardo DiCaprio.PHOTO: ASSOCIATED PRESS

Mr. Aziz, asked about Red Granite’s financing in a 2014 New York Times interview, identified the main investor as a businessman in Abu Dhabi named Mohamed Ahmed Badawy Al-Husseiny. “There was no Malaysian money,” he said.

Mr. Al-Husseiny is an American who then headed Aabar Investments PJS, which is an arm of an Abu Dhabi sovereign-wealth fund known as IPIC. The state-owned firms did business with 1MDB. For instance, IPIC guaranteed some of the Malaysian fund’s bonds.

In connection with the IPIC guarantees, 1MDB reported in corporate filings that in 2012, it sent $1.4 billion to Aabar as collateral.

Investigators believe this money never got to Aabar in Abu Dhabi but went instead to a separate, almost identically named company that Mr. Al-Husseiny had helped set up in the British Virgin Islands, called Aabar Investments PJS Ltd., said people familiar with the probes.

The investigators believe about $155 million of this money then flowed to Red Granite Capital, a firm Mr. Aziz had formed to fund the film company.

Documents reviewed by the Journal show three transfers to Red Granite Capital: of $60 million, $45 million and $50 million in 2012.

The $60 million and $45 million transfers were booked by Red Granite Capital as a loan from the British Virgin Islands company that had a name almost identical to Aabar Investments.

Most of the $50 million moved to Red Granite from that same British Virgin Islands company, via intermediaries, the investigators believe.

Among the intermediaries, according to people familiar with investigations and the person familiar with 1MDB: Telina Holdings Inc., a company that had been set up in the British Virgin Islands by Mr. Al-Husseiny and his boss, Khadem Al Qubaisi.

Representatives of the two men, who have been removed from their posts in Abu Dhabi, declined to comment.

Financing ‘The Wolf of Wall Street’

The 2013 Leonardo DiCaprio film came from little-known Red Granite Pictures. Investigators of a Malaysian state fund called 1MDB believe much of the film’s financing originated there and moved circuitously to Red Granite.

Note: Red Granite has said these were loans that are being repaid and that the $50 million is already repaid.

Sources: Malaysia’s Attorney General; people familiar with investigations

A November 2012 loan agreement from Telina Holdings, reviewed by the Journal, shows the $50 million was to fund “The Wolf of Wall Street.” This loan has been repaid, said people familiar with it.

The spokesman for Red Granite said it “has been repaying and will continue to repay all of its loans in accordance with their terms.”

It isn’t clear to whom Red Granite could repay the $105 million loan. The British Virgin Islands firm that extended it was liquidated last June.

“Red Granite had no reason to believe at the time that the source of Aabar’s funds was in any way irregular and still believes the loan to be legitimate,” said the film company’s spokesman.

Once “The Wolf of Wall Street” was in production, Messrs. Aziz and McFarland were sometimes on the set and involved.

On Dec. 31, 2012, around the end of filming, many of those involved celebrated New Year’s festivities in Australia and then flew to Las Vegas on a rented jetliner in time to celebrate it again, according to people familiar with the trip, who said the celebrants included Messrs. Aziz and Low, “Wolf of Wall Street” stars Mr. DiCaprio and Jonah Hill, along with singer and actor Jamie Foxx, an acquaintance of Mr. Aziz. A representative of Mr. Foxx declined to comment. A spokeswoman for Mr. Hill didn’t respond to a request for comment.

Six months after the movie’s debut, Messrs. DiCaprio, Aziz and Low attended the Brazilian World Cup and spent time on the Topaz, a 482-foot yacht owned by Sheikh Mansour Bin Zayed Al Nahyan, chairman of the Abu Dhabi sovereign-wealth fund IPIC, according to people familiar with the excursion. Sheikh Mansour, who is also deputy prime minister of the United Arab Emirates, didn’t attend, they said.

The success of “The Wolf of Wall Street” established Red Granite as a player in Hollywood. It went on to produce “Dumb and Dumber To,” a sequel to the 1994 Jim Carrey and Jeff Daniels comedy, and another comedy, “Daddy’s Home,” with Will Ferrell and Mark Wahlberg. It is planning to bring out a film about George Washington.

Leonardo DiCaprio in a scene from ‘The Wolf of Wall Street.’ PHOTO: PARAMOUNT PICTURES/EVERETT COLLECTION

Investigations of 1MDB “will not affect our ability to move forward with the exciting projects Red Granite is developing,” the firm’s spokesman said. - WSJ