By Joseph Sipalan and Julia Fioretti
KUALA LUMPUR/HONG KONG (Reuters) - A lawyer representing former Malaysian prime minister Najib Razak was charged with money laundering on Thursday, as anti-corruption agents try to retrieve billions of dollars siphoned off from a scandal-plagued state fund.
The charges against Muhammad Shafee Abdullah come as a blow for Najib who is fighting charges of criminal breach of trust, money laundering and abuse of power at a former unit of state fund 1Malaysia Development Berhad (1MDB).
Prime Minister Mahathir Mohamad's government, which came to power after a surprise win in elections in May, also acknowledged that the 1MDB fraud investigation was going much more slowly than had been expected, and that "realistically" it was looking at getting back 30 percent of the misappropriated funds.
Shafee pleaded not guilty to two counts of money laundering at a court in Kuala Lumpur after allegedly receiving 9.5 million ringgit (1.7 million pounds) from Najib. He also faces two charges of false income tax declaration.
Prosecutor Gopal Sri Ram said the case was part of the 1MDB investigation but didn't say if the money allegedly received by Shafee was from the fund.
The charge sheet claims Shafee received the money through cheques from Najib in 2013 and 2014.
Shafee's opponents say the money was paid in return for leading the prosecution against Anwar Ibrahim, the president of Parti Keadilan Rakyat (PKR) party, who was imprisoned in 2015 on sodomy charges. Shafee denies the claim.
Anwar was released in May and is now the prime minister in-waiting.
Shafee's bail was set at 1 million ringgit ($241,400). He faces a maximum jail term of five years, a fine of five times the alleged amount or 5 million ringgit whichever is higher,
or both, if found guilty of money laundering.
1MDB is at the centre of money-laundering probes in at least six countries, including the United States, Switzerland and Singapore. A total of $4.5 billion was misappropriated from 1MDB by high-level officials of the fund and their associates, according to the U.S. Department of Justice.
Malaysia reopened the probe into 1MDB after Najib, who chaired the fund's advisory board, was defeated by Mahathir in the May election.
Najib has pleaded not guilty to abuse of power and other charges arising the 1MDB investigation. His trial starts on Feb 12.
Mahathir has vowed to punish people responsible for the 1MDB scandal and also to get back all the misappropriated funds.
Singapore returned 1MDB funds worth $11.1 million to Malaysia last week, Malaysia also got back a $250 million super yacht.
But Malaysia's finance minister said that recovery of the 1MDB assets was going much more slowly than had been expected.
"We subscribe to the rule of law, and the rule of law moves slowly, sometimes at a glacial pace...," Lim Guan Eng told reporters in Hong Kong.
“We want to get as much as we can, but the reality is that, you can’t get the actual amount. You’ll be lucky, very lucky, if you get half, but realistically you’re looking at maybe 30 percent,” he added.
(Additional reporting by Emily Chow and Liz Lee in KUALA LUMPUR; writing by Praveen Menon; Editing by Michael Perry)