By Rozanna Latiff and Joseph Sipalan

KUALA LUMPUR (Reuters) - Just eight weeks after losing an election, former Malaysian prime minister Najib Razak was charged on Wednesday with abuse of power and criminal breach of trust in an investigation over billions of dollars missing from a state fund.

Najib pleaded not guilty, but the charges, the first of their kind faced by a Malaysian premier, and his court appearance were the culmination of a swift and stunning downfall for the man who led the country for nearly a decade.

"I believe in my innocence and this is the best chance to clear my name," Najib told reporters outside the courtroom after being released on bail of 1 million ringgit ($247,000).

 

Crowds of journalists and onlookers jostled for a glance of Najib, and some of his backers chanted and held up placards in support of a man whose father, Malaysia's second prime minister, is held in high regard.

National television networks broadcast live images of Najib's convoy moving through morning rush-hour traffic to the court in the capital, Kuala Lumpur, an extraordinary spectacle few could have imagined before the May 9 election upset.

Najib thwarted corruption allegations for three years after revelations in 2015 that hundreds of millions of dollars from troubled state fund 1MDB were diverted to his personal accounts.

But his life has unraveled since the election defeat by his one-time mentor and the country's most seasoned politician, Mahathir Mohamad, who returned to the prime minister's office he occupied from 1981 to 2003.

Mahathir reopened an investigation into the fund, 1Malaysia Development Berhad (1MDB), and barred Najib from leaving the country. Wednesday's charges fulfilled an election promise to prosecute Najib, whom he called a "thief" during the campaign.

Najib has been charged with abuse of power and three counts of criminal breach of trust, each of the four charges carrying prison terms of up to 20 years. The abuse of power charge also carries a fine of five times the "value of gratification".

He was ordered to surrender his passports and the judge set the trial for Feb. 18 next year.

Wednesday's charges relate to funds of about 42 million ringgit ($10.4 million) that allegedly went from SRC International, a former 1MDB unit, into Najib's personal bank account.

This represents a small fraction of the $4.5 billion the U.S. Department of Justice has said was misappropriated from 1MDB, which is being investigated in at least six countries on suspicion of money laundering.

Malaysia's attorney general indicated there could be more charges in the case as the Malaysian Anti-Corruption Commission continues its investigations.

SRC has been the initial focus of Malaysian investigators as all the suspicious transactions involving it went through Malaysian entities, unlike other 1MDB-related transactions that went through foreign banks and companies.

The judge imposed a temporary gag order to stop public discussion of the case. Najib's lawyers have said their client has been dragged through a trial by the media.

FAMILY QUESTIONED

Najib entered parliament at 23 and attained the top job in 2009, setting up 1MDB shortly after, but his second term in office was plagued by allegations about the fund.

Mahathir, who helped Najib's political ascent before turning on him as the accusations surfaced, led a campaign to unseat him, appealing to voters' disgust with a government apparently mired in corruption.

Mahathir told Reuters last month that embezzlement and bribery using government money were among the charges being considered against Najib, adding that his former protege was fully responsible for the 1MDB scandal.

Since the election loss, investigators have seized luxury handbags, jewelry and other items worth nearly $275 million from properties linked to Najib's family.

His wife Rosmah Mansor and stepson Riza Aziz have also been questioned. Riza is the co-founder of Red Granite Pictures, a company U.S. prosecutors say financed three Hollywood films, including the 2013 Martin Scorsese movie "The Wolf of Wall Street", with funds misappropriated from 1MDB.

Najib must be held accountable, said Anwar Ibrahim, the prime-minister-in-waiting and former opposition leader.

"Because of the allegations against him regarding 1MDB, he must be held accountable in court," Anwar told reporters in neighboring Indonesia.

In a pre-recorded message posted on Twitter after his arrest on Tuesday, Najib said he was not perfect and "not all the accusations against me and my family are true."

(Reporting by Rozanna Latiff and Joseph Sipalan; writing by John Geddie and A. Ananthalakshmi; Editing by John Chalmers and Clarence Fernandez)

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