Goldman Sachs’ Malaysian Woes Grow

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Goldman Sachs’ Malaysian Woes Grow as That Country Files Criminal Charges
Ben WalshDec. 17, 2018 12:32 p.m. ET
Now, the Malaysian government has filed its own criminal charges against subsidiaries of Goldman Sachs (GS) in connection to the 1MDB scandal, the country’s attorney general said in a statement.

The attorney general also said that charges would be filed shortly against a former partner of the bank and ex-chairman of its Southeast Asia business, Tim Leissner, and another former Goldman Sachs banker, Roger Ng.

A Goldman Sachs spokesman told Barron’s that the bank believes “these charges are misdirected and we will vigorously defend them and look forward to the opportunity to present our case.” “The firm continues to cooperate with all authorities investigating these matters,” he said.

The spokesman later added: “Certain members of the former Malaysian government and 1MDB lied to Goldman Sachs, outside counsel, and others about the use of proceeds from these transactions. 1MDB, whose CEO and board reported directly to the prime minister at the time, also provided written assurances to Goldman Sachs for each transaction that no intermediaries were involved. Under the Malaysian legal process, the firm was not afforded an opportunity to be heard prior to the filing of these charges against certain Goldman Sachs entities, which we intend to vigorously contest. These charges do not affect our ability to conduct our current business globally.”

In afternoon trading, Goldman shares were down about 2.5%.

In a November radio interview, Malaysia’s finance minister said the country would seek a $600 million refund on the fees it paid to Goldman Sachs for three bond offerings the bank underwrote in 2012 and 2013. Billions of dollars from those deals were allegedly siphoned off to private accounts and used to pay bribes, and were laundered through things like real-estate deals and Hollywood investments.

An Abu Dhabi sovereign wealth fund has also sued the bank in connection to the scandal, alleging that Goldman enabled its bankers in bribing former officials at the fund.

At the center of the alleged fraud is Jho Low, a financier with no formal role in the fund who nevertheless effectively controlled it, and Leissner, who said in his plea statement that he evaded the bank’s compliance controls to help Low divert money and that such actions were part of the bank’s culture.

Goldman Sachs underwrote the bonds and reaped around $600 million in fees from the deals—equal to about 10% of the total issuance, which is an astronomical fee for what was putatively debt issued by a sovereign wealth fund.

Leissner pleaded guilty to his role in shifting money out of 1MDB and of bribing various government officials in order to pull off the fraud in November but has yet to be sentenced. Low has also been charged but his whereabouts are unclear.
https://www.barrons.com/articles/VbBihuPp0U

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Malaysia Charges Goldman Directors Over 1MDB Scandal
Custodial sentences and fines will be sought for the executives, who include Goldman Sachs International’s CEO

Richard Gnodde, Goldman Sachs International’s chief executive, was among those charged Friday. PHOTO: SIMON DAWSON/BLOOMBERG NEWS
By Yantoultra Ngui
Aug. 9, 2019 5:25 am ET
KUALA LUMPUR, Malaysia—Malaysia filed criminal charges against 17 current and former Goldman Sachs Group Inc. directors over their handling of the sprawling, multibillion-dollar financial scandal at the country’s state fund 1Malaysia Development Bhd.
Attorney-General Tommy Thomas said Friday that custodial sentences and fines would be sought for the directors, who worked for three Goldman Sachs subsidiaries—Goldman Sachs International, Goldman Sachs (Asia) LLC, and Goldman Sachs (Singapore) Pte—in relation to bond sales the U.S. bank arranged for 1MDB in 2012 and 2013. The accusations relate to the individuals’ participation in the deals as arrangers, structure agents, underwriters and sellers.
The charges hold that the bonds were issued under false or misleading statements to “dishonestly misappropriate billions from the bond proceeds,” according to Mr. Thomas. The directors were charged under a section of the Malaysian Capital Markets and Services Act that holds certain senior executives responsible for any offense that may have been committed.
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The 1MDB scandal has sparked multinational investigations from Switzerland to the U.S., with billions of dollars allegedly siphoned from the fund, created by then-Malaysian Prime Minister Najib Razak to boost the Southeast Asian nation’s economy. He has denied wrongdoing.
Friday’s charges pertained to those filed by Malaysia in December against the same Goldman units, and some former Goldman employees, for attempting to defraud the government and purchasers of the three 1MDB bonds with a total face value of $6.5 billion.
The people charged Friday included Richard Gnodde, Goldman Sachs International’s chief executive.
“We believe the charges announced today, along with those against three Goldman Sachs entities announced in December last year, are misdirected and will be vigorously defended,” a Goldman spokesman said Friday.
Public anger over the 1MDB scandal led to Mr. Najib’s election defeat in 2018 and his associates face charges in Malaysia ranging from money-laundering to abuse of power. Mr. Najib himself faces 42 1MDB-related criminal charges and the first of a series of trials at the Kuala Lumpur High Court.

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