1MDB scandal

Malaysia seeks fines of $3.3 billion from banking goliath Goldman Sachs

Malaysian authorities filed the criminal charges on Monday, alleging the “misappropriation” of billions of dollars by the Wall Street titan from the quasi-sovereign wealth fund 1MDB

Robin Spiess
December 18, 2018
Malaysia seeks fines of $3.3 billion from banking goliath Goldman Sachs
Malaysian prosecutors will seek criminal fines upwards of $3.3 billion from Goldman Sachs Photo: Justin Lane / EPA-EFE

This is the first time that Goldman Sachs has been officially charged for its alleged violations of Malaysia’s security laws as a result of its involvement in 1MDB’s multibillion-dollar corruption scandal. The US Justice Department estimates a total of $4.5 billion was stolen from 1MDB and funnelled into the United States, and Goldman Sachs has become a central figure in the alleged misconduct.

According to a recent media release from Malaysian attorney general Tommy Thomas, the fresh charges are based on the Wall Street firm’s “false or misleading statements… in order to dishonestly misappropriate $2.7 billion” from the proceeds of three 1MDB bonds, which Goldman Sachs arranged and underwrote in 2012 and 2013. The US firm’s employees Tim Leissner and Roger Ng Chong Hwa allegedly conspired with the now-infamous 1MDB financier Low Taek Jho, better known as Jho Low, to bribe Malaysian officials in order to secure Goldman Sachs’ involvement in these three bond issuances.

The total value of all three bonds was approximately $6.5 billion, and Goldman Sachs allegedly received $600 million in fees for its underwriting and arranging services – a much higher rate than the prevailing market averages at the time, according to Thomas.

The bonds themselves were made to appear legitimate to investors thanks to “false” and “misleading” statements from Goldman Sachs and 1MDB employees, but their proceeds were allegedly “corruptly and fraudulently misappropriated” by the same employees.

Thomas has stated that prosecutors will seek criminal fines upwards of $3.3 billion from Goldman Sachs, as well as the imprisonment of both Leissner and Chong Hwa for up to ten years.

Their fraud goes to the heart of our capital markets… In consequence, they have to be held accountable

Leissner, the former Southeast Asia chairman for Goldman Sachs, pleaded guilty in a US court in August to conspiring to steal money from 1MDB, stating that the firm’s culture encouraged him to skirt legal obligations in favour of big payouts. He is due to be sentenced on 17 January 2019.

Fresh charges against Jho Low have also been filed as a result of his involvement in the alleged scheme, though Low remains at large.

“Their fraud goes to the heart of our capital markets, and if no criminal proceedings are instituted against the accused, their undermining of our financial system and market integrity will go unpunished,” Thomas stated in the press release.

“Having held themselves out as the preeminent global adviser and arranger for bonds, the highest standards are expected of Goldman Sachs,” Thomas said. “They have fallen short of any standard. In consequence, they have to be held accountable.”
Goldman Sachs released a statement in support of the firm’s innocence following the announcement of the charges.

“We believe these charges are misdirected and we will vigorously defend them and look forward to the opportunity to present our case,” the statement reads. “The firm continues to cooperate with all authorities investigating these matters.”

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