Goldman Sachs people ‘cheated’ Malaysia over 1MDB: PM Mahathir, Latest World News - The New Paper
World

Goldman Sachs people ‘cheated’ Malaysia over 1MDB: PM Mahathir

This article is more than 12 months old

M'sian PM says evidence shows wrongdoing by bank

KUALA LUMPUR: The Goldman Sachs Group "cheated" Malaysia over its dealings with state fund 1Malaysia Development Berhad (1MDB), the subject of corruption and money-laundering investigations, Prime Minister Mahathir Mohamad told CNBC in an interview aired yesterday.

The US, Malaysia and at least four other countries are investigating how billions of dollars went missing from 1MDB, founded by former Malaysian premier Najib Razak.

US prosecutors filed criminal charges against two former Goldman Sachs bankers earlier this month. One of them, Tim Leissner, pleaded guilty to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act.

Goldman Sachs earned about US$600 million (S$830 million) in fees for its work with 1MDB, which included three bond offerings in 2012 and 2013 that raised US$6.5 billion, reported Reuters.

Dr Mahathir said "there is evidence that Goldman Sachs has done things that are wrong".

"Obviously we have been cheated through the compliance by Goldman Sachs people," he said in the interview.

The bank's compliance controls "don't work very well", he added.

A Goldman Sachs spokesman in Hong Kong declined to comment on the allegation, Reuters reported. The bank denied any wrongdoing on Monday.

Dr Mahathir also saidUS prosecutors have promised to help return money that Goldman Sachs charged for its dealings with 1MDB.

Asked if he had officially requested the US Department of Justice to help return money, Dr Mahathir said: "It takes a little bit of time but they (DOJ) have promised that they will give back the money."

Goldman shares fell to their lowest in nearly two years on Monday after Malaysian Finance Minister Lim Guan Eng said Malaysia would seek a "full refund" from the bank of the fees from 1MDB deals.

"The Malaysian government will want to reclaim all the fees paid, as well as all the losses including the interest rate differential," Mr Lim told reporters.

He said the rate Malaysia received was about 100 basis points higher than the market rate.

The firm's shares tumbled 7.5 per cent, their biggest one-day drop since November 2011. The volume of stock bought and sold was more than triple the average amount, Bloomberg reported.

The bank was the worst performer in the Dow Jones Industrial Average on a day in which all but four companies in the index declined.

The US DOJ has said US$4.5 billion was misappropriated from 1MDB by high-level officials of the fund and their associates between 2009 and 2014.

Najib has been charged with corruption in Malaysia as part of the investigation into 1MDB. He has pleaded not guilty and denied any wrongdoing.

Malaysian financier Low Taek Jho was also charged by US prosecutors. He remains at large.

Goldman's litigation risks in the US include lawsuits and probes with estimated costs that could top US$2 billion, including more than US$1 billion from 1MDB matters, according to Bloomberg Intelligence analysts.

Goldman Sachs has said it believed proceeds of the debt it underwrote were for development projects and that Leissner withheld information from the firm, Bloomberg reported.

Leissner said the bank's culture of secrecy made him hide wrongdoing from the company's compliance staff.

The bank's chief executive David Solomon, who took over last month, said he found the allegations against the former employees "very distressing".

WORLD