Malaysia charges Goldman Sachs and ex-bankers in USD $2.7 billion probe

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Malaysia will seek jail terms and billions of dollars in fines from Goldman Sachs and four other individuals who allegedly diverted about USD $2.7 billion from 1Malaysia Development Bhd (1MDB), the country’s Attorney General Tommy Thomas said in a statement. The 1MDB scandal was a major reason for former Premier Najib Razak’s election defeat in May 2018, who has been charged with corruption over the scandal and pleaded not guilty.

Mr. Thomas said criminal charges under securities laws were filed on Monday against Goldman Sachs, its former bankers Tim Leissner and Roger Ng, former 1MDB employee Jasmine Loo, and financier Jho Low in connection with the bond offerings. “The charges arise from the commission and abetment of false or misleading statements by all the accused in order to dishonestly misappropriate $2.7 billion from the proceeds of three bonds issued by the subsidiaries of 1MDB, which were arranged and underwritten by Goldman Sachs,” Mr. Thomas said in a statement. He said the offering circulars filed with the regulators contained statements that were false, misleading, or with material omissions, and “Having held themselves out as the pre-eminent global adviser/arranger for bonds, the highest standards are expected of Goldman Sachs. They have fallen short of any standard.

Prosecutors would seek fines against the accused “well in excess” of the allegedly misappropriated $2.7 billion bond proceeds plus $600 million in fees received by Goldman Sachs. Malaysia will seek jail terms of up to 10 years for each of the individuals accused, Mr. Thomas said, and that the four individuals are charged of conspiring to “bribe Malaysian public officials in order to procure the selection, involvement and participation of Goldman Sachs in the bond issuances.

This is the first time Goldman Sachs, which has consistently denied wrongdoing, has faced criminal charges in the 1MDB scandal. Goldman Sachs has been under scrutiny for its role in helping raise $6.5 billion through three bond offerings for 1MDB, which is the subject of investigations in at least six countries. The United States (U.S.) Department of Justice has said about $4.5 billion was misappropriated from 1MDB, including some money that Goldman Sachs helped raise, by high-level officials of the fund and their associates from 2009 through 2014.

A Goldman Sachs spokesman said the charges were “misdirected” and the bank would vigorously defend them and continue to cooperate with all authorities in their investigations. U.S. prosecutors filed criminal charges against the former Goldman Sachs bankers, Mr. Leissner and Mr. Ng, last month. Mr. Leissner pleaded guilty to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act. Mr. Ng is detained in Malaysia and facing extradition to the U.S.