Goldman Sachs 'cheated' Malaysia
Prime minister questions bank’s compliance controls, while finance minister says country wants a full fee refund
Malaysian Prime Minister Mahathir Mohamad said bankers at Goldman Sachs “cheated” the country in dealings with state fund 1MDB and that US authorities have promised to help return the fees the Wall Street bank earned from the fund.
Malaysian Prime Minister Mahathir Mohamad said that bankers at Goldman Sachs “cheated” the country in dealings with state fund 1MDB and that US authorities have promised to help return the fees the Wall Street bank earned from the fund.
The US investment bank has been under scrutiny for its role in helping raise funds through bond offerings for 1Malaysia Development (1MDB), which is the subject of corruption and money-laundering probes in at least six countries.
Goldman’s stock fell to a near two-year low on Monday after Malaysia’s minister of finance, Lim Guan Eng, said his country would seek a “full refund” of the almost $600m in fees the bank earned from raising $6.5bn for the fund.
A spokesperson for Goldman Sachs on Monday said the bank denied any wrongdoing.
The US department of justice has said about $4.5bn was misappropriated from 1MDB, including some money that Goldman Sachs helped raise, by high-level officials of the fund and their associates from 2009 to 2014.
US prosecutors filed criminal charges against two former Goldman Sachs bankers earlier in November. One of them, Tim Leissner, pleaded guilty to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act.
“There is evidence that Goldman Sachs has done things that are wrong,” Mahathir said in an interview with US news channel CNBC aired on Tuesday.
“Obviously we have been cheated through the compliance by Goldman Sachs people,” he said, without specifying details. The bank’s compliance controls “don’t work very well”.
Asked by reporters later in Singapore if he had officially requested the department to help return money that Goldman earned, Mahathir said: “It takes a little bit of time but they have promised that they will give back the money.”
The department of justice was not immediately available for comment outside of regular US business hours.
Anwar Ibrahim, the appointed successor to 93-year-old Mahathir, told parliament on Tuesday that the country needs to take “more aggressive measures” to reclaim the fees and losses “due to the effects on Malaysia’s image”.
Speaking to reporters, finance minister Lim repeated his stance that Malaysia wants to reclaim fees paid to Goldman Sachs and said the country will also seek consequential losses.
“The Malaysian government will want to reclaim all the fees paid, as well as all the losses, including the interest rate differential,” Lim said.
He said the rate Malaysia paid was about 100 basis points higher than the market rate.
Critics have said the fees earned by Goldman Sachs were far in excess of the normal 1%2% a bank could expect for helping sell bonds.
Goldman has said the outsized fees related to additional risks: it bought the unrated bonds while it sought investors and, in the case of a 2013 bond deal that raised $2.7bn, 1MDB wanted the funds quickly for planned investment.
Malaysia’s government, in power since May, is scrambling to bring back funds that were allegedly siphoned off from 1MDB, a fund founded by former premier Najib Razak.
The 1MDB scandal was a major reason for Najib’s shock election loss. Najib has since been charged with corruption as part of Malaysia’s investigation. He has pleaded not guilty and denied any wrongdoing.
Malaysian financier Low Taek Jho, described by US and Malaysian authorities as central to the scandal, was charged by US prosecutors in November. He remains at large.