Where’s your heart, Goldman Sachs?
Malaysia is not buying bank’s argument
ACCUSED of helping to carry out an international multibillion-dollar fraud, Goldman Sachs has tried to pin the blame on a few rogue bankers.
It’s an argument that the government of Malaysia, where the fraud was carried out, is not buying.
“We have suffered extremely large losses, and you were the financial adviser,” said Malaysia Finance Minister Lim Guan Eng, referring to Goldman Sachs.
“Now how do you account for that? And don’t tell me you don’t know where the money went,” Lim said in an interview in Hong Kong on Monday. “Goldman Sachs needs to come to terms with the facts.”
Malaysia is gearing up for a fight with an institution that was once synonymous with power and influence around the world. The government is seeking $7.5 billion (R103bn) in compensation from Goldman Sachs, adding to a mounting pile of penalties against the bank and deepening one of the most serious crises in its 149-year history.
The crisis is expected to be the main focus for David M Solomon, Goldman Sachs’ recently appointed chief executive, when he announces the bank’s fourth-quarter results this week. Goldman has found itself entangled in civil and criminal investigations around the world related to the work it did in helping 1Malaysia Development Berhad – or 1MDB, which US prosecutors have alleged was a slush fund for former Malaysian prime minister Najib Razak and other officials.
New York regulators have issued subpoenas to some Goldman bankers, the bank has held talks with prosecutors about possible fines, and most recently, its lawyers in Malaysia have reached out to the country’s attorney-general.
Last month, Malaysia filed criminal charges against Goldman Sachs, accusing the bank of defrauding investors by raising more than $6bn for 1MDB. Goldman Sachs has denied the charges and said that “certain members of the former Malaysian government and 1MDB lied to Goldman Sachs”.
It has said it would “vigorously contest” the charges. “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,” the bank said in an emailed statement.
In November, the Justice Department announced that it had secured a guilty plea from one former senior Goldman banker and filed bribery and money laundering charges against a second.
Goldman has since said its dealings with 1MDB could still result in “significant fines, penalties and other sanctions”.
In Malaysia, the scandal has gripped the nation and led to the unexpected ouster of Najib, handing power to Mahathir Mohamad, 93, a former prime minister and long-time politician.
At the heart of the scandal is the 1MDB fund, which Najib created in the name of raising money for development projects to benefit Malaysians. Instead, prosecutors have alleged, billions of dollars were siphoned off into the personal accounts of Najib, other officials and a flamboyant Malaysian financier known as Jho Low.
Under Mahathir, the new government is trying to recover some of the billions that disappeared and subsequently burned a big hole in the government’s finances.
“You look at the agony that Malaysia had to endure – not just in terms of the figures but the trauma,” Lim said. “You must have a heart. Sometimes you ask, does Goldman have a heart?”