Malaysia files criminal charges against Goldman Sachs
December 17, 2018
Goldman subsidiaries and two of the bank's former employees were accused of misappropriating $2.7 billion from Malaysian fund 1MDB. The US bank has also been accused of benefiting from $600 million in inflated fees.
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Malaysia on Monday filed criminal charges against Goldman Sachs and four other individuals as part of an investigation into a multibillon-dollar scandal involving the 1 Malaysia Development Berhad (1MDB) state investment fund.
The US bank has been under scrutiny for its role in helping raise $6.5 billion (€5.7 billion) through three bond offerings for 1MDB, a fund launched in 2009 by former Malaysian Prime Minister Najib Razak to promote economic development in the country.
Attorney General Tommy Thomas said criminal charges were filed Monday against Goldman Sachs, ex-bankers Tim Leissner and Ng Chong Hwa (also known as Roger Ng), Malaysian financier Low Take Jho (also known as Jho Low) and former 1MDB employee Jasmine Loo.
All are accused of making false statements in order to "dishonestly misappropriate $2.7 million" from the proceeds of the three bonds. Thomas said the four individuals are accused of conspiring to "bribe Malaysian public officials in order to procure the selection, involvement and participation of Goldman Sachs in the bond issuances."
Thomas also said that Goldman also benefited by collecting what he claims were inflated fees of $600 million.
"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," the attorney general said as he announced the charges.
"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 said prosecutors would seek jail terms of up to 10 years for each individual as well as fines "well in excess" of the allegedly misappropriated $2.7 billion bond proceeds and the $600 million in fees received by Goldman.
The US bank said in a statement that the charges were "misdirected" and the bank would fight the charges. The bank said it has continued to cooperate with investigators.
Excessive spending
Both Leissner and Ng had already been charged over the 1MDB scandal last month in the US in November. Leissner pleaded guilty to money laundering conspiracy and to conspiring to violate foreign bribery laws. Ng was arrested in Malaysia and is facing extradition to the US.
US and Malaysian prosecutors allege that huge sums were stolen from the 1MDB fund by associates of Razak, then the Malaysian prime minister. The looted funds were allegedly used for an excessive spending spree, which included the purchase of a $265 million yacht and a $100 million investment in the music label EMI.
In July, Malaysian police said Low, who was also charged in the US, had fled to an unknown location in Macau. US prosecutors have accused him of using misappropriated funds for bribes and kickbacks to foreign officials, to pay for luxury real estate, art and jewelry in the United States and helping to finance Hollywood movies, including "The Wolf of Wall Street."
Former Malaysian Prime Minister Mahathir Mohamad could make history as the world's oldest head of government and a successful "comeback retiree" if he beats incumbent Najib Razak in the country's upcoming elections.
Image: picture alliance/AP/D. Chan
The doctor is in - again
A medical doctor by training, Mahathir led Malaysia from 1981 to 2003 and is dubbed the country's "father of modernization." A shrewd politician, he won five consecutive general elections, while deflecting challenges to his leadership of the United Malays National Organization (UMNO), a core component party of the ruling coalition, the Barisan Nasional (BN).
Image: Getty Images/AFP/M. Vatsyayana
Extraordinary elections ahead
The Malaysian elections must be held by August this year, with analysts predicting they will happen by June. It promises an unprecedented spectacle as it will pit incumbent Najib Razak against Mahathir, his former mentor, who had favored him and helped install him as PM in 2009. Mahathir quit UMNO in 2016 following the 1MDB scandal, saying it had become "Najib's party."
Image: AP
Rallying for 'clean' elections
Called a "dictator" by critics for his hard stance on dissidents and the press, and for curbing the power of the judiciary while he was PM, he attended a Bersih ("Clean") rally in 2016 organized by several NGOs seeking reforms of the current electoral system to ensure free, clean and fair elections. Critics also blame him for consolidating power in the hands of the executive during his tenure.
Image: AFP/Getty Images/M. Rasfan
An astounding about-turn
Mahathir set up a new party in 2016, which then joined forces with Pakatan Harapan, a loose coalition of oppostion parties. Ironically, he had locked away some members of these parties before, most significantly, his former deputy, Anwar Ibrahim. The coalition has stated that if it wins the 2018 elections, Mahathir would be PM and Anwar's wife, Wan Azizah Wan Ismail (pictured here), his deputy.
Image: Reuters/L. Seng Sin
The eyebrow-raising reconciliation
Anwar (L), once Mahathir's heir apparent-turned-archrival, was sacked from his post as deputy PM, and later charged and found guilty of graft and sodomy. Yet, in their shared zeal to unseat Najib, they've now struck a deal, with Mahathir offering to secure a royal pardon for Anwar (currently serving a second sentence for sodomy under Najib's administration), easing the way for Anwar to become PM.
Image: AFP/Getty Images/F. Silvan
Between a rock and a hard place
Not all Malaysians are on board with this pact though. Some civil society members and opposition lawmakers blame Mahathir for engineering the very system he now opposes. This disquiet has spurred a new movement. #UndiRosak (or #SpoiltVote) that urges voters to either boycott the polls or cast spoilt ballots. But others argue that this will merely split opposition votes and empower BN further.
Image: AP
Future in peril?
Current PM Najib Razak's administration has been mired in scandals, most notably involving the state fund 1MDB, which is being probed for money laundering in several countries. However, a survey in December predicted that he is likely to remain in power given a fractious opposition and his government's efforts to redraw electoral boundaries that critics claim highly favor a BN win.
Image: picture-alliance/dpa/F. Ismail
Loss of popular vote
The BN, which has governed Malaysia since independence in 1957, lost its two-thirds parliamentary majority after the 2013 elections. It also then lost the popular vote for the first time in its history to Pakatan Harapan.
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Courting the millennials
Meanwhile, the nonagenarian has taken to social media in a bid to court the country's younger electorate. But a poll conducted in August 2017 found that "seven out of 10 voters below the age of 30 in Peninsular Malaysia do not care about politics; two-thirds believe that politicians were not just untrustworthy, but also the 'main problem in Malaysia.'"
