Malaysia Seeking ‘Full Refund’ From Goldman for 1MDB Deals

Malaysia is stepping up pressure against Goldman Sachs Group Inc. as leader-in-waiting Anwar Ibrahim called for “more aggressive” claims against the bank, after the finance minister said the country is seeking a full refund of all the fees it paid for 1MDB deals.

The Southeast Asian nation should also seek compensation from the bank for ruining Malaysia’s image, Anwar said in parliament Tuesday. Malaysia has been “cheated” by Goldman, Prime Minister Mahathir Mohamad said in a CNBC interview. Asked whether he would ban the bank from operating in the country, he said, “We are watching.”

Finance Minister Lim Guan Eng said on Monday that he’s banking on the firm’s “indirect” admission of wrongdoing and U.S. law against kleptocracy, to help Malaysia recoup fees that include nearly $600 million that it paid Goldman for three 1MDB bond deals.

Goldman Sachs hasn’t publicly admitted any wrongdoing and has said it’s cooperating with authorities. Its shares plunged 7.5 percent on Monday in the steepest drop since 2011.

The bank has been under scrutiny for years for its role in raising $6.5 billion for 1MDB and for the fees and commissions it earned from the bonds. 1MDB is at the center of a global investigation involving claims of embezzlement and money laundering, which have triggered probes in the U.S., Singapore, Switzerland and beyond. Goldman has “admitted culpability” after former banker Tim Leissner entered a guilty plea for his role in the scandal, Lim said in a Monday interview with radio station BFM.

“I would be happy if we can get around 30 percent net after all the expenses incurred” from the entire 1MDB scandal, he said, referring to the overall amount of funds thought to be lost through the troubled state fund. Mahathir has set a goal of bringing back $4.5 billion.

Leissner Plea

Goldman has consistently said that it believed proceeds of the debt it underwrote were for development projects and that Leissner, its former Southeast Asia chairman, withheld information from the firm. Leissner said in his guilty plea unveiled on Friday that others at the bank helped him conceal bribes used to retain business in Malaysia.

Michael DuVally, a Goldman spokesman in New York, declined to comment. The firm said in a quarterly filing earlier this month that it couldn’t predict the outcome of the U.S. Justice Department’s investigation, but said it could face “significant fines.”

It’s unclear how Malaysia plans to regain the fees that Goldman got, and Mahathir said in June that the government would pursue legal action if there is a case. There are ongoing discussions about recovering money from financial institutions including Goldman, Anwar told Bloomberg last week.

The attorney-general will be the one to decide how and how much compensation the government seeks from Goldman, Lim said in parliament Tuesday. 1MDB’s bonds were sold at a higher yield than the market rate at that time, and Malaysia will also seek restitution for the interest-rate differential as well as “other consequential losses,” he said.

Jho Low

Recouping the 1MDB funds would require tracing assets bought using the money, with Malaysian authorities focused on locating Low Taek Jho, or Jho Low, who has been described by investigators as a central figure in the 1MDB transactions.

Records show that Low, who remains at large, isn’t in China on a Malaysian passport as previously thought, Lim told the BFM radio station. It is unclear if Low entered the country using different travel documents, he said. Chinese authorities have been cooperative, with Lim adding that he hoped they would help if Low had managed to slip into the country.

“It is a matter of trying to determine where he is first before we can ask other countries to help us to detain him and extradite him back to Malaysia if there’s an extradition agreement,” Lim said. “But so far, as I said, we are still relying on Interpol to locate this rather slippery character.”

Bloomberg | November 12, 2018