Malaysia denies Goldman Sachs’ allegations in 1MDB arbitration suit

NEW YORK – The Malaysian government on Thursday denied allegations by Goldman Sachs that it had breached a settlement deal over the US bank’s role in the

multi-billion dollar 1MDB corruption scandal

.

Goldman in 2020 had

agreed to pay US$3.9 billion (S$5.3 billion)

to settle Malaysia’s criminal probe over its role in the scandal.

But the parties are now in disagreement over the settlement.

The deal stipulates that Goldman should make an interim payment if Malaysia did not recover at least US$500 million from the firm by August 2022.

Goldman said earlier on Thursday it is suing Malaysia in a British court after the country pushed to redo the settlement.

Executives at the Wall Street firm had grown increasingly frustrated with the country’s demands to redo the existing 2020 pact in favour of more onerous penalties, and the lack of information tied to the looted assets that the nation has been recovering. 

“We filed for arbitration against the government of Malaysia for violating its obligations to appropriately credit assets against the guarantee provided by Goldman Sachs in our settlement agreement and to recover other assets,” a spokesperson for the New York-based bank said, in an e-mailed statement. 

The complaint was filed on Wednesday in the London Court of International Arbitration, a person familiar with the matter said.

Malaysia’s Attorney General Chambers said in a statement that the allegation of breaches mischaracterises the conduct of the government and it would prepare its response, adding that “the interest of the Malaysian people is paramount”.

Earlier, Malaysia’s 1MDB task force said Goldman’s move to sue in the London arbitration court was “premature”.

“At this juncture... parties are still considered to be in the amicable good faith discussions stage and therefore as an aggrieved party, the 1MDB Taskforce views Goldman Sachs’ initiation of arbitration proceedings as premature and without due consideration of necessary prerequisites,” 1MDB task force chairman Johari Abdul Ghani said in a statement.

The bank had requested several extensions to a deadline for discussions to settle the dispute, with the latest deadline coming up on Nov 8, he said.

Mr Johari accused Goldman of trying to distract from the interim payment, and said the Malaysian government would respond to the matter accordingly.

Goldman Sachs lodged its suit less than two months after Malaysian Prime Minister Anwar Ibrahim

threatened to take the company to court.

The 1MDB investment fund became the centre of a multibillion-dollar scandal that spawned probes across continents.

Months after striking the initial agreement in 2020, Goldman admitted to its role in the biggest foreign bribery case in US enforcement history, reaching multiple international settlements exceeding US$5 billion for its part in raising funds for 1MDB.

As part of the 2020 settlement with Malaysia, Goldman made an initial US$2.5 billion payment in September of that year.

It also guaranteed the return of US$1.4 billion of 1MDB assets seized by authorities worldwide in exchange for Malaysia agreeing to drop criminal charges against the firm and to not bring new ones. 

The bank also was required to make an interim payment of US$250 million if Malaysia did not receive at least US$500 million of assets and proceeds by August 2022, according to Goldman. The two sides have been locked in a disagreement over that, the bank has spelled out in public filings.

Malaysia recently threatened to sue Goldman if the bank did not renegotiate the settlement. 

“They are taking us for granted, they think that we’ll not proceed,” Malaysian Prime Minister Anwar Ibrahim said in September. “There’s nothing for us to lose except for the legal fees, which a government can manage. But it’s also the integrity of Goldman Sachs that’s in question.” REUTERS, BLOOMBERG