Malaysia privately discusses Goldman penalty of just US$2 billion over 1MDB

Goldman reaped US$600 million from helping 1MDB raise US$6.5 billion in 2012 and 2013, much of which later went missing.
Goldman reaped US$600 million from helping 1MDB raise US$6.5 billion in 2012 and 2013, much of which later went missing.PHOTO: REUTERS

KUALA LUMPUR (BLOOMBERG) - Again and again, Malaysia has publicly demanded Goldman Sachs pay an eye-popping US$7.5 billion (S$10.23 billion) for its role in the 1Malaysia Development Berhad (1MDB) scandal.

But privately, Malaysian negotiators are considering settling for a fraction of that.

Representatives for Malaysia have discussed figures of around US$2 billion to US$3 billion in talks with the Wall Street bank, according to people with knowledge of the matter.

Though a final deal may diverge from that range, it shows what negotiators for the country may be willing to accept.

Simultaneously, Malaysian prosecutors are trying to turn up the pressure by pushing for Goldman's criminal case to be heard at the country's High Court.

Prime Minister Mahathir Mohamad, 94, is keen to reach an accord before year-end to show progress on his signature pledge to recoup money plundered from the scandal-ridden state investment fund.

He has dispatched Mr Daim Zainuddin, a confidant outside his Cabinet, to serve as a top dealmaker, the people said, asking not to be named because talks are confidential.

A sizable settlement would help cement the country's fiscal footing, which Tun Dr Mahathir has cited as a reason he has delayed handing over power to his former protege, Datuk Seri Anwar Ibrahim.

Yet, for Goldman Sachs Group, Malaysia's probe is among a slew of related international investigations the company is eager to solve in their entirety, and it is unclear how much credit regulators and prosecutors back in the United States may give the firm for a costly deal with the South-east Asian nation.

'REPARATION PAYMENTS'

Goldman reaped US$600 million from helping 1MDB raise US$6.5 billion in 2012 and 2013, much of which later went missing.

 
 

Malaysia has demanded the bank shoulder those losses. Earlier this month, Finance Minister Lim Guan Eng reiterated in an interview that means "reparation payments" amounting to US$7.5 billion.

It is also unclear whether a multi-billion-dollar settlement might lead Malaysia Attorney-General Tommy Thomas to drop all charges against Goldman Sachs or 17 current and former bank executives individually charged, the people said. The allegations against the directors are based on the criminal case against the bank's units.

Representatives for Goldman Sachs and the US Department of Justice declined to comment. Representatives for Malaysia's attorney general and for Tun Daim's office had no immediate comment.

Goldman previously blamed its entanglement in the scandal on its former South-east Asia chairman, Tim Leissner, who pleaded guilty in 2018 to US charges that he conspired to launder money and violate the Foreign Corrupt Practices Act.

US prosecutors are expected to extract a serious penalty from the bank for its role in funding 1MDB.

Last year, they undermined the firm's effort to focus blame on one person by also charging another banker, Roger Ng, who has denied any complicity in wrongdoing. The Justice Department previously stunned the Malaysian government in 2016 by filing a forfeiture case that implicated then-Prime Minister Najib Razak.

Dr Mahathir, who was prime minister from 1981 to 2003, returned to power in 2018 while promising to recoup money allegedly stolen from the state investment fund. Najib is now fighting dozens of criminal charges related to 1MDB.

 
 

Mr Daim is a long-time confidant of Dr Mahathir, hailing from the same village in the northern Malaysian state of Kedah. He was finance minister from 1984 to 1991, and was brought back by Dr Mahathir to help steer the economy in the aftermath of the Asian financial crisis in 1999 to 2001.

When Dr Mahathir returned to power last year, he appointed Mr Daim as his top adviser to guide the new government's economic policy in the first 100 days.

Prosecutors in Kuala Lumpur said on Tuesday (Oct 22) that they have submitted an application to move their criminal case against Goldman to the High Court, a request typically made to underscore the seriousness of the case.

Mr Thomas has said he has a strong case against Goldman and is not dropping the charges against the units or the 17 people, responding to a report in Nikkei Asian Review that cited him as saying Goldman has been in settlement talks with Malaysia.

"We'll see them in court," he said last Thursday.