Malaysia could drop Goldman Sachs' 1MDB charges for US$7.5 billion: Finance Minister Lim Guan Eng

Finance Minister Lim Guan Eng said Goldman Sachs' apology would not have surfaced if there had not been a change in government.
Finance Minister Lim Guan Eng said Goldman Sachs' apology would not have surfaced if there had not been a change in government.PHOTO: EPA-EFE

PUTRAJAYA (BLOOMBERG, THE STAR/ASIA NEWS NETWORK) - An apology from Goldman Sachs Group doesn’t cut it for Malaysia, which said it may consider a discussion to absolve the bank of blame for its role in the 1MDB scandal for US$7.5 billion (S$10.2 billion). 

The country filed criminal charges against the lender in December, the first for Goldman, and may discuss dropping those allegations if the bank pays the sum, Finance Minister Lim Guan Eng told reporters on Friday (Jan 18).

Malaysia alleges that Goldman misled investors in the three bond sales it arranged for 1MDB, or 1Malaysia Development Berhad, while knowing the money raised would be misappropriated. Units of the bank were accused of making false statements in documents submitted to a local regulator in arranging US$6.5 billion bond offers for 1MDB, from which at least US$2.7 billion was allegedly stolen.

“Goldman Sachs should understand the agony and the trauma suffered by the Malaysian people as a result of the 1MDB scandal,” Mr Lim said in the administrative capital of Putrajaya. “An apology is just not sufficient. Not enough. There must be the necessary reparations and compensations.”

Goldman’s chief executive officer David Solomon this week apologised to the Malaysian people for the role that senior banker Tim Leissner played in the 1MDB scandal. The country was “defrauded by many individuals”, with Leissner being “one of those people”, Mr Solomon said on a conference call with analysts after the investment bank reported its earnings on Wednesday. 

Leissner has pleaded guilty to charges including conspiring to launder money, while another former Goldman banker Roger Ng remains in custody in Malaysia as he faces extradition to the United States to face related allegations. 

Mr Solomon reiterated that the firm conducted considerable due diligence on the deals and was lied to by Leissner. Appearing on his first earnings call since becoming CEO in October, Mr Solomon said the firm is cooperating with the US Justice Department and the investigation is still open.

Goldman has said it will vigorously defend against the charges by Malaysia. 

The allegations against Goldman were filed by Attorney-General Tommy Thomas as the nation’s top prosecutor, while the finance minister is not formally authorised to make decisions on criminal charges. 

 
 
 
 

“At least he accepted that they have to bear and shoulder some responsibility,” Mr Lim said, referring to Mr Solomon. “That apology, of course, goes some way towards that, but that is insufficient.” 

By comparison, Mr Lim said, former prime minister Najib Razak is in a complete state of denial in his refusal to admit that Malaysians have suffered huge losses because of the scandal.

Following Mr Solomon's apology, Najib said on Thursday that Goldman should take responsibility if it had failed to take care of 1MDB's interests.

Mr Lim, the Finance Minister, said Goldman's apology would not even have surfaced if there had not been a change in government.

Najib was Malaysia's finance minister and headed the advisory board of 1MDB, which is a unit under the Finance Ministry. Prosecutors have alleged that billions of dollars were siphoned off into the personal accounts of Najib, other officials and a flamboyant Malaysian financier known as Jho Low.

The 1MDB scandal erupted into public view in 2015, and led to Najib's electoral defeat last year.

Mr Lim asked if Najib was still going to insist that 1MDB benefited Malaysians and keep trying to avoid taking responsibility.

"If not for the fact that there was a change in government, do you think Goldman Sachs will apologise?" Mr Lim said.

"Or will it be prosecuted and their senior partners charged? No."

"So, when is Najib going to apologise, apart from facing the charges in court?"

Mr Lim added: "It's worse for a former prime minister for not admitting that something was very wrong, and that this was the largest financial corruption scandal in history."