Malaysia may not follow IPIC’s move to sue Goldman Sachs

Govt takes ‘a wait-and-see approach’ on the civil suit

By MOHAMAD AZLAN JAAFAR & RAHIMI YUNUS / Pic By TMR

Malaysia is not expected to follow International Petroleum Investment Co’s (IPIC) move to file civil proceeding against Goldman Sachs Group Inc as the country is already battling the Abu Dhabi-owned fund in a London court.

According to sources, the government will take “a wait-and-see approach” on the civil suit filed by IPIC against the US investment bank.

Goldman, which is embroiled in a massive investigation by the US authorities and facing various legal suits, had orchestrated 1Malaysia Development Bhd’s (1MDB) three fundraising bonds totalling US$6.5 billion (RM27.27 billion). The bank pocketed US$600 million in commission from the bond issuances.

“We also have to see the effect on our case against IPIC in the UK,” said a government source to The Malaysian Reserve (TMR).

The government is challenging the US$5.78 billion consent award in 1MDB debt settlement claims in the UK court, claiming that the agreement was orchestrated by a figure central to a multibillion fraud.

Malaysia is claiming for a relief from any obligation to pay the balance of the US$4.32 billion to IPIC or Aabar Investments PJS under the consent award.

Putrajaya is also seeking to recover the US$1.46 billion already paid to the Abu Dhabi-based funds.

Attorney General (AG) Tommy Thomas has said Malaysia has a strong case in the legal dispute with IPIC, as the US$5.78 billion award was procured by fraud or in a manner contrary to public policy.

Under the consent award accepted by the previous government, Malaysia has to pay US$5.78 billion to IPIC and the board trustee over a five-year period — of which US$1.41 billion has been paid, including the US$50 million due on Nov 11.

IPIC said it would fight Malaysia’s action and take steps to reaffirm the validity of the settlement.

News portal Malaysiakini reported that top British barrister Lord David Pannick has been appointed by the Malaysian government to lead the case against IPIC at the London High Court.

The Abu Dhabi sovereign wealth fund on Wednesday sued Goldman for allegedly conspiring against the organisation to further a criminal scheme by 1MDB.

The suit, filed in a New York court, named Goldman and its former officials who were charged by the US Department of Justice (DoJ) in indictments unsealed earlier this month.

About US$4.5 billion from the Goldman-led bond issuance was misappropriated by 1MDB’s officials and associates, according to the DoJ.

IPIC’s civil suit was triggered after US prosecutors unveiled criminal charges against two former Goldman bankers and Malaysian financier Low Taek Jho in the first criminal indictments related to 1MDB financial scandal.

Meanwhile, lawyer Syahredzan Johan said it would be wise for Putrajaya to focus efforts and resources on the court case in London before commencing any action on Goldman, which is bound to be a lengthy process.

“I think resources should be focused on the arbitration award in London first, instead of going to a lengthy trial against Goldman. I would foresee the action against Goldman will be a full-blown trial involving witnesses to be called to the stand,” Syahredzan told TMR.

He said the country might also need to do a cost-benefit analysis whether the route to sue the US investment bank will be worthwhile,

Lawyer Mohamed Haniff Khatri Abdulla said Malaysia could pursue similar course to prove it was a victim of the alleged 1MDB scandal.

“But in (light of) the circumstances of what we are going through, I think we can do it later,” he said.

Mohamed Haniff agreed that Malaysia could wait for the result of the consent award case in London and take one thing at a time.

“Malaysia could further prove that the country was a victim of Goldman if it manages to set aside the consent award to IPIC in the UK court,” he said.

However, he said the AG has the right to file the same legal challenges against Goldman.

“(A banker of) Goldman has already pleaded guilty over wrongdoings. IPIC is saying they are the victim of the fraud. We have the right to say we are the victim too,” Mohamed Haniff said.

Former Goldman officer Tim Leissner pleaded guilty and agreed to pay US$43.7 million in restitution of ill-gotten gains.

Prime Minister (PM) Tun Dr Mahathir Mohamad said that Malaysia was “cheated” by Goldman in an interview with CNBC last week.

Malaysia also wants to recover the US$600 million it paid to Goldman as the fee for 1MDB’s fundraising exercise.

Former PM Datuk Seri Mohd Najib Razak, in an interview with Sinar Harian yesterday, claimed he was cheated by Low, better known as Jho Low, the central figure in the multibillion scandal.

He also blamed Goldman over the alleged misappropriation.

“Back then, we appointed lawyers, auditors and Goldman, a well-known investment bank in the world, to look after the interest of Malaysia.

“So, if they had failed to take care of the interest of Malaysia, how should I know (what happened)? They should have informed (me) that something was not right,” he was reported as saying.

DAP’s Lim Kit Siang yesterday urged Putrajaya to sue Goldman to recover the billions of losses suffered over its dealing with 1MDB.

“The Malaysian government has indicated that it would be asking Goldman to return nearly US$600 million in fees it earned from bonds raised for scandal-tainted 1MDB,” he said in a statement.