Malaysia files criminal charges against Goldman Sachs, Jho Low

In the criminal indictment, the prosecutor named former executives Leissner and Ng, together with ex-1MDB employee Loo


Jho low (Pic: Bloomberg)

MALAYSIA has filed criminal charges against Goldman Sachs Group Inc’s subsidiaries, its two former executives and fugitive businessman Low Taek Jho, or better known as Jho Low, as the government tightens the noose on individuals involved in the siphoning of billions of ringgit from 1Malaysia Development Bhd (1MDB).

In the criminal indictment filed in Malaysia, the prosecutor named former executives Tim Leissner and Roger Ng Chong Hwa, together with ex-1MDB employee, Jasmine Loo Ai Swan.

Prosecutors are seeking “well in excess” of the US$2.7 billion (RM11.29 billion) allegedly misappropriated from 1MDB’s three separate bond issuances and the US$600 million fee pocketed by the investment bank for arranging the debt papers.

The criminal indictment is also seeking custodial sentences against each of the individuals accused, with a maximum imprisonment of 10years, if they are found guilty.

Malaysia’s filing of criminal charges against Leissner and Ng came after the US Department of Justice indicted the duo for conspiring to launder money and violating the Foreign Corrupt Practices Act (FCPA) in relation to 1MDB by paying bribes to various Malaysian and Abu Dhabi officials.

Jho Low is also charged with the criminal indictment in the US. Ng is arrested following the request from the US government and is awaiting to be extradited.

Tim Leissner. (Pic: Bloomberg)

Leissner, the former South East Asia chairman and participating MD has pleaded guilty to two counts of charges of conspiring to launder money and violate the FCPA.

“Their fraud goes to the heart of our capital markets, and if no criminal proceedings are instituted against the accused, their undermining of our financial system and market integrity will go unpunished,” said Attorney General (AG) Tommy Thomas in a statement.

“Having held themselves out as the pre-eminent global advisor/arranger for bonds, the highest standards are expected of Goldman Sachs.

“They have fallen far short of any standard. In consequence, they have to be held accountable,” Thomas said.

The three bonds with a total value of US$6.5 billion are the US$1.75 billion bonds issued by 1MDB Energy Ltd, US$1.75 billion bonds issued by 1MDB Energy (Langat) Ltd and US$3 billion bonds issued by 1MDB Global Investments Ltd via offering circulars and a private placement memorandum.

The charges claim that Leissner and Ng conspired with Jho Low, Loo and others to bribe Malaysian public officials in order to procure the selection, involvement and participation of Goldman Sachs in the issuances of the bonds.

In turn, the US bank is said to have received inflated underwriting and arranging fees of approximately US$600 million.

Thomas said those involved with Goldman Sachs received large bonuses and enhanced career prospects at the company and in the investment banking industry.

Meanwhile, a Goldman Sachs spokesman issued an email statement saying that “these charges are misdirected” and that the bank continues to cooperate with all authorities in their investigations, according to Reuters.

The 1MDB scandal, which the US prosecutors claimed that about US$4.5 billion had been plundered from the sovereign wealth fund, is being investigated in six different countries.

Meanwhile, lawyer Lim Wei Jiet said the AG’s charges against Goldman Sachs and 1MDB operatives — particularly under the Capital Markets and Services Act 2007 (CMSA) — signify the government’s seriousness in protecting the integrity of Malaysia’s securities industry framework.

“The AG’s statement specifically mentions that charges will be made under Section 179 of the CMSA, which stipulates offences for the use of manipulative and deceptive devices in the subscription, purchase or sale of any securities.

“On conviction, a person can be imprisoned for a term not exceeding 10 years and to a fine not less than RM1 million.

“Goldman Sachs’ subsidiary companies will also reportedly be charged. In this regard, Section 367 of the CMSA provides that whenever a corporate body commits an offence, a director, CEO or officer of such corporate body is deemed to have committed that offence,” Lim told The Malaysian Reserve.

He said the presumption can only be rebutted if the person accused can prove that the offence was committed without his/her consent or connivance, and that the individual exercised all such diligence to prevent the commission of the offence.

“It will, therefore, be interesting to see if the AG will also be targeting other directors or executives of Goldman Sachs’ subsidiaries,” Lim said.

Prosecutors recently have filed charges against Jho Low and four others with 13 money laundering and criminal breach of trust crimes totalling US$1.17 billion.

Jho Low’s and Loo’s whereabouts are unknown. It is also not known whether Ng will be extradited to the US after the Malaysian prosecutors have levelled criminal charges against him.