Malaysia plays hard ball despite Goldman Sachs apology

If they pay us US$7.5b, then we will discuss about dropping the lawsuit, says finance minister

By AFIQ AZIZ / Pic By BLOOMBERG

Malaysia is certainly playing hard ball and is not rolling over with just an apology. The scandal which rocked the country’s political landscape and ended six decades of Barisan Nasional rule remains an expensive blunder, costing billions of losses.

The servicing of the debt papers related to 1Malaysia Development Bhd (1MDB), the brainchild of former Prime Minister Datuk Seri Mohd Najib Razak, would extend to another two decades or in May 2039.

Billions were allegedly looted from the fund and US$6.5 billion (RM26.72 billion) of the borrowings were arranged by US-based Goldman Sachs Group Inc.

The apology by the Goldman Sachs head to Malaysians over the involvement of the bank’s former partner — the man instrumental in driving the bond issuances — has not mellowed the resolve of the country’s leadership.

It is estimated that around US$2.7 billion from the proceeds have ended up in the accounts of people close to or associates of the fund.

Finance Minister Lim Guan Eng said the apology by Goldman Sachs over the billions stolen from 1MDB is not enough, unless it comes with a US$7.5 billion refund.

He said the US investment bank must be held accountable and shoulder the blame, including to pay compensation over the 1MDB scandal.

Lim said Goldman Sachs should be fully liable to compensate Putrajaya with the sum of US$7.5 billion for the government to consider dropping its lawsuit against the New York-based investment bank.

“Apology is not enough, but apology with US$7.5 billion, that’s what matters,” he told the press after announcing the appointments of the Samurai bond joint lead arrangers in Putrajaya last Friday.

The government alleged that Goldman Sachs had misled investors in the three bond sales it arranged for 1MDB, while knowing the money raised would be misappropriated.

Putrajaya claimed that Goldman Sachs had helped the arrangement of US$6.5 billion in bonds for 1MDB, from which at least US$2.7 billion was allegedly stolen.

The government is also claiming the US$600 million pocketed by the bank as the fee to arrange for the bonds.

In December, Malaysia had filed criminal charges against the bank and two former employees for the alleged theft.

Last Wednesday, Goldman Sachs CEO David Solomon apologised to the Malaysian people for the role that former senior banker Tim Leissner played in the 1MDB scandal.

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

“Goldman Sachs should understand the agony and the trauma suffered by the Malaysian people as a result of the 1MDB scandal.

“An apology is just not sufficient. Not enough. There must be the necessary reparations and compensations,” Lim said.

“If they pay us US$7.5 billion, then we will discuss about it (dropping the lawsuit),” Lim said.

Lim also said Najib is still in a complete state of denial by refusing to admit that he had caused huge losses to the country due to 1MDB.

Najib, in response to Solomon’s apology, said Goldman Sachs should take responsibility if it had failed to take care of 1MDB’s interests.

“At least he (Solomon) accepted that they have to bear and shoulder some responsibility,” Lim said.

Najib was also the then finance minister and head of the 1MDB advisory board. He is facing multiple charges of graft and money laundering related to the fund.

“(However,) if not for the fact that there was a change in government, do you think Goldman Sachs would have apologised?” Lim said.

Meanwhile, he announced the appointments of Mizuho Bank (M) Bhd, HSBC Bank Malaysia Bhd and Daiwa Capital Markets Ltd as lead arrangers for the nation’s proposed 10-year ¥200 billion (RM7.6 billion) Samurai bond issue.

Lim said the appointments were made after six proposals had been shortlisted from the 27 received by the Finance Ministry.

“As part of a government-to-government arrangement, the Japan Bank for International Cooperation will be guaranteeing the bond.

“This will allow the government of Malaysia to pay all-inclusive indicative coupon rates of less than 0.65% per annum, including the guarantee fee,” Lim said, adding that the bond is expected to be raised in the next few months.