Goldman agrees to RM16.7b settlement with Malaysia over 1MDB case

With the new out-of-court agreement, Malaysia is set to recoup over RM19.4b including monies that it has received from the US DoJ

by RAHIMI YUNUS/ pic by BLOOMBERG

GOLDMAN Sachs Group Inc has agreed to a US$3.9 billion (RM16.7 billion) settlement for all the criminal and regulatory proceedings in Malaysia in relation to 1Malaysia Development Bhd (1MDB).

The Finance Ministry said in a statement last Friday that the settlement comprises a US$2.5 billion payout to the Malaysian government and a guarantee of recovering at least US$1.4 billion in assets linked to 1MDB seized around the world, traceable to three bond transaction proceeds Goldman helped raise previously.

Goldman, at their cost, also agreed to assist Malaysia by appointing an asset recovery specialist to recover other related assets currently lying outside Malaysia.

The ministry said the settlement represents a significant increase compared to the previous offer of US$1.75 billion made by Goldman to the previous administration last year.

With the new out-of-court agreement, Malaysia is set to recoup over US$4.5 billion including the monies that it has received from the US Department of Justice (DoJ).

“This settlement represents assets that rightfully belong to the Malaysian people. We are confident that we are securing more money from Goldman compared to previous attempts, which were far below expectations.

“We are also glad to be able to resolve this outside the court system, which would have cost a lot of time, money and resources. With this settlement, we will have the return of the monies expedited, and not held up by lengthy and costly court battles and legal process,” Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said in the statement.

Tengku Zafrul on Saturday said Goldman will pay US$2.5 billion cash to the government in the next two months.

He said the fund would be useful, particularly in settling 1MDB bonds which are maturing in 2022 and 2023.

Prime Minister (PM) Tan Sri Muhyiddin Yassin said in a statement last Friday that the government is committed to regaining other assets related to 1MDB and pursuing claims against individuals and parties related to the 1MDB scandal.

Goldman said the Malaysian government agreed to withdraw the pending criminal charges and that no further charges would be brought against the company, its subsidiaries, or any of their directors, officers and employees related to 1MDB, excluding former employees Tim Leissner and Roger Ng.

“Today’s settlement is an important step towards putting the 1MDB matter behind us and will help enable the Malaysian government to move forward with additional recovery efforts and to execute on its economic priorities.

“There are important lessons to be learned from this situation, and we must be self-critical to ensure that we only improve from the experience,” the New York, US-based investment banking firm said last Friday.

It said the agreement in principle does not resolve the other pending governmental and regulatory investigations involving the firm relating to 1MDB.

In December 2018, Malaysia filed criminal charges against three Goldman’s subsidiaries — Goldman Sachs International, Goldman Sachs (Asia) LLC and Goldman Sachs (Singapore) Pte Ltd — and their key employees Leissner and Ng, as well as 1MDB’s Jasmine Loo Ai Swan and Low Taek Jho, or Jho Low, for perpetrating a scheme to defraud the government and purchasers of three bonds with a face value of US$6.5 billion.

Goldman raised US$6.5 billion for 1MDB via the three bond sales in 2012 and 2013 and earned US$600 million of fees, according to the DoJ.

A bulk of the proceeds from the bond sales was allegedly misappropriated as orchestrated by Jho Low, including buying expensive artworks, properties, a private jet and super yacht and funding the production of Hollywood film “Wolf of Wall Street”.

In August last year, Malaysia filed criminal charges against 17 current and former directors of the three subsidiaries of Goldman under Sections 367(1) and 179 of the Capital Markets and Services Act 2007.

The Act deems any person who was a director, CEO, officer or representative of the company responsible for offences committed, unless the person is able to prove the offence was committed without their consent, or that they “exercised all such diligence to prevent the commission of the offence” in regard to their capacity in the corporation.

Last month, Tengku Zafrul said US$3 billion will not be enough for Goldman to settle the 1MDB legal proceedings, Reuters reported.

As it is, all the proceedings related to 1MDB wrongdoings implicating former PM Datuk Seri Mohd Najib Razak are currently ongoing at the High Court, while Jho Low remains on the loose.