Wednesday, October 28, 2020

1MDB Money Laundering Trial: Goldman exploited 1MDB in a money-laundering conspiracy scheme

-

GOLDMAN Sachs stood to gain an astonishing RM3.18 billion had 1Malaysia Development Bhd’s (1MDB) acquisition of Tanjong Energy Holdings Sdn Bhd not materialised because it had agreed that the US investment firm would be entitled to 30% of the RM10.6 billion deal in the event it was terminated, former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi testified last week in the 1MDB-Tanore trial involving former prime minister Datuk Seri Najib Razak.

Should Goldman’s service as adviser be terminated midway, it would be eligible to “30% of Tanjong Energy’s acquisition cost in cash”, according to a clause in the deal.

Amazingly, 1MDB saw fit to agree to such a clause, which was likely inserted by Goldman Sachs to protect its interests following its appointment in 2012 as the state investment fund’s financial adviser for the Tanjong Energy acquisition. Its fee for the deal was set at a more reasonable 0.5% of the acquisition cost, or RM53 million.

Three years earlier, in March 2009, Goldman Sachs had its first dealings with 1MDB when it was appointed the international adviser and lead coordinator for proposed international capital fundraising by the then Terengganu Investment Authority (which later morphed into 1MDB).

- Advertisement -

Shahrol implied that fugitive financier Low Taek Jho, better known as Jho Low, had been instrumental in recommending Goldman Sachs, which became the go-to investment firm for 1MDB in its business transactions from 2009 onwards.

In his testimony before High Court judge Collin Lawrence Sequerah, Shahrol spoke of a meeting between Najib and Llyod Craig Blankfein — the then Goldman Sachs group CEO — during a visit to New York.

The meeting at Najib’s suite at Four Seasons Hotel on Nov 22, 2009, was also attended by Shahrol and the then 1MDB chairman Tan Sri Lodin Wok Kamaruddin.

“Jho Low and Tim Leissner (the then Goldman Sachs Asia CEO) acted as matchmakers for the meeting. Jho Low was the facilitator for Datuk Seri Najib while Leissner was the facilitator for Llyod Craig Blankfein,” Shahrol said.

- Advertisement -

“If I recall [correctly], that was when Datuk Seri Najib requested Blankfein and Goldman Sachs to support and consult on 1MDB investments. At the time, the prime minister asked Goldman Sachs for its commitment to 1MDB.”

He said Lodin and he left the meeting first while Jho Low, Leissner, Najib and Blankfein stayed on. “After the meeting, my confidence in any financial arrangements through Goldman Sachs became higher.

“Whenever Jho Low brought in Goldman Sachs for 1MDB’s investments and financial arrangements, I assumed it was made with the prime minister’s knowledge.

“I accepted Jho Low’s recommendation to use Goldman Sachs’ services in good faith, considering a high-level meet had taken place between the prime minister and Goldman Sachs (Global) CEO for the collaborations.”

In any event, the investment bank subsequently made quite a killing when it was appointed by 1MDB to arrange a US$1.75 billion bond issue to part-fund the acquisition of Tanjong Energy’s two gas-fired power plants.

From the proceeds, US$196 million was deducted for “certain commissions, fees and expenses”. According to previous reports, Goldman Sachs charged a 10% commission fee, or US$175 million (around RM532 million at the time), even though the coupon rate of the bond of 5.99% — way above industry norms, never mind for a government-issued paper — would have made them an easy sell.

After the first bond issuance, 1MDB voluntarily collaborated with Goldman Sachs again, letting the firm arrange two more issues — amounting to US$1.75 billion and US$3 billion — to finance its other acquisitions.

In total, Goldman Sachs helped 1MDB raise US$6.5 billion and reportedly pocketed a staggering US$600 million throughout its entire dealings with the beleaguered fund.

The Malaysian government is suing Goldman Sachs for US$2.7 billion that was allegedly misappropriated from the proceeds of the three bonds, plus the return of the US$600 million fees.

The High Court has fixed Oct 30 for case mention.

Source: Edgemarkets.com

MUST READ

South Korea’s former Vice Justice Minister sentenced to jail for bribery and sexual favors

Former Vice Justice Minister Kim Hak-eui, the figure at the center of one of Korea’s biggest political sex scandals, was placed under pretrial detention...

Beam Suntory Inc. fined $19.6 million in foreign bribery case

Beam Suntory Inc. (Beam), a Chicago-based company that produces and sells distilled beverages, has agreed to pay a criminal monetary penalty of $19,572,885 to...

Julius Baer to deny two former CEOs their bonuses over money laundering scandal

Julius Baer will withhold millions of francs in bonuses from its former chief executives Boris Collardi and Bernhard Hodler, as a result of a...

Goldman Sachs executives to cover part payments of $3 billion fines in 1MDB scandal

Nine current or former Goldman Sachs executives, including CEO David Solomon, will have to pay back hundreds of millions of dollars in compensation over...

Goldman Sachs agrees $3 billion settlement with US DoJ over 1MDB corruption scandal

Goldman Sachs has agreed to pay nearly $3bn (£2.3bn) in the US to end a probe of its role in Malaysia's 1MDB corruption scandal. The...

Subscribe For More

Get our daily notification on the latest financial crimes news around the World

Advertisement
Advertisement

Latest News

This Week

Two U.S. Navy service members get prison for defrauding military insurance program

Two U.S. Navy service members were sentenced in San Diego federal court Friday for their roles in an insurance fraud scheme that involved making false medical claims to...

Goldman Sachs agrees $3 billion settlement with US DoJ over 1MDB corruption scandal

Goldman Sachs has agreed to pay nearly $3bn (£2.3bn) in the US to end a probe of its role in Malaysia's 1MDB corruption scandal. The...

Beam Suntory Inc. fined $19.6 million in foreign bribery case

Beam Suntory Inc. (Beam), a Chicago-based company that produces and sells distilled beverages, has agreed to pay a criminal monetary penalty of $19,572,885 to...

Texas AG Ken Paxton fires second whistleblower who accused him of bribery

A second whistleblower has been fired from the Texas attorney general’s office after reporting his boss, Texas Attorney General Ken Paxton, to law enforcement for...
Advertisement

Adblock Detected!

Our website is made possible by displaying online advertisements to our visitors. Please consider supporting us by whitelisting our website.

Enable Notifications    Ok No thanks