Malaysia yesterday filed criminal charges against 17 current and former directors of three Goldman Sachs subsidiaries, piling further pressure on the Wall Street titan over the multibillion-dollar 1Malaysia Development Bhd (1MDB) scandal.
Huge sums were looted from the sovereign wealth fund in a globe-spanning fraud that allegedly involved former Malaysia prime minister Najib Razak and his inner circle.
Goldman’s role has been under scrutiny, as it helped arrange a series of bond issues worth US$6.5 billion for the investment vehicle.
Malaysian Prime Minister Mahathir Mohamad last year reopened investigations into the 1MDB affair after defeating Najib at the polls, in large part due to public anger at the scandal, and pressure has been steadily mounting on the bank since.
Announcing the latest charges, Malaysian Attorney General Tommy Thomas said: “Custodial sentences and criminal fines will be sought against the accused ... given the severity of the scheme to defraud and fraudulent misappropriation of billions in bond proceeds.”
Goldman said in a statement that it believed the charges were “misdirected” and would be “vigorously defended.”
Thomas identified the 17 accused, who he said were directors of three Goldman subsidiaries in 2012 and 2013.
In December last year, Malaysia filed charges against the units — Goldman Sachs International, Goldman Sachs (Asia) and Goldman Sachs (Singapore) — and two former employees. They were accused of giving false statements that led to US$2.7 billion being misappropriated in relation to the bond issues.
Goldman vowed to fight those charges, saying that the former Malaysian government and 1MDB lied to the bank.
Yesterday’s charges were filed under laws that stipulate that directors, CEOs and other corporate representatives in position at the time of an offense are also deemed to have committed that crime, the statement said.
However, this does not apply in cases in which someone can prove that the crime was committed without their consent or that they sought to prevent it from being committed.
Goldman earned about US$600 million in fees for helping 1MDB arrange three bond issues in 2012 and 2013.
The Malaysian government has said that the payments were far above regular market rates, and is seeking compensation of US$7.5 billion from the bank in relation to the scandal.
The two former employees charged in December, Tim Leissner and Ng Chong Hwa (吳崇華), were also indicted in the US. Leissner has already pleaded guilty in the US, while Ng was extradited to the US from Malaysia in May and pleaded not guilty.
The alleged mastermind of the scandal — Malaysian financier Low Taek Jho (劉特佐), who was close to Najib — has been charged in Malaysia and the US, but remains at large.
The US Department of Justice, which is investigating the scandal, as money was allegedly laundered through the US financial system, said that it believes US$4.5 billion was looted from the fund.
Those funds were allegedly spent on luxury goods ranging from a super-yacht to high-end real estate and art.
Since his shock election loss, Najib has been hit with dozens of charges over the scandal and went on trial in April.
He has denied any wrongdoing.
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