Malaysia is seeking US$7.5 billion in reparations from Goldman Sachs Group Inc over its dealings with scandal-linked state fund 1Malaysia Development Berhad (1MDB), the Financial Times reported yesterday, citing Malaysian Minister of Finance Lim Guan Eng (林冠英).
Malaysian prosecutors this week filed charges against Goldman Sachs in connection with its role as underwriter and arranger of three bond sales that raised US$6.5 billion for 1MDB, the first criminal action against the US bank over the scandal.
Goldman Sachs has denied wrongdoing and said certain members of the former Malaysian government and 1MDB lied to the bank about the proceeds of the bond sales.
In addition to the bonds’ total value, Goldman Sachs should also return US$1 billion to cover US$600 million in fees paid to the bank and bond coupons that were “higher than the market rate,” the Financial Times quoted Lim as saying.
The three 10-year bonds carried coupons ranging from 4.4 percent to 5.99 percent.
Lim also told the Financial Times that reparations should at least be more than US$1.8 billion, the sum Goldman Sachs has told investors it had set aside to cover potential losses related to 1MDB legal proceedings.
“Their figure is [US]$1.8 billion. Ours is [US]$7.5 billion,” Lim said.
Goldman Sachs did not immediately respond to reporters’ request for comment.
The bank told the Financial Times: “The 1MDB bond offerings were meant to raise money to benefit Malaysia; instead, a huge portion of those funds were stolen for the benefit of members of the Malaysian government and their associates.”
Malaysia has sought jail terms and billions in fines from Goldman Sachs and four individuals who allegedly misappropriated about US$2.7 billion from the 1MDB bond proceeds.
Two former Goldman Sachs bankers, Tim Leissner and Roger Ng (黃宗華), were among those charged.
Singapore has banned Leissner, the bank’s former Southeast Asia chairman, from its securities industry for life after he pleaded guilty in the US for conspiring to launder 1MDB money and contravene the US Foreign Corrupt Practices Act.
The city-state has expanded a criminal probe into fund flows linked to 1MDB to include Goldman Sachs, people with knowledge of the matter said.
Authorities are trying to determine whether some of the about US$600 million in fees from the three bond deals Goldman arranged for 1MDB from 2012 to 2013 flowed to the Singapore subsidiary, they said.
Singapore is coordinating closely with the US Department of Justice, which is also investigating Goldman and has filed criminal charges against two former senior bankers at the firm, the people said.
“The firm continues to cooperate with all authorities investigating this matter,” Goldman spokesman Edward Naylor said.
The US is also seeking extradition of Ng, who has been detained in Malaysia.
Malaysia is not negotiating with Goldman, but charges filed on Monday could bring the bank to the table, Lim said.
Additional reporting by Bloomberg
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