Inside Goldman’s five-day race to seal a 1MDB deal with Malaysia
03 Aug 2020

As negotiators from Goldman Sachs Group Inc. and the Malaysian government gathered at the Mandarin Oriental hotel in Kuala Lumpur last week, the two sides could hardly have been further apart on a 1MDB deal.

The storied U.S. bank, needing to turn the page on one of the biggest scandals in its history, started with the same offer it made to the previous government: $1.75 billion.

While this was a step up from the 1 billion ringgit ($235 million) that former leader Mahathir Mohamad said the bank offered last year, it was a far cry from Malaysia’s demand: more than $7 billion to resolve probes into the role Goldman’s bankers played in a scheme to plunder the nation’s sovereign wealth fund.

With that glaring $5.25 billion gap, the two sides dug in to negotiate in a meeting room at the Kuala Lumpur five-star hotel, a favorite of the country’s former monarch, perched steps from the iconic Petronas Twin Towers.

This account of the talks is from people familiar with the negotiations who declined to be identified discussing private matters. A representative for Goldman declined to comment, while the prime minister’s office couldn’t immediately comment on the matter.

Digging In

Goldman flew some heavy hitters 9,400 miles (15,200 kilometers) from New York to sit at the table. Chief of Staff John Rogers, once an aide to former President Ronald Reagan, was there. So was General Counsel Karen Seymour, famous for prosecuting Martha Stewart. Lawyer David Markowitz posed a particular challenge for Malaysia, digging his heels in the most.

On the other side, Malaysia brought its top lawyers including Prime Minister Muhyiddin Yassin’s attorney Rosli Dahlan, as well as Secretary General of Treasury Asri Hamidon and Securities Commission Chairman Syed Zaid Albar.

Negotiations dragged on through the week. Long days stretched into night, with hotel staff delivering boxed meals including local rice dishes, in keeping with Covid-19 measures. The talks stalled a few times as Malaysia pressed Goldman to cough up more toward the billions the country alleges were siphoned away to buy condos, jewelry and art.

Goldman’s investment-banking group, led at the time by now-Chief Executive Officer David Solomon, collected an unusually high $600 million for its work raising $6.5 billion from bond sales for the 1MDB fund. The bank has consistently denied wrongdoing, saying that former Malaysian officials lied about how the proceeds would be used.

When a $2.2 billion offer was put on the table, Malaysia said it wasn’t enough.

Yet the two sides kept at it, both highly motivated to reach a deal. For Goldman, a Malaysia settlement would go a long way in securing a resolution with the U.S. Department of Justice, which is also probing the 1MDB affair. Attorney General William Barr is overseeing the case after getting a waiver because his former law firm represents Goldman. A defeat of Donald Trump in November elections could upset that plan if there’s no settlement by then.

Several Goldman bankers have already paid a price for the scandal. Former Southeast Asia Chairman Tim Leissner pleaded guilty to U.S. charges including conspiracy to launder money. Former banker Roger Ng faces similar charges while Andrea Vella, a former co-head of investment banking in Asia, was banned from the industry by the Federal Reserve this year.

By Yantoultra Ngui, Elffie Chew, Hadi Azmi and Cathy Chan, Bloomberg, 30 July 2020

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