17 Oct 2019
Goldman Sachs has been negotiating with the Malaysian authorities to drop criminal charges against three of its subsidiaries in connection with three bond issues by 1Malaysia Development Berhad, or 1MDB.
The government is seeking $3.3 billion in compensation from the U.S. investment bank, accusing it of helping a Malaysian businessman loot the state-backed fund.
Malaysian Attorney General Tommy Thomas told the Nikkei Asian Review that two rounds of talks have taken place so far, but that the parties have not yet arrived at an agreement on the amount of compensation. Thomas leads Malaysia’s negotiating team.
“We have had some preliminary meetings, but the gulf is still very wide,” Thomas said on the sidelines of the International Directors Summit, organized by the Institute of Corporate Directors Malaysia.
“Both the criminal charges and settlement negotiations are happening in parallel. They are not mutually exclusive,” Thomas said.
Malaysia is the first country in the world to prosecute Goldman Sachs as a company, filing charges in December against Goldman Sachs (Asia) LLC, Goldman Sachs International (UK) and Goldman Sachs (Singapore), and is seeking $2.7 billion in fines. The government alleges that Goldman Sachs misled investors in the issue of the three 1MDB bonds. It is also demanding the return of $600 million that the investment bank pocketed as fees.
Malaysia has announced separate charges against 17 current and former Goldman executives, whom it accuses of misleading investors by making false statements and omitting key facts in relation to the 1MDB-related bond issues worth $6.5 billion. Malaysian Prime Minister Mahathir Mohamad said in June that Goldman had offered $239 million in compensation, an amount he described as “little,” given the “huge killing” made by the investment bank.
The government’s case is set to come before the Magistrate Court, the lower court in Malaysia, on Oct. 22 and will later be transferred to the High Court.
Thomas said the settlement negotiations with Goldman may continue until the opening of the criminal trial. “We can always reach a settlement on the first day of the trial. A lot of cases are even settled even after the trial begins. So the doors for discussion are still open while the prosecution readies the criminal case.”
“See you in court,” Thomas said. “We have a strong case and are very confident of winning it. But if you want to negotiate, the doors are open.”
Goldman faces charges of misconduct and material omissions on the bonds’ prospectuses. They include material omissions regarding fugitive Malaysian businessman Low Taek Jho, also known as Jho Low, who was allegedly involved in siphoning money from 1MDB.
By P Prem Kumar, Nikkei Asian Review, 17 October 2019
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