Malaysia has targeted 17 Goldman Sachs former and current directors with criminal charges over their alleged failure to provide appropriate oversight in the 1Malaysia Development Bhd (1MDB) corruption scandal.
Malaysian prosecutors filed charges as part of an investigation into the investment banks’ role in raising US$6.5 billion for the sovereign wealth fund through bond sales, for which the US-based investment bank earned about US$600 million in fees.
Current Alibaba president Michael Evans, who joined the Chinese retail giant in 2015, is one of the names listed. Goldman’s former chief international banker, Richard Gnodde, was also charged.
Prosecutors say Goldman Sachs and some of its staff misled investors about the bond sales and US$2.7 billion was illegally diverted from the fund.
Malaysia is also asking Goldman Sachs to pay back the fees it earned from deals with 1MDB, which was set up in 2009 by Najib Razak, who later became prime minister. The US-based bank has offered to pay 1 billion ringgit (US$239 million) but Malaysian Prime Minister Mahathir Mohamad has said he wants more.
The charges come under the Malaysian Capital Markets and Services Act, which threatens jail terms of 10 years and a penalty of at least 1 million ringgit, 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,” Thomas said.
Goldman denied the charges.
“We believe the charges announced today, along with those against three Goldman Sachs entities announced in December last year, are misdirected and will be vigorously defended,” the firm said.
“Under the Malaysian legal process, the firm and the individual entity directors were not afforded an opportunity to be heard prior to the filing of these charges, which do not affect our ability to conduct our current business globally.”
The US Department of Justice is investigating Goldman’s role as underwriter and arranger of the bond offer.
An estimated US$4.5 billion was stolen from 1MDB between 2009 and 2014, according to US prosecutors.
Malaysian prosecutors in December filed charges against GS International, as well as former Goldman bankers Tim Leissner and Roger Ng. Leissner and Ng filed fraudulent documents while issuing 1MDB bonds.
Leissner, a former Goldman partner in Asean, pleaded guilty last year to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act and agreed to forfeit US$43.7 million.
The Malaysian government is seeking up to US$7.5 billion in reparations from Goldman over 1MDB.
Najib, who was defeated in the May 2018 general election, faces dozens of criminal charges related to 1MDB.
Goldman Sachs Tower. Picture credit: Wikimedia