1MDB scandal: Malaysia files criminal charges against Goldman Sachs

Malaysia today filed criminal charges under local securities laws against Goldman Sachs subsidiaries over three bonds worth $6.5 billion that the US investment bank had handled for 1Malaysia Development Berhad (1MDB).

Goldman subsidiaries and ex-bankers Tim Leissner and Ng Chong Hwa are accused of misappropriating $2.7 billion, bribing officials and giving false statements when helping to arrange bonds for state fund 1MDB.

“The charges arise from the commission and abetment of false or misleading statements by all the accused in order to dishonestly misappropriate US$2.7 billion from the proceeds of three bonds issued by subsidiaries of 1MDB, which were arranged and underwritten by Goldman Sachs,” Attorney General Tommy Thomas said in a statement.

Both former Goldman employees had already been charged over the scandal in the US last month, with Leissner pleading guilty while Ng was arrested in Malaysia. Low Taek Jho, a Malaysian financier accused of masterminding the fraud, was also hit with new charges.

Leissner, who worked as Southeast Asia chairman and managing director at Goldman, and Ng, a managing director at the bank, conspired with Jho and others to bribe Malaysian officials to ensure that Goldman was selected to work on the bonds, Thomas said in a statement.

The money earned by Goldman for the bond issuances was “several times higher than the prevailing market rates and industry norms”, the statement said.

Those accused personally benefited from receiving stolen funds and also got large bonuses and improved their career prospects, and false statements were presented to investors suggesting the proceeds of the issuances would be used for legitimate purposes, Thomas said.

Malaysia’s new Prime Minister Mahathir Mohamad, who came to power in part on a pledge to investigate the 1MDB scandal, has been taking an increasingly tough line against Goldman and has accused the bank of having “cheated” the country.

A steady stream of negative news concerning the scandal has come out of the US, focusing on the great lengths the bank went to in courting 1MDB.

It emerged last month that former Goldman chief Lloyd Blankfein met with Jho – commonly known as Jho Low – at a reception in 2009 hosted by Najib at a hotel in New York while the ex-premier was visiting the US.

A Goldman Sachs spokesman said in a statement, the charges were “misdirected” and the bank would vigorously defend against them. The bank continued to cooperate with all authorities in their investigations, he said.