1MDB: Malaysia charges Goldman Sachs and two bankers

Image source, Reuters

Malaysia has filed criminal charges against Goldman Sachs and two former employees in connection with a corruption and money laundering probe at the country's investment fund, 1MDB.

The US bank has been under scrutiny for its role in helping to raise funds for the 1Malaysia Development Bhd (1MDB).

It is being investigated in at least six countries.

Goldman Sachs called the charges "misdirected" and said it would "vigorously defend them".

"The firm continues to co-operate with all authorities investigating these matters," the bank added.

Malaysia filed the charges against Goldman Sachs and its former bankers Tim Leissner and Roger Ng.

Mr Leissner served as Goldman's South East Asia chairman, and left the bank in 2016. Mr Ng was a managing director at Goldman until his departure in May 2014.

Malaysia also filed charges against local financier Low Taek Jho, also known as Jho Low who maintains his innocence, and former 1MDB employee Jasmine Loo Ai Swan.

Last month, Mr Leissner, Mr Ng and Mr Low were served with criminal charges in the US in relation to 1MDB.

Mr Leissner pleaded guilty in the US to conspiring to launder money and violating anti-bribery laws.

Image source, Getty Images
Image caption,
Jho Low (right) is seen with Wolf of Wall Street star Leonardo DiCaprio in 2013

US prosecutors said Mr Leissner and Mr Ng worked with Mr Low to bribe government officials to win 1MDB business for Goldman Sachs.

Authorities in the US said billions of dollars were embezzled from the state fund - which was set up by the Prime Minister Najib Razak in 2009 - and were used to buy a list of expensive properties, and even finance the Wolf of Wall Street movie.

They allege that among the things bought by the money were:

  • L'Ermitage hotel property and business
  • Park Lane Hotel assets in New York
  • Four California properties
  • Four New York properties
  • One London property
  • A private jet
  • EMI assets, including royalties
  • Van Gogh painting
  • Two Monet paintings

Malaysia's attorney general Tommy Thomas said in a statement: "The charges arise from from the proceeds of three bonds issued by the subsidiaries of 1MDB, which were arranged and underwritten by Goldman Sachs."

The scandal has prompted investigations around the world and played a role in the election defeat earlier this year of Mr Razak who is accused of pocketing $700m (£517m) from the fund.

Analysis: How bad is this for Goldman Sachs?

By Natalie Sherman

Malaysia has made its indictment against Goldman Sachs public - the first time a government has brought criminal charges against the bank over the 1MDB scandal.

Now investors are waiting to see what the US Department of Justice will do.

The case US prosecutors outlined last month against bankers Tim Leissner, Roger Ng and Malaysian financier Jho Low left Goldman's role up for debate.

Image source, Getty Images
Image caption,
Tim Leissner, the former chairman of Goldman Sach's South East Asia operation, is married to model and fashion designer Kimora Lee Simmons

Goldman Sachs underwrote around $6bn in bonds issued by 1MDB in three separate offerings between 2012 and 2013.

The Department of Justice accused the men of working around Goldman's compliance office to do the deals.

But it also noted that "other employees" had helped execute transactions in connection with 1MDB and in his guilty plea, Mr Leissner said his actions were "very much in line" with the bank's culture.

So will US officials decide the bank had weak oversight?

Already, the investigation has clouded the reputation of departing chief executive, Lloyd Blankfein, while adding to troubles at the bank, which has performed relatively poorly compared to its rivals this year.

That said, a decade of post-financial crisis scandals has left Wall Street's banks bigger and more profitable than ever.

If the US Department of Justice chooses, for example, to level a fine against Goldman Sachs, it is questionable just how much impact that would really have on the financial giant.

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