Malaysia | KL files criminal charges against Goldman Sachs over 1MDB

Former Malaysian Prime Minister Najib Razak walks out of courtroom after a court hearing at Kuala Lumpur High Court

Malaysia filed criminal charges against Goldman Sachs and two former executives yesterday for their role in the alleged multibillion-dollar ransacking of state investment fund 1MDB.

Attorney General Tommy Thomas said the government is seeking several billion dollars in fines from Goldman Sachs for breaches of securities laws that involved it making false and misleading statements to investors.

He said his office will seek prison sentences of up to 10 years for the former Goldman executives, Roger Ng Chong Hwa and Tim Leissner, who is married to model Kimora Lee Simmons.

Malaysian and U.S. prosecutors allege that bond sales organized by Goldman Sachs for 1MDB provided one of the means for associates of former Malaysian Prime Minister Najib Razak to steal billions from a fund that was ostensibly set up to promote Malaysia’s economic development.

Outrage over the scandal, first reported by Sarawak Report and the Wall Street Journal, resulted in Najib and his party losing power in a historic election defeat earlier this year. Najib himself is facing corruption charges.

U.S. legal filings that are part of a Justice Department civil case to recover assets bought with 1MDB funds allege the money was used to finance Hollywood films and spent on luxuries such as diamond jewelry for Najib’s wife, a yacht, artworks and high-end properties.

Thomas said USD2.7 billion was stolen from three bond sales organized by subsidiaries of Goldman Sachs. The investment bank, he said, received $600 million in fees for organizing the bond deals, which was several times higher than industry norms.

Leissner and Ng conspired with Najib associate Jho Low, a key architect of the fraud, to bribe Malaysian government officials to use Goldman Sachs as the arranger of the bond deals, according to Thomas. They and Goldman Sachs knew that the money would be stolen, he said.

“Having held themselves out as the pre-eminent global adviser/arranger for bonds, the highest standards are expected of Goldman Sachs,” the attorney general’s statement said. “They have fallen far short of any standard. In consequence, they have to be held accountable.”

Prosecutors plan to seek fines “well in excess” of the amount allegedly stolen because of the severity of the violations of Malaysia’s laws, Thomas said.

Goldman Sachs denied any wrongdoing.

“We believe these charges are misdirected and we will vigorously defend them and look forward to the opportunity to present our case,” bank spokesman Edward Naylor said in a statement. “The firm continues to cooperate with all authorities investigating these matters.” AP