Analyst: Government has the right to recover Goldman fees

KUALA LUMPUR: The Malaysian government has the right to question the legitimacy of the fees charged in financial deals by Goldman Sachs, says an analyst.

Economist Shan Saeed said the fee structure should be based on market norms rather than extra charges for nominal work.

“All the emerging market governments are closely scrutinising the global banks in terms of how many times they have made the right calls and how responsible and accountable they are to their investors.

“They are also scrutinised on the effort they are putting in taking care of their clients’ funds and how fair they are in the country’s economic and growth outlook forecasts,” he told Bernama.

He was responding to a recent report quoting Prime Minister Dr Mahathir Mohamad as saying that Malaysia would seek to recover US$4.5 billion of funds potentially lost through 1MDB, as well as fees paid to Goldman Sachs Group Inc.

The government is considering asking the US Department of Justice (DoJ) to get Goldman Sachs to return nearly US$600 million in fees it earned from bonds raised for 1MDB.

According to Saeed, there are also questions on how smart global banks are getting market intelligence for the equity/bond/currency market and how genuine they are in understanding the economy based on the facts and figures.

“Many central banks globally are advising banks in areas like risk and compliance, human resources, asset management and capital adequacy ratio.

“If you recall, the Indonesian government asked JP Morgan to close shop last year after it made a wrong assessment on the country’s economy and financial market.

“The Indonesian government cut off ties with JP Morgan. It was all reported in the global media and press,” he said, adding that it was perfectly legitimate for the government to recover money from Goldman and ask them to refund the extra fees they had charged.

The economist said global banks should not dictate to governments but should instead forge a partnership to build the financial markets of the country and bolster the government’s efforts to devise an economic strategy.

He said global banks should play a strategic role in policy framework and maintain economic confidence in the country.

Meanwhile, Oh Ei Sun, the senior adviser for international affairs at the Asian Strategy and Leadership Institute, said the new administration, having played the role of vigilant watchdog during its many years in the opposition, was extremely scrupulous in its adherence to the rule of law when it came to investigations into alleged misdeeds by the previous government.

In fact, he said, the government had also started to collaborate with related investigations launched by concerned foreign countries, in stark contrast with the previous government which was seen as stonewalling any genuine investigation.

“So if the relevant evidence points to wrongdoing and therefore the possibility of recovering misappropriated funds, it is only natural that the government would like to pursue these money trails, not least with the hope that if recovered, they could be used to partially offset the recently unearthed massive national debts,” he said.