Report: AG Thomas to file RM19 bil suit against Goldman Sachs

KUALA LUMPUR: Putrajaya is preparing to file a civil suit against Goldman Sachs seeking US$4.5 billion (RM18.88 billion) in damages for the US investment bank’s role in raising funds that were later misappropriated from 1MDB, according to a report in Asia Times.

This comes in the wake of Abu Dhabi’s International Petroleum Investment Company (IPIC) and subsidiary Aabar Investments filing a suit on Nov 21 against Goldman Sachs for allegedly paying bribes to former fund officials in the 1MDB scandal.

Quoting “sources familiar with the preparations”, the Asia Times report said Attorney-General Tommy Thomas Thomas would argue that knowledge of the fraud reached the highest levels of the bank’s management.

The suit will name senior Goldman executives, including those yet to be charged in a recently filed US Department of Justice (DoJ) criminal case.

According to the report, Putrajaya will argue that senior Goldman executives knew that proceeds from three 2012 1MDB bond issues the bank arranged were funneled into a company, Aabar BVI, that was set up in the British Virgin Islands to resemble a similarly named company, Aabar Investments, belonging to the guarantor of the bonds, Abu Dhabi’s International Petroleum Investment Company (IPIC).

The report said Malaysia’s new US$4.5 billion civil suit could lead to a new sell-off of the New York-based bank’s publicly listed shares.

IPIC and Aabar Investments, after filing the suit, had said in a statement: “Goldman Sachs conspired with individuals from Malaysia to bribe and corrupt two officials, Khadem Abdulla Al Qubaisi and Mohamed Ahmed Badawy Al-Husseiny to further the business of Goldman Sachs and 1MDB at the expense of IPIC and Aabar’s business interests.”

The DoJ had earlier charged two former Goldman Sachs bankers – Tim Leissner and Roger Ng – as well as fugitive financier Low Taek Jho, or Jho Low, for their roles in enabling the misappropriation of funds from 1MDB.

On November 12, Finance Minister Lim Guan Eng had said Putrajaya would seek the return of US$600 million in fees Goldman earned in raising a total of US$6.5 billion for 1MDB in three separate bond issuances between 2012 and 2013.

According to the Asia Times, the stark jump in damages sought from US$600 million to US$4.5 billion, as well as Malaysia’s intent to file a formal civil case against Goldman, reflects a new level of confidence in the Mahathir Mohamad government’s pursuit of justice for 1MDB-related fraud in foreign jurisdictions.

It suggested, the report said, that Mahathir was adopting an “aggressive yet practical approach” in fulfilling his campaign promise to swiftly recover billions of dollars pilfered from 1MDB, noting that the pledge was key to the ruling Pakatan Harapan’s landslide election win that deposed Najib Razak and the Barisan Nasional government.

“Until now, it appeared that Malaysia’s efforts to recoup lost 1MDB funds would rely largely on collaboration with the US DoJ in a global dragnet aimed at building civil and criminal cases against alleged 1MDB fraudsters to recover assets and funds scattered across over a dozen global jurisdictions.

“While this apparently remains the cornerstone of Malaysia’s 1MDB recovery strategy, the slow pace of DoJ investigations into various individuals to date has evidently spurred Thomas to pursue a swifter legal remedy by targeting Goldman in US courts,” the report said.

Thomas had announced on Oct 30 that his office would challenge a “consent award”, signed by Najib and filed at London’s Court of Arbitration, that requires Malaysia to pay US$5.78 billion to IPIC over five years as a guarantor of the 1MDB bonds Goldman helped to issue.

The fee includes substantial interest payments, which if paid, will inevitably be shouldered by Malaysian taxpayers. As of October 2018, the Malaysian government owed IPIC US$1.2 billion under the agreement, an amount Mahathir’s government has recently sought to set aside.

Najib, who created 1MDB, has since been charged with money laundering. He has claimed trial.