Here’s why Goldman Sachs is suing Malaysia

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For most people, the whole 1MDB scandal kind of ended when Najib got sentenced to 12 years of jail time back in 2022. Well, that’s not exactly true, cuz U.S. banking giant Goldman Sachs just announced they’re taking our government to court for something related to 1MDB.

And most of y’all are probably pretty fuzzy on the details – you might’ve heard the name Roger Ng, and vaguely know that he’s connected to Goldman Sachs somehow. Still, questions remain. How was the U.S. bank involved in the affair? Why are they, of all people, suing us?

To answer the first question…

Goldman Sachs helped 1MDB raise billions of dollars back in 2012-2013 by misleading investors

A couple of years after 1MDB Development Berhad was set up, they needed money to (allegedly) buy assets in the energy industry, and to do that, they approached Goldman Sachs in 2012 to help them issue bonds for sale to investors. How bonds work isn’t important here, the important thing is that Goldman Sachs is a household name, and they underwrote those bonds – basically, the bank bought 1MDB’s bonds, then resold them to investors for a profit.

Goldman Sachs was kind of like the middleman in that transaction, and investors know it’s cool to buy from them cuz they’re the second largest investment bank in the world by total revenue.

This sale reportedly netted 1MDB USD6.5 billion, and the U.S. bank received a very handsome USD600 million in fees. That USD600 million was, according to The American Prospect, at least ten times the usual going rate, with some analysts pegging it at over two hundred times.

Eventually, two ex-Goldman Sachs bankers were indicted in relation to the 1MDB scandal, and as it turns out, the bank had handwaved off numerous red flags that 1MDB showed, including:

There was significant staff and executive turnover
Those working there had little or no experience
The Chairman of the Board of Directors resigned abruptly in 2009 as did another director just weeks later;
The company sacked two massive auditing companies in four years
Jho Low was caught by Goldman’s own compliance system at least twice

Eventually, regulators investigated the deals in 14 countries, and Malaysia filed charges in December 2018 against three of the bank’s units for misleading investors. Fast forward about two years, and…

In 2020, the bank reached a settlement with Msia’s government… until Anwar came in

In July 2020, Goldman Sachs reached a settlement with the Malaysian government.

Explained very simply – Goldman Sachs agreed to pay our goverment USD$3.9 billion, and if Malaysia tak dapat at least USD$500 million by August 2022, the bank would have to pay us USD$250 million as a sort of one-time downpayment. In return, our government won’t pursue criminal charges.

Here’s the problem: this arrangement was made during Muhyiddin’s (Mahiaddin? Mayonnaise?) time as PM, and our current PM is apparently not happy with whatever’s been agreed to. Anwar indicated in April this year that he wants to review the settlement in an effort to recoup more of the lost funds, and he’s not all talk.

The Malaysian Anti-Corruption Commission (MACC) has recently made moves to obtain documents from lawyers involved in the settlement. According to MACC investigating officer, Mohamad Sabri, they suspected the lawyers of being involved with Goldman Sachs and relevant parties in reducing the settlement amount.

Apparently, the settlement sum was supposed to be USD$9.7 billion instead of the final USD$3.9 billion.

But according to Chetan Jethwani who represented Goldman, all of this is madness. He said that it was impossible for the original settlement sum to be USD$9.7 billion:

“…It was a matter of public record that the government was advised to and did in fact offer a sum of $4 billion by way of settlement. It is therefore impossible for there to be a reduction from $9.7 billion to US$3.9 billion which arose as a matter of corruption. The entire explanation as to why and how the government came to accept the settlement sum was also publicly explained,” – Chetan Jethwani, Goldman Sach’s lawyer to various news outlets

There’s also a dispute as to whether we’ve received the aforementioned USD$500 million as of August 2022, and both sides have been in talks, but Goldman Sachs has filed for arbitration with the London Court of International Arbitration last week in a bid to resolve things once and for all.

And as we wait and see how everything shakes out, time to speculate on why Anwar is doing whatever he’s doing.