The Malaysian government on Thursday (12/10) questioned Goldman Sachs’ move to submit to arbitration in a dispute related to the looting of billions of dollars in sovereign wealth funds.
Johari Abdul Ghani heads a task force to recover lost assets from a government fund known as 1MDB. He said it was too early to seek arbitration as talks were still ongoing to resolve the conflict and accused the US bank of trying to divert attention from its payment obligations.
Under a 2020 deal, Goldman Sachs paid Malaysia $2.5 billion to settle criminal charges in the 1MDB case. They also guaranteed they would help recover $1.4 billion in 1MDB assets, including $500 million by August 2022. If that fails, they will have to spend $250 million as an interim payment. The two parties were at odds over the interim payments.
Malaysia said Goldman Sachs failed to recover the amount agreed last year and had to pay $250 million. The bank disagrees.
Johari said the government had extended the deadline for talks four times. Malaysia may initiate arbitration proceedings if a settlement is not reached by November 8, he said.
“At this time, the parties involved are still considered to be in the discussion stage in good faith and therefore as the aggrieved party, the 1MDB task force views the initiation of the arbitration process by Goldman Sachs as premature,” he said in a statement.
Malaysia will respond in accordance with the established legal framework and ensure that people’s interests are protected, Johari added without elaborating.
Investigators say more than $4.5 billion was stolen from 1MDB, a fund set up by Malaysia’s then leader, Najib Razak, to finance economic development projects. These funds were later embezzled by a number of parties to buy yachts and real estate as well as to finance the 2013 film “The Wolf of Wall Street”.
The scandal led to Najib’s defeat in the 2018 election. He began serving a 12-year prison sentence last year after losing an appeal court over his conviction in the first corruption case linked to 1MDB. Malaysian investor Low Taek Jho, accused of being the plot’s architect, is an international fugitive.
Goldman Sachs managed $6.5 billion worth of bonds for the fund in 2012 and 2013, and earned fees of more than $600 million. Roger Ng Chong Hwa, one of two former Goldman bankers indicted in the US, was sentenced to 10 years in prison in March. His prison term was postponed because Ng was sent back to Kuala Lumpur at the weekend to help with efforts to recover 1MDB assets, officials said.
Tim Leissner, Ng’s former boss at Goldman Sachs, pleaded guilty in 2018 to bribing several government officials in Malaysia and the United Arab Emirates. He was ordered to pay $43.7 million and became the government’s key witness during Ng’s two-month trial. He has not been sentenced. (ab/uh)