23-1-2024 (KUALA LUMPUR) Malaysia is contemplating initiating legal proceedings against foreign banks connected to the multi-billion dollar corruption scandal of 1Malaysia Development Berhad (1MDB), according to Datuk Seri Johari Abdul Ghani, the chairman of the 1MDB asset recovery task force. While he did not disclose the names of the foreign banks, Johari stated that they had failed to conduct proper due diligence before facilitating fund transfers associated with the sovereign fund.
Both Malaysian and United States investigators estimate that around US$4.5 billion (S$6 billion) was embezzled from 1MDB, implicating a former Malaysian prime minister, Goldman Sachs employees, and high-ranking officials from other countries.
In 2021, Malaysia filed lawsuits against units of Deutsche Bank, JP Morgan, and Coutts in an attempt to recover billions of dollars in alleged losses from the fund. However, the cases have yet to progress in court.
“The 1MDB task force is fully committed to addressing the 1MDB matter transparently and holding all parties accountable,” stated Johari in a released statement.
Additionally, he revealed that Malaysia had responded on November 8 to an arbitration request from Goldman Sachs, and the two parties were currently in the process of agreeing on a procedural timetable.
In 2020, Goldman Sachs agreed to pay US$3.9 billion to settle Malaysia’s criminal investigation into its role in the scandal. However, the current disagreement revolves around the settlement, which stipulates that Goldman should make an interim payment if Malaysia fails to recover at least US$500 million from the firm by August 2022.
Goldman Sachs sued Malaysia in a British court in October 2023, alleging that the Malaysian government breached its obligations to appropriately credit assets against the guarantee provided by Goldman in the settlement agreement, and to recover other assets worth US$1.4 billion.
Denying the allegations of breaching the settlement deal, Malaysia accused Goldman Sachs on January 23 of attempting to offset 1MDB fines and settlements recovered from other institutions, such as AmBank and Abu Dhabi’s International Petroleum Investment, against the sum of US$1.4 billion.
Johari clarified that the fines and settlements were outside the scope of Goldman’s asset recovery guarantee.
Furthermore, the 1MDB task force is investigating whether negotiators and lawyers representing the Malaysian government at the time failed to secure a fair and adequate settlement from Goldman, considering the firm’s role in the scandal.
Johari highlighted that Goldman had assisted 1MDB in raising US$6.5 billion through bond sales, earning a fee of US$600 million, which he deemed “unusually high.”
“Such lapses on the part of negotiators and lawyers, in failing to negotiate a fair and clear settlement agreement, have compromised the government of Malaysia’s position in the ongoing dispute,” Johari expressed.
