Malaysia filed criminal charges Monday against U.S.-based investment bank Goldman Sachs, two of its former executives, fugitive financier Jho Low and a lawyer for allegedly misappropriating money through bonds linked with the 1MDB state fund in 2012 and 2013, officials said.
Goldman Sachs must be held accountable for benefiting from U.S. $600 million (2.5 billion ringgit) for underwriting and arranging the series of bonds, Malaysian Attorney General Tommy Thomas said, as he announced the latest move in a multinational investigation into alleged massive corruption at 1Malaysia Development Berhad (1MDB) under the previous government.
“In addition to personally receiving part of the misappropriated bond proceeds, those employees and directors of Goldman Sachs received large bonuses and enhanced career prospects at Goldman Sachs and in the investment banking industry generally,” Thomas said in a statement issued Monday.
“Their fraud goes to the heart of our capital markets, and if no criminal proceedings are instituted against the accused, their undermining of our financial system and market integrity will go unpunished.”
Low Taek Jho, who is better known as Jho Low, former Goldman Sachs executives Tim Leissner and Roger Ng Chong Hwa along with Jasmine Loo Ai Swan, an ex-legal counsel for the cash-strapped fund formally known as 1Malaysia Development Berhad (1MDB), made false or misleading statements to misappropriate $2.7 billion (11.25 billion ringgit) from the proceeds of the three bonds, according to Thomas.
They are charged with violating the Capital Markets and Services Act of 2007.
Because the Malaysian government considers the allegations to be grave violations of its securities law, it is seeking a criminal fine of more $2.7 billion along with the $600 million gained by Goldman Sachs, Thomas said. In addition, the defendants could face a maximum jail sentence of 10 years if convicted.
The Malaysian charges related to the bond issues are similar to charges filed by the U.S. government in November against Jho Low, Ng and Leissner. Leissner pleaded guilty to two charges of money laundering related to 1MDB and was fined $43.7 million (182 million ringgit).
Goldman Sachs, a powerhouse on Wall Street, denied any wrongdoing related to the Malaysian charges, the Associated Press reported.
“We believe these charges are misdirected and we will vigorously defend them and look forward to the opportunity to present our case,” Goldman Sachs spokesman Edward Naylor said in a statement. “The firm continues to cooperate with all authorities investigating these matters.”
In its indictment last month, the U.S. Department of Justice (DOJ) alleged that the conspirators cooked up three schemes to collect funds from 1MBD and diverted portions for their own use.
The first scheme, named Project Magnolia, began in early 2012, according to DOJ. Jho Low, Ng, Leissner and other unnamed conspirators allegedly agreed that assistance from Goldman, 1MDB would issue $1.75 billion in bonds guaranteed by an entity owned by Abu Dhabi’s government.
The U.S. government alleged that more than $500 million (2 billion ringgit) was misappropriated and diverted from 1MDB through wire transfers to bank accounts in the name of shell companies owned and controlled by Low, Leissner, Ng and other co-conspirators.
Beginning in May 2012 and running through 2013, the trio and unnamed conspirators pushed through a pair of bond transactions, Project Maximus and Project Catalyze, designed to raise more than $4 billion (16.7 billion ringgit) for 1MDB projects, the DOJ alleged.
“More than $2.7 billion (11.25 billion ringgit) was misappropriated from 1MDB and Jho Low, Ng, Leissner and others conspired to launder this money through the U.S. financial system to pay bribes to foreign officials and for the personal benefit of themselves and their relatives,” the U.S. government said at the time.
Among those named in the U.S. indictment as having received kickbacks were Malaysian Official 1 (MO1) and his wife, referred to as “the Madam,” in email correspondence among the three. MO1 has not been named in previous lawsuits related to 1MDB filed by the Justice Department, but sources have identified him as former Prime Minister Najib Razak, who faces 39 charges related to 1MDB in Malaysian courts.
Najib established 1MDB in 2009 to fund development projects throughout Malaysia. Investigators allege that $4.5 billion (18.7 billion ringgit) was embezzled from the beleaguered fund and laundered through real estate and other assets.
Guilt ‘predetermined by politics’
Jho Low, through a statement issued by an Australian public relations firm on Monday, maintained his innocence and asserted that he would not be given a fair trial in Malaysia.
“Mr. Low will not submit to any jurisdiction where guilt has been predetermined by politics and there is no independent legal process,” the statement attributed to Benjamin Haslem, co-CEO of Sydney-based Wells Haslem Mayhew Strategic Public Affairs.
Ng, who was arrested in Malaysia in relation to the U.S. charges, is the only one of the four defendants in custody. On Dec 13, a Malaysian court declined Ng’s application to be released on bail as High Court Judge Collin Lawrence Sequerah branded him as likely to abscond.
“This is a special circumstance case and Ng is a flight risk,” the judge said.
Ng is expected to be extradited to the United States to face trial there.
Malaysian officials have said that Jho Low and Loo absconded and were to be extradited when captured.