Malaysia filed criminal charges on Friday against a top executive at Goldman Sachs, a former executive who now works for Alibaba of China and others as it intensifies pressure on the Wall Street bank in a scandal involving the misuse of billions of dollars in government funds.
The charges escalate the legal challenges for Goldman, which has come under scrutiny for its role in a multibillion-dollar international fraud scandal that led to the ouster of Najib Razak as Malaysia’s prime minister.
Two of Goldman’s former bankers face charges in the United States of bribery and money laundering related to its Malaysia business. Malaysia filed criminal charges against Goldman in December. Its finance minister has said the government would seek $7.5 billion in compensation from the bank.
On Friday, Malaysia’s attorney general charged Richard John Gnodde, the chief executive of Goldman Sachs International, and John Michael Evans, who left the bank in 2013 and later became president of Alibaba Group, under a law that holds senior executives responsible for any offenses that may have been committed during their tenure.
Both had been directors of Goldman Sachs arms that did business in Malaysia. These cases bring the number of people charged in connection with the scandal to 17.
“We believe the charges announced today, along with those against three Goldman Sachs entities announced in December last year, are misdirected and will be vigorously defended,” Edward Naylor, a Goldman spokesman in Asia, said in an emailed statement.
An Alibaba spokesman, Adam Najberg, said in a statement that the company was “aware of the news and will continue to monitor the situation.”
On Friday, Malaysian officials also charged four other directors from Goldman Sachs International, two others from its Singapore-based arm and nine other executives from its Asia division.
The charges center on Goldman’s role in helping a Malaysian state investment fund called 1Malaysia Development Berhad, or 1MDB, raise $6.5 billion through a series of bond sales. The money was spent on diamonds and other jewels, Birkin bags, Picassos and a Monet, as well as on the production of Hollywood films like “The Wolf of Wall Street,” according to federal prosecutors in the United States.
For its work, the bank earned $600 million in fees in 2012 and 2013. Goldman has repeatedly denied any wrongdoing and said 1MDB officials had lied to it.
Friday’s charges signal that the investigation into Goldman is widening, exacerbating the potential reputational damage for the bank. Malaysia will seek custodial sentences and criminal fines against the individuals, Attorney General Tommy Thomas said in a statement. Each charge carries a maximum of 10 years in prison.
The penalties sought reflect “the severity of the scheme to defraud and fraudulent misappropriation of billions in bond proceeds,” and the lengthy period over which the offenses were planned and executed, Mr. Thomas said in his statement.
Among those charged in December were Timothy Leissner, a former Goldman investment banker; the former 1MDB employee Jasmine Loo Ai Swan; and Jho Low, a flamboyant Malaysian financier who United States investigators say masterminded the scheme.
Mr. Leissner had already pleaded guilty in the United States last August to taking part in a bribery and money-laundering scheme. Roger Ng, a Goldman banker who left the company in 2014, pleaded not guilty in a Brooklyn federal court in May after being flown back to the United States.
The charges against Mr. Leissner and Mr. Ng mark a more aggressive posture by the Justice Department against Wall Street. Few senior bank employees have been charged since the financial crisis in 2008.
The fallout could mean lower pay for several senior executives at the bank, including the chief executive, David Solomon, and his predecessor, Lloyd Blankfein. In February, the bank’s board, in approving year-end compensation for Mr. Solomon and Mr. Blankfein, adopted a provision giving it the ability to claw back, or reduce, some of that pay package, depending on the outcome of the federal investigation.
SOURCE : https://www.nytimes.com/2019/08/09/business/1mdb-goldman-sachs-malaysia.html