When Malaysian authorities filed criminal charges in December against Goldman Sachs’ employees and subsidiaries for alleged misconduct in their dealings with the 1Malaysia Development Berhad (1MDB) state investment fund, they sought from the outset to exact a high price.
Finance Minister Lim Guan Eng declared soon thereafter that Malaysia would seek a whopping US$7.5 billion in reparations from the American investment bank, a figure that exceeded market expectations and underscored the urgency his government placed on recouping billions of dollars lost in the now infamous global scandal.
While law enforcement officials in the United States, Malaysia and beyond have maintained pressure on Goldman Sachs, sources familiar with the matter told Asia Times that Malaysian authorities have voiced frustration with the perceived slow pace of the multinational effort to recover assets illegally acquired through funds diverted from 1MDB.
That could explain why Malaysian authorities ultimately allowed ex-Goldman Sachs banker Roger Ng to be extradited to the US earlier this month on a warrant permitting him to remain in American custody for up to 10 months. His extradition was initially postponed by Malaysia as it sought its own legal proceedings against the banker.
The reversal appears to have been taken with the understanding that Ng’s extradition would be rewarded in quid pro quo fashion with the US Department of Justice (DoJ) returning a first tranche of nearly $200 million to the country, the same sources said.
Ng, a Malaysian citizen, was detained in Kuala Lumpur in November shortly after money laundering and bribery charges brought against him by the DoJ were made public. Malaysian authorities had initially said they wanted Ng to stand trial in Malaysia before acceding to US authorities’ extradition request.
Malaysia filed its own criminal charges against Ng in December for defrauding investors and conspiring to launder stolen 1MDB funds. A Malaysian court ruled in favor of the 46-year-old’s extradition in February, though action was stymied pending an order from the Home Affairs Ministry citing a recommendation from the Malaysian attorney general.
“We will carry out the extradition, but we want to make sure that this case in Malaysia will be completed first,” Home Affairs Minister Muhyiddin Yassin told a news conference, adding that Ng would remain in the country until he has been tried on the separate criminal charges. “That is the advice of the attorney general and we will likely follow it,” he said.
Sources said Attorney General Tommy Thomas’s decision to delay Ng’s extradition aimed to spur the DoJ into expediting the return of millions of dollars in seized assets and funds pilfered from Malaysian coffers, as Malaysian officials sensed – according to the same source – that their US counterparts were “dragging their feet on the asset recovery process.”
Four days after Malaysia reversed course and extradited Ng to the US on May 3, Kamala Shirin Lakhdhir, the US ambassador to Malaysia, announced that the US would be returning some $196 million to Malaysia, the first installment of funds recovered from the DoJ’s asset seizures and the biggest ever case in its anti-kleptocracy program.
Funds returned to Malaysia appear to correspond to a $139 million stake in New York’s Park Lane Hotel linked to entities affiliated with fugitive Malaysian financier Low Taek Jho and $57 million from a settlement paid to the DoJ by Riza Aziz, producer of the 2013 blockbuster “The Wolf of Wall Street” who is accused of financing the film with pilfered 1MDB funds.
The DoJ’s remittance came only days before the Pakatan Harapan government marked its first year in office, bringing the total amount recovered by Malaysia to $322 million after resort operator Genting Malaysia purchased a luxury yacht owned by Low for $126 million after it was seized by Indonesian authorities at the request of the DoJ in 2018.
Malaysian and US authorities regard Low, once a close associate of former Malaysian prime minister Najib Razak, as a central player in the alleged theft of an estimated $4.5 billion from 1MDB, with the ex-premier and his family members allegedly among the corrupt scheme’s major beneficiaries. Both men consistently deny any and all wrongdoing.
Ng and Tim Leissner, an ex-managing director at Goldman Sachs, were named by the DoJ along with Low as the first defendants to face criminal charges in relation to 1MDB. Though Low held no formal position at the fund, he is said to have leveraged his high-level business contacts in a bid to persuade Najib to effectively allow him to run 1MDB’s operations.
US prosecutors have described the two Goldman bankers as playing a crucial role in enabling Low’s alleged plunder of the Malaysian fund, fueling bottomless spending on a range of assets including a private jet, luxury property, fine art purchases and other goods that are now the subject of various civil forfeiture lawsuits brought by the DoJ.
Malaysia’s attorney general accuses the two Goldman bankers of conspiring with Low to bribe Malaysian state officials. In December, he claimed Goldman’s employees and directors received “large bonuses and enhanced career prospects” from the proceeds of three bond issuances in 2012 and 2013 that raised $6.5 billion for 1MDB.
Those issuances were vetted by internal committees comprised of senior Goldman Sachs executives. Goldman Sachs controversially collected profits for its work topping $600 million, or about 10% of the deal’s value, returns that US prosecutors have flagged as “above average” of the normal 1% to 2% a bank could typically expect for helping to sell bonds to investors.
DoJ officials are now said to be advancing a settlement against Goldman Sachs at the parent company level, the same sources told Asia Times, adding that Ng’s extradition had been quietly negotiated since February and that any potential guilty plea offer necessitated evidence that could only be obtained by Ng’s transfer to the US.
Malaysia’s initial insistence that Ng first face charges at home is said to have raised concern over the degree to which Malaysia was willing to act unilaterally on the 1MDB case, given that such a trial could be seen to potentially complicate or upend US cases against Ng and Leissner, as well as Low, whose whereabouts are currently unknown.
Sources familiar with the situation told Asia Times that Malaysia ultimately reached a deal to hand over Ng in exchange for the first installment of DoJ-recovered funds. DoJ officials assured Malaysia that Ng’s cooperation could help build a stronger case against Goldman Sachs, which in turn would result in a larger settlement for the Malaysian government, the sources said.
Wong Chen, a parliamentarian with the ruling coalition’s Parti Keadilan Rakyat (PKR) party who was one of the first politicians to raise concerns over 1MDB’s bond issuances in 2013, denied the existence of a deal to hand over Ng and said the move was not a quid pro quo trade but rather a gesture of good faith between the two sides.
Appearing in a New York court on May 6, Ng pleaded not guilty to the three charges against him based on alleged violations of the Foreign Corrupt Practices Act which, if convicted, could see him serve up to 30 years in prison. Leissner, Ng’s former boss, pleaded guilty last August to a separate two-count criminal indictment for money laundering.
Ng is now staying at an undisclosed location in the New York City area after a judge ruled he could be released in exchange for a $20 million bond. Marc Agnifilo, his lawyer, reportedly convinced Ng to “come to the US and face the music” and is trying to negotiate a plea bargain with prosecutors to prevent the case from going to trial.
Goldman Sachs has consistently denied any institutional wrongdoing and has argued that misconduct was limited to a small number of “rogue employees” who went to great lengths to hide their scheme from senior management and compliance officers who the firm insists were unaware of any criminal activity.
DoJ staff, according to a report last month in the Financial Times, have recommended that a settlement with Goldman Sachs over its 1MDB dealings include a guilty plea at the parent company level.
Chief Executive Officer David Solomon said in late April that the Wall Street firm has not yet begun talks with the DoJ over how to best resolve its role in the scandal.
Earlier this month, authorities from the US, Malaysia and Singapore met near Kuala Lumpur to coordinate their legal actions against Goldman Sachs for its role in the 1MDB matter, according to a Bloomberg report. The meeting included members of the DoJ, Malaysia’s Attorney General’s office and Singapore’s white-collar police.
Authorities in the three countries will continue to pursue 1MDB-related legal action independently while keeping each other informed, according to the report. Meanwhile, a spokesperson said the DoJ would work collaboratively with partners, including Malaysia, to “identify and, where possible, seek to forfeit the proceeds of this corrupt scheme.”
Matt Mulberry reported from New York City. Nile Bowie reported from Singapore.