MALAYSIA has filed criminal charges under its securities laws against Goldman Sachs subsidiaries, two of its ex-bankers and key figures from 1Malaysia Development Bhd over the embezzlement of funds from bonds issued by 1MDB subsidiaries.

Attorney-General Tommy Thomas said charges have been filed against ex-Goldman Sachs bankers Tim Leissner and Roger Ng Chong Hwa, as well as former 1MDB legal adviser Jasmine Loo Ai Swan and wanted businessman Low Taek Jho, or Jho Low.

Their charges involve conspiracy to make false or confusing statements and bribing public officials to secure Goldman Sachs’ participation in the issuance of three bonds so as to embezzle US$2.7 billion (RM11.2 billion) from the proceeds.

The three bonds, arranged and underwritten by Goldman Sachs, with a total face value of US$6.5 billion were issued by 1MDB Energy Limited (US$1.75 billion) at a rate of 5.99% per annum, 1MDB Energy (Langat) Limited (US$1.75 billion) at 5.75%, and 1MDB Global Investments Limited (US$3 billion) at 4.4%.

They were issued from May 2012 to March 2013.

“Tim Leissner and Roger Ng of Goldman Sachs had conspired with Jho Low, Jasmine Loo Ai Swan (then general-consul of 1MDB) and others to bribe Malaysian public officials in order to procure the selection, involvement and participation of Goldman Sachs in these bond issuances.

“Goldman Sachs benefited by receiving underwriting and arranging fees of approximately US$600 million which was several times higher than the prevailing market rates and industry norms,” Thomas said in a statement.

He said the bonds were filed with the Labuan Financial Services Authority – the regulator of offshore banking in Malaysia – using offering circulars and a private placement memorandum.

The documents filed contained statements that are “false, misleading, or from which there were material omissions by representing to the investors that the process… would be used for legitimate purposes, when, in fact, the proceeds were corruptly and fraudulently misappropriated”.

“Offering circulars and private placement memorandums are serious documents, intended to be relied on, and, in fact, were relied on, by the purchasers of the bonds.”

The charges filed under the Capital Markets and Services Act 2007 carries a maximum sentence of 10 years’ imprisonment for the convicted party.

Thomas said prosecutors, due to the severity of the violations, would also seek to fine the accused sums that were “well in excess of the US$2.7 billion misappropriated” and the US$600 million in fees.

“Their (crimes) go 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.”

The A-G noted that employees and directors of Goldman Sachs had received part of the misappropriated bond proceeds, as well as large bonuses and enhanced career prospects.

He said the investment bank was expected to hold to the “highest standards”.

“They have fallen far short of any standard. In consequence, they have to be held accountable.” – December 17, 2018.