NEW York-based bank Goldman Sachs Group Inc structured 1Malaysia Development Bhd (1MDB) debt issues to secure outsized profits, a new book on the scandal-ridden fund has revealed, Bloomberg reported.

The authors of Billion Dollar Whale said Goldman Sachs did so by purchasing 1MDB bonds at a discount, despite having lined up buyers for the notes.

“And Goldman’s internal committees that were set up to identify fraud failed to do sufficient diligence on the deals, or carry out a proper valuation of assets that 1MDB purchased, the authors claimed,” the Bloomberg report said.

The book, according to Bloomberg, also revealed that former Goldman Sachs president, Gary Cohn, had backed the bank’s dealings with 1MDB while executives who questioned the transactions were sidelined.

Cohn supported the “potentially lucrative line of business” that some of its top Asia-based bankers were developing in Malaysia, said the authors.

Those executives included Tim Leissner, a former Goldman Sachs banker who led the 1MDB bond sales, and Andrea Vella, who headed Goldman Sachs’s debt and structured finance business in Asia.

“The backing of a domineering and powerful personality like Cohn afforded significant cover to those involved in the 1MDB business and drowned out the voices of those who were uncomfortable with the plans to raise billions of dollars for the fund,” the authors wrote.

Cohn left Goldman Sachs in 2016 and later became a White House economic adviser. He left the role earlier this year.

Goldman Sachs has been under scrutiny for years for its role in raising US$6.5 billion (RM26.9 billion) for state-owned 1MDB and for nearly US$600 million in fees it earned for the bond issuance.

However, the bank has not been accused of any wrongdoing, saying it was helping 1MDB raise funds for investments that would benefit Malaysia, and couldn’t have foreseen where the money would go after that.

The book also stated that one potential deal with 1MDB wound its way through five Goldman Sachs committees set up to examine financial and legal risk.

Some executives also questioned the position of Low Taek Jho, also known as Jho Low, at 1MDB, but Leissner downplayed his role.

“We take issue with several characterisations in the book but it does corroborate that Leissner deliberately hid certain activities from us and repeatedly violated our policies and procedures,” Goldman Sachs spokesman Edward Naylor in Hong Kong told Bloomberg.

In July, Bloomberg News had reported that US prosecutors were negotiating a possible deal with Leissner, seeking information on whether the bank turned a blind eye to the plunder of 1MDB.

If they reach a plea agreement with Leissner, he would become a key witness against his superiors at the bank, the business portal said, citing a source.

Malaysia has charged Low with money laundering and said it was seeking Interpol’s help to locate and arrest him, tightening the net around a central figure in the scandal. – September 14, 2018.