1MDB: Malaysia eyes legal action against banks, questions past negotiators

KUALA LUMPUR - The 1MDB Asset Recovery Taskforce is considering initiating legal proceedings against several foreign banks that facilitated the fund transfers related to 1Malaysia Development Bhd (1MDB) without conducting proper know your client (KYC) processes at that material time.

Chairman Datuk Seri Johari Abdul Ghani said the taskforce is firmly committed to addressing the 1MDB matter transparently and holding all parties accountable.

"The complexities of the settlement agreement require careful examination, and the 1MDB Taskforce is actively participating in the arbitration process to ensure a fair resolution in the best interests of the Malaysian people,” he said in a statement today.

Johari said the taskforce is additionally examining whether the negotiators and lawyers representing the Malaysian government at the material time may have failed in their fiduciary duty or were negligent in arriving at the settlement agreement.

He said currently, it has been noted that the negotiators and lawyers representing the Malaysian government at the material time failed to secure a fair and adequate settlement from Goldman Sachs Group Inc.

"Such lapses on the part of negotiators and lawyers, in failing to negotiate a fair and clear settlement agreement have compromised the government of Malaysia's position in the ongoing dispute,” he said.

According to Johari, the settlement agreement signed in August 2020 between the Malaysian government and Goldman Sachs required the company to pay US$2.5 billion (US$1=RM4.728) cash payment and provide the government of Malaysia with a US$1.4 billion asset recovery guarantee.

Meanwhile, Johari said the Malaysian government had filed its reply on Nov 8, 2023, to Goldman Sachs’ arbitration request and the parties are currently in the process of agreeing on the procedural timetable.

For the information of the public, 1MDB paid unusually high advisory fees of US$606 million to Goldman Sachs for advising on the issuance of the three bonds totalling US$$6.5 billion.

Goldman Sachs’ direct involvement in the 1MDB scandal has resulted in it being fined by various regulators, including the United States Department of Justice, for the sum of US$2.9 billion.

Notably, the amount paid by Goldman Sachs in fines surpassed the cash payment paid to the government of Malaysia (US$2.5 billion), despite Malaysia suffering the greatest repercussions from the 1MDB scandal by having to pay US$6.5 billion (principal amount) plus interest of approximately US$3.2 billion over 10 years to service the 1MDB debt.

The current dispute centres around Goldman Sachs' attempt to offset the fine imposed on AMMB Holdings Bhd (Ambank; RM2.8 billion) and the settlement agreement with the International Petroleum Investment Company (IPIC) (US$1.8 billion) against the US$1.4 billion asset recovery guarantee.

Goldman Sachs contends that its obligations under the asset recovery guarantee have been discharged through this offset.

However, the Malaysian government disputes this and asserts that the fines imposed on Ambank and the settlement with IPIC are not encompassed within the scope of the US$1.4 billion asset recovery guarantee. - BERNAMA