[Marxism] Malaysia Blames Goldman Sachs for Stolen Billions

Louis Proyect lnp3 at panix.com
Tue Jan 15 09:51:56 MST 2019

NY Times, Jan. 14, 2019
Malaysia Blames Goldman Sachs for Stolen Billions
By Alexandra Stevenson

Accused of helping to carry out an international multibillion-dollar 
fraud, Goldman Sachs has tried to pin the blame on a few rogue bankers.

It is an argument that the government of Malaysia, where the fraud was 
carried out, is not buying.

“We have suffered extremely large losses, and you were the financial 
adviser,” said Lim Guan Eng, the finance minister of Malaysia, referring 
to Goldman Sachs.

“Now how do you account for that? And don’t tell me you don’t know where 
the money went,” Mr. Lim said in an interview in Hong Kong on Monday. 
“Goldman Sachs needs to come to terms with the facts.”

Malaysia is gearing up for a fight with an institution that was once 
synonymous with power and influence around the world. The government is 
seeking $7.5 billion in compensation from Goldman Sachs, adding to a 
mounting pile of penalties against the bank and deepening one of the 
most serious crises in its 149-year history.

The crisis is expected to be the main focus for David M. Solomon, 
Goldman Sachs’s recently appointed chief executive, when he announces 
the bank’s fourth-quarter results this week.

Goldman has found itself entangled in civil and criminal investigations 
around the world related to the work it did in helping 1Malaysia 
Development Berhad — or 1MDB, which United States prosecutors have 
alleged was a slush fund for the former Malaysian prime minister Najib 
Razak and other officials. New York regulators have issued subpoenas to 
some Goldman bankers, the bank has held talks with prosecutors about 
possible fines, and most recently, its lawyers in Malaysia reached out 
to the country’s attorney general.

Last month, Malaysia filed criminal charges against Goldman Sachs, 
accusing the bank of defrauding investors by raising more than $6 
billion for 1MDB.

Goldman Sachs has denied the charges and said that “certain members of 
the former Malaysian government and 1MDB lied to Goldman Sachs.” It has 
said it would “vigorously contest” the charges.

“Under the Malaysian legal process, the firm was not afforded an 
opportunity to be heard prior to the filing of these charges against 
certain Goldman Sachs entities, which we intend to vigorously contest,” 
the bank said in an emailed statement.

In November, the Justice Department announced that it had secured a 
guilty plea from one former senior Goldman banker and filed bribery and 
money laundering charges against a second.

Goldman has since said its dealings with 1MDB could still result in 
“significant fines, penalties and other sanctions.”

In Malaysia, the scandal has gripped the nation and led to the 
unexpected ouster of Mr. Najib, handing power to Mahathir Mohamad, 93, a 
former prime minister and longtime politician.

At the heart of the scandal is the 1MDB fund, which Mr. Najib created in 
the name of raising money for development projects to benefit 
Malaysians. Instead, prosecutors have alleged, billions of dollars were 
siphoned off into the personal accounts of Mr. Najib, other officials 
and a flamboyant Malaysian financier known as Jho Low.

Under Mr. Mahathir, the new government is trying to recover some of the 
billions that disappeared and subsequently burned a big hole in the 
government’s finances.

“You look at the agony that Malaysia had to endure — not just in terms 
of the figures but the trauma,” Mr. Lim said. “You must have a heart. 
Sometimes you ask, does Goldman have a heart?”

He also said Malaysia would be ready to walk away from an ambitious 
railway project that started under Mr. Najib and was promoted as a 
showcase deal in China’s Belt and Road Initiative. The initiative, an 
enormous infrastructure plan financed by China, includes countries 
across Asia, Eastern Europe and Africa.

“All options are on the table,” Mr. Lim said, adding that a decision 
would be made in the coming weeks.

Last summer, citing the high costs of the deal, Malaysia halted a 
contract for the China Communications Construction Company to build an 
East Coast Rail Link, a rail line linking vast swaths of the country.

Representatives from the Chinese side have been negotiating with 
Malaysian counterparts to revive the deal. Under the current terms, 
officials in Kuala Lumpur estimate that Malaysia would be making annual 
interest payments of 2 billion ringgit, roughly $488 million, a person 
with direct knowledge of the government’s estimates said. The rail, once 
built, is also expected to lose about $122 million a year, that person said.

Last week, The Wall Street Journal reported that Chinese officials had 
offered to help bail Mr. Najib out of a growing debt hole related to 
1MDB in exchange for stakes in the East Coast Rail Link and a pipeline 

Chinese officials also offered to get the United States and other 
countries to drop their early investigations into 1MDB in exchange, The 
Journal reported, citing documents and the minutes of meetings between 
Chinese and Malaysian officials.

The China Communications Construction Company did not respond to an 
emailed request for comment.

Mr. Lim said the Malaysian government was looking into the allegations.

“For us to be able to initiate any investigation, we need the 
documents,” he said, adding that the government had sought documents 
from The Journal.

The revelations could add to tensions among Malaysia, the United States 
and China at a time when Malaysia is hoping to raise money through the 
bond market and strike new deals. The United States has grown 
increasingly skeptical of China’s One Belt One Road campaign, which it 
sees as a campaign for political influence overseas.

Mr. Lim sought to play down rising tensions.

“You have to look past these instances,” he said. “Just like Goldman 
Sachs is an outlier and doesn’t reflect the entire financial industry in 
the United States, it is similar for this case vis a vis China.”

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