Malaysia files criminal charges against Goldman Sachs over 1MDB

Kuala Lumpur: Malaysia filed criminal charges against Goldman Sachs and two former executives on Monday for their role in the alleged multibillion-dollar ransacking of state investment fund 1MDB.

Attorney-General Tommy Thomas said the government was seeking several billion dollars in fines from Goldman Sachs for breaches of securities laws that involved it making false and misleading statements to investors.

Construction workers chat in front of a billboard for state investment fund 1 Malaysia Development Berhad (1MDB) in Kuala Lumpur, Malaysia in 2015.Credit: AP

He said his office will seek prison sentences of up to 10 years for the former Goldman executives, Roger Ng Chong Hwa and Tim Leissner, who is married to model Kimora Lee Simmons.

Malaysian and US prosecutors allege that bond sales organised by Goldman Sachs for 1MDB provided one of the means for associates of former Malaysian prime minister Najib Razak to steal billions of dolalrs over several years from a fund that was ostensibly set up to accelerate Malaysia's economic development.

The scandal, first reported by Sarawak Report and the Wall Street Journal, resulted in Najib and his ruling coalition losing power in a historic election defeat earlier this year.

Former Malaysian prime minister Najib Razak walks into a court room at Kuala Lumpur High Court in October. Credit: AP

Najib himself is facing corruption charges. He has said that more than $US700 million ($974 million) that moved through his bank account was a political donation from the Saudi royal family, but US prosecutors say it came from 1MDB, of which Najib was the top official.

US legal filings that are part of a Justice Department civil case to recover assets bought with 1MDB funds allege the money was used to finance Hollywood films and spent on luxuries such as diamond jewelry for Najib's wife, a yacht, artworks and high-end properties.

Goldman Sachs denied any wrongdoing in response to Malaysia's criminal charges.

"We believe these charges are misdirected and we will vigorously defend them and look forward to the opportunity to present our case," bank spokesman Edward Naylor said in a statement.

"The firm continues to cooperate with all authorities investigating these matters."

Thomas said $US2.7 billion was stolen from three bond sales organised by subsidiaries of Goldman Sachs. The investment bank, he said, received $US600 million in fees for organising the bond deals, which was several times higher than industry norms.

Leissner and Ng conspired with Najib associate Low Taek Jho, a key architect of the entire 1MDB fraud, to bribe Malaysian government officials to use Goldman Sachs as the arranger of the bond deals, according to Thomas. They and Goldman Sachs knew that the money would be stolen, he said.

"Having held themselves out as the pre-eminent global adviser/arranger for bonds, the highest standards are expected of Goldman Sachs," the attorney general's statement said. "They have fallen far short of any standard. In consequence, they have to be held accountable."

Prosecutors plan to seek fines "well in excess" of the amount allegedly stolen because of the severity of the violations of Malaysia's laws, Thomas said.

Leissner, who headed Goldman's operations in Southeast Asia, pleaded guilty in the US last month to money laundering conspiracy and conspiring to violate foreign bribery laws after the Justice Department charged him, Ng and Low in relation to the 1MDB scandal.

The super yacht Equanimity approaches the Boustead Cruise Centre in Port Klang, Selangor, Malaysia.Credit: Bloomberg

Ng was arrested in Malaysia in early November and Low, also known as Jho Low, remains at large. He maintained his innocence in a statement issued by via Sydney law firm Wells Haslem Mayhew Strategic Public Affairs on Tuesday.

"As has been stated previously, Mr Low will not submit to any jurisdiction where guilt has been predetermined by politics and there is no independent legal process.

"It is clear that Mr Low cannot get a fair trial in Malaysia, where the regime has proven numerous times that they have no interest in the rule of law."

Malaysian police said in July that Low had fled Macau to an unknown destination.

Before facing criminal charges, Low became well known in the New York City and Los Angeles club scenes. In 2012, he threw a lavish 31st birthday bash attended by Leonardo DiCaprio, Kim Kardashian and other celebrities.

AP