SINGAPORE (Sept 30): Amid what has turned out to be a week of explosive revelations from a former CEO of the troubled 1Malaysia Development Berhad (1MDB), investment bank Goldman Sachs Group now wants to make amends for its role in the scandal that saw RM2.6 billion siphoned out of Malaysia’s public coffers.
In a Bloomberg TV interview on Sept 25, its president and chief operating officer John Waldron said the bank was looking to put the matter behind it and return the money to Malaysia. “We’re focused on getting it behind us and resolving it in an appropriate manner,” he said. “We want the Malaysian people to be taken care of.”
This comes just before the next hearing in Malaysia’s criminal case against Goldman, which is due to take place in Kuala Lumpur on Sept 30. At the start of the year, Goldman CEO David Solomon had “apologised” to the people of Malaysia for the role of the former head of its Southeast Asian business, Tim Leissner, in the scandal.
Yet, as more details about what went so wrong with 1MDB come to light, Goldman’s statement may come across as a mere platitude.
The trial of disgraced former Malaysian prime minister Najib Razak is ongoing, and witnesses who were close to Najib and 1MDB have begun to lay bare the mismanagement, abuse of power and manipulation that cost Malaysian taxpayers money meant for the nation’s development.
Najib, who was also finance minister and director of 1MDB, is facing four charges of abuse of power and 21 charges of money laundering involving a staggering RM2.28 billion ($751.48 million). He also faces seven counts of abuse of power, criminal breach of trust and money-laundering involving RM42 million in relation to SRC International, a subsidiary of 1MDB.
On Sept 25, former 1MDB CEO Shahrol Azral Ibrahim Halmi testified before the court that Najib and the alleged mastermind of the scandal, fugitive businessman Low Taek Jho, blocked an audit by the country’s auditor general in order to hide the mismanagement.
During questioning by deputy public prosecutor Gopal Sri Ram, Shahrol said 1MDB was exempted from an audit by the National Audit Department as it would have revealed misdeeds by Low, better known as Jho Low, in relation to the issuance of RM5 billion of Islamic bonds in 2009.
According to Shahrol, an audit would have shown that the management of Terengganu Investment Board (the precursor to 1MDB) had pushed through with the bond issuance despite protests from the Terengganu royalty. He also revealed that US$700 million out of US$1 billion earmarked for the 1MDB-PetroSaudi joint venture was channelled to a Jho Low-controlled firm, Good Star Ltd.
Shahrol said Jho Low had told him that 1MDB had already appointed private audit firm Ernst & Young. “As per the normal course of events, I updated Jho [Low] and he reverted back to me saying that an audit or due diligence by the National Audit Department could present a political risk to [former premier and finance minister] Datuk Seri Najib [Razak],” he said.
Najib and Low also dismissed doubts about the joint venture expressed by then 1MDB chairman Mohd Bakke Salleh, Shahrol testified. Further, shortly before the 1MDB board of directors was about to decide on the joint venture on Sept 26, 2009, Low had passed his phone to Mohd Bakke, with Najib on the line.
After a brief conversation, Mohd Bakke said Najib had wanted the deal expedited as it was a government-to-government deal. Later, in October 2009, upon finding out that US$700 million of the US$1 billion in bonds had been channelled to Good Star, Mohd Bakke was incensed and quit as chairman of the board.
Shahrol also described Najib and Low’s relationship as “symbiotic”, whereby Low would execute what Najib wanted, and Najib’s role was to approve whatever decisions were required to achieve those ends.
The symbiotic relationship extended to being “matchmaker” for Najib and the top executives of Goldman. Shahrol said Goldman Sachs’ Leissner and Low were matchmakers for the meeting between Najib and then Goldman Sachs CEO Lloyd Craig Blankfein (Blankfein is now senior chairman of the bank) in New York in November 2009.
It was also revealed that Najib had paid himself RM120,000 a year as remuneration for being chairman of the 1MDB board of advisers. Najib had set and approved his own annual remuneration, while members of the board each received RM96,000 annually.
The trial continues.
