Goldman Sachs Faces Criminal Charges in Malaysia for Helping Billions Vanish from State Fund

Corruption is Everywhere - in Malaysia, in Goldman Sachs, apparently

FILE PHOTO: A Goldman Sachs sign at the New York Stock Exchange © Reuters / Lucas Jackson

Malaysia filed criminal charges against Goldman Sachs and two ex-bankers over the multi-billion dollar looting of state fund, 1MDB. The US bank denies the accusation, claiming it was deceived by the previous Malaysian government.

The subsidiaries of the Wall Street banking giant and its former key employees, ex-chairman of Goldman’s South East Asia, Tim Leissner, and ex-managing director, Roger Ng, are accused of giving false statements when helping to arrange bonds for 1MDB, Malaysia’s Attorney General Tommy Thomas announced on Monday.

Malaysia says the accused wanted to misappropriate $2.7 billion from $6.5 billion in bonds, issued by 1MDB and underwritten by Goldman Sachs, in three separate offerings between 2012 and 2013.

Malaysia also filed charges against former employee of 1MDB Jasmine Loo Ai Swan and local financier Low Taek Jho, also known as Jho Low, who maintains his innocence. The prosecution believes the duo conspired with Leissner and Ng to bribe officials in order to procure the selection, involvement and participation of Goldman Sachs in these bond issuances.

Now Kuala Lumpur is seeking to take back the misappropriated $2.7 billion from Goldman Sachs as well as $600 million in fees received by the bank. The prosecution is demanding fines and up to 10 years behind bars for each of the accused. The fines may amount to at least 1 million ringgit ($240,000), according to the charge sheets, seen by Reuters.

Billions of dollars from the Malaysian fund were reportedly used to buy everything from Beverly hills mansions, yachts and a private jet to artworks among other things in a fraud that allegedly involved former Malaysian Prime Minister Najib Razak.

As Malaysia brought the charges, the bank hit back, claiming that it was the victim of deceptive Malaysian officials. The long-running scandal has already rocked the bank’s shares this year, which dropped more than 30 percent.

“Certain members of the former Malaysian government and 1MDB lied to Goldman Sachs, outside counsel and others about the use of proceeds from these transactions,” Goldman said in a statement cited by media. It added that the charges have no effect on its “ability to conduct our current business globally.”

Analysts warn that the scandal is just the tip of the iceberg of the bank’s “criminal” deeds. Despite being investigated in several countries, including in the US, no matter the crimes, Goldman chiefs will never go to jail as they are too close to both sides of the US political aisle, Jack Rasmus, professor of political economy at St. Mary's College told RT. He also warned that the bank is driving the world to the next financial crisis.

“They just haven’t been caught in the other places,” Rasmus said in an interview to RT. “We’re on the verge of another financial crisis that will make the last one pale in comparison and Goldman Sachs and businesses like them are at the center of the cause of this.”

Jail Bankers Who Caused 2008 Financial Crisis, says ex-PM Gordon Brown

Gordon Brown has launched a scathing attack on bankers over the 2008 financial crisis

© Neil Hall / Reuters

Millionaire bankers responsible for the 2008 financial crisis should be stripped of their bonuses and sent to prison, former British Prime Minister Gordon Brown has said. He warned bankers have not learnt a thing and are still playing fast and loose.

The former Labour leader, who was Tony Blair’s chancellor before replacing him as PM in 2007, has torn into wealthy bankers and revealed he was preparing to quit Downing Street when the banking crisis was at its height.

The ex-PM, toppled in 2010 when David Cameron formed a Conservative-Liberal Democrat coalition, had called for tougher regulations at a special G20 summit in London. None have been implemented, however.

In an autobiography released next week – entitled My Life, Our Times – Brown says history will repeat itself if action is not taken.

“If bankers who act fraudulently are not put in jail with their bonuses returned, assets confiscated and banned from future practice, we will only give a green light to similar risk-laden behavior in new forms,” he writes.

“Little has changed since the promise in 2009 that we would bring finance to heel. The banks that were deemed ‘too big to fail’ are now even bigger than they were."

“Similarly... some regulators freely confess that risks have morphed and migrated out of the formal banking system and if the next crisis came they would still not know what is owed and by whom and to whom. 2009 has proved to be the turning point at which history failed to turn.”

The book details the time he, along with his chancellor Alistair Darling, arranged a rescue package for some UK banks.

In a revealing personal insight into the life of a prime minister, Brown writes about a time he instructed his family to pack their bags, convinced he would be forced to stand down if the rescue package failed and he had to quickly flee Downing Street.

At the time taxpayers’ money was invested in Royal Bank of Scotland (RBS), HBOS and Lloyds to save them from going under. Brown, 66, says foreign countries have been quick to prosecute bankers when they fail – but the UK has resisted.

Not sure which countries he's referring to, but it certainly isn't the USA. Canada had no bank failures because we have tough regulations governing our banks.

The former politician is especially scathing of Fred ‘the Shred’ Goodwin, the former chief executive of RBS, who Brown says drove the bank into the ground and gambled with the public’s cash while living a luxurious lifestyle.

He also attacks Barclays for what he says was a decision to seek a state bailout from Qatar and the UAE, while attacking rival banks who were helped by the public purse in Britain.

“In doing so, they [Barclays] made it far more difficult to explain to the British public that this was a widespread banking crisis and not just an emergency faced by one or two banks and, by not telling the full truth, they hampered our ability to persuade legislators around the world of the need for far-reaching reform.”

That was probably the idea all along.

Another Global Financial Crisis Likely Within Next 5 Years – Economist

Carlo Allegri / Reuters

The world hasn’t fully recovered from the problems of 2008 which means another crisis is possible, says Director-General of the China Banking Regulatory Commission Min Liao.

"It is likely that the world will face another global financial crisis in the next five years. The reason lies in the fact that many of the problems behind the 2008 crisis remain unsolved. The fragility is still there, for instance in shadow banking, high indebtedness, a lack of structural reform, the sustainability of emerging markets, and high leverage," Liao said in an interview at the Summit on the Global Agenda of the World Economic Forum.

He said the super low-rate environment delayed structural reforms, and market discipline was breached.

“The real economy cannot recover to the pre-crisis level in the foreseeable future, and it remains uncertain whether the intensified regulation can control risks from shadow banking and disruptive technologies. Therefore, the next crisis will probably catch us unprepared once more,” said the economist.

Liao urged the tightening of international regulations for shadow banking, which he sees as a threat to the global economy.

"China’s recent stock market turmoil testified to the risk amplifying effect of shadow banking, which is armed with new technologies. The concern is the same in the US and Europe," he added.