COMMENT | As Malaysians, we should welcome the apology from Goldman Sachs over the 1MDB debacle. We should accept it as a good gesture from the bank to initiate communication with us, and we should now wait and see what it will do next. It is certainly not a closed matter.
About six years ago, Goldman was engaged by an incorporated entity to raise US$6.5 billion for the 1MDB fund, and for that service, it was paid US$593 million, or nine percent of the amount raised.
Almost four years later, the US Department of Justice in a statement stated that the US government was embarking on “its largest single action“ under its kleptocracy initiative.
It was alleged by the DOJ that almost 40 percent of the funds raised was transferred out of 1MDB accounts and went into the accounts of a Swiss Bank account controlled by a shell company incorporated in the British Virgin Islands.
After that, the money was being constantly transferred as if such movement would render that money respectable.
Now, these gyrating funds are the subject of inquiry, investigation and indictment in several countries, including Malaysia, Singapore, Australia, Switzerland, and possibly at least two other countries.
It is helpful that Tim Leissner (photo), the then-Goldman chairperson for Southeast Asia, has pleaded guilty in the US to conspiracy relating to money laundering, bribery and corruption in violation of the US Foreign Corrupt Practices Act (FCPA). Under US laws all monetary and other assets acquired as a result of the violation of FCPA would be forfeited.
Other charges have been brought against Leissner’s co-conspirators and they would also be charged, tried, and if found guilty, convicted.
Goldman cannot now claim ignorance of the acts of criminal impropriety of its employees. Leissner could not have committed these offences as a private individual, but with the status and legal affiliation he had with his bank.
We should realistically expect that arising from its qualified apology, Goldman would seek to negotiate with the relevant Malaysian authority to resolve this issue amicably.
Time is on its side as the various indictments, court processes and convictions will take some time. It is essential that Goldman shows some earnestness in wanting to come to an early agreement so that this matter does not drag on.
Not tinpot entity
With hindsight, it is now realised that Goldman, in arranging the US$6.5 billion bond facility, actually gave the Malaysian people a poisoned chalice. The embezzlement of the 1MDB funds has created for the Malaysian people an unprecedented debt burden.
Given this background, in any agreement reached between Malaysia and Goldman at least three questions must be resolved. It must agree to its culpability and a mutually agreed quantum of substantial compensation to the government. A ballpark figure of US$10 billion is not far-fetched.
Secondly, Goldman must agree to assist the relevant Malaysian authority to provide the necessary assistance to prosecute all those who acted in violation of our Penal Code in respect of 1MDB.
Lastly, a banking and financial transaction quarantine should be imposed so that Goldman and its subsidiaries are banned from engaging in or entering any new banking, fiduciary or business ventures for 10 years in Malaysia.
Adherence to these conditions would be a clear indication that this government seriously subscribes to the rule of law.
Martin Wolf, the well-regarded Financial Times columnist, would feel vindicated by these steps, as he had some 11 years ago written:
“No industry has a comparable talent for privatising gains and socialising losses. Participants in no other industry get as self-righteously angry when public officials – particularly, central bankers – fail to come at once to their rescue when they get into (well deserved) trouble.”
The world must know our Malaysia is not some tinpot entity.
M SANTHANANBAN is a retired Malaysian foreign service officer whose last diplomatic assignment was as an ambassador to the Republic of Korea with concurrent accreditation to Mongolia (2003-2008).
The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.