KUALA LUMPUR: Goldman Sachs’s Malaysia fraud and bribery scandal intensified Wednesday after two Abu Dhabi investment funds claimed in a lawsuit they suffered losses from the bank’s “central role” in the case.
International Petroleum Investment Co. and Aabar Investments alleged in a court filing that Goldman Sachs Group Inc. paid bribes to former fund officials, who in exchange “agreed to manipulate and mislead IPIC and Aabar, and to misuse the companies’ names, networks, and infrastructures to further the criminal schemes and to personally benefit.”
The funds say they were harmed when Goldman Sachs paid bribes to IPIC’s former managing director, Khadem Al-Qubaisi and ex-Aabar Investments CEO Ahmed Badawy Al-Husseiny.
According to the complaint, Al-Qubaisi and Al-Husseiny in exchange agreed to manipulate and mislead IPIC and Aabar, and to misuse the companies’ names, networks, and infrastructures to further the criminal schemes and to personally benefit.”
The U.S. Justice Department claims Al-Qubaisi received $473 million that was siphoned from 1MDB in 2012.
The furor surrounding Goldman Sachs’s role in raising money for the Malaysian state investment fund, known as 1MDB, has weighed on the bank’s shares, which fell the most in seven years on Nov. 12 after Malaysia’s finance minister said he would seek a full refund of all the fees it paid for 1MDB deals. At least three senior current or former Goldman executives were implicated in the first charges against individuals by U.S. prosecutors.
The Abu Dhabi funds are seeking unspecified damaged in their complaint, which was filed in state court in New York. The funds outlined their claims in a summary that was less than two pages long. A more substantiate complaint will be filed in two to three weeks.
“We are in the process of assessing the details of allegations and fully expect to contest the claim vigorously,” a Goldman Sachs spokesman said in an emailed statement.
The U.S. alleges that a small group of Malaysians diverted money from 1MDB into personal accounts disguised to look like legitimate businesses, and kicked back some of those funds to officials. Goldman Sachs made $593 million working on three bond sales that raised $6.5 billion for 1MDB in 2012 and 2013, dwarfing what banks typically make from government deals.
Tim Leissner, Goldman Sachs’s former chairman of Southeast Asia, admitted in a plea that he bribed officials to get bond deals and said a culture of secrecy at the investment bank led him to conceal wrongdoing from compliance staff.
1MDB, set up by former Prime Minister Datuk Seri Najib Razak to attract foreign investment, accumulated billions of dollars of debt after its 2009 inception and is at the center of multiple investigations in relation to alleged corruption and money laundering.