Malaysia on Friday filed criminal charges against 17 current and former directors at subsidiaries of Goldman Sachs Group Inc. and is seeking up to $7.5 billion in reparations from the American investment bank, which posted a net income of $10.5 billion in 2018.
Among the top Goldman executives charged are Richard Gnodde, CEO of Goldman Sachs International and Michael Sherwood, former vice chairman of Goldman Sachs Group Inc and co-CEO of Goldman Sachs international.
Malaysia is suing Goldman Sachs for its role in helping to raise $6.5 billion through bond offerings for scandal-wracked 1Malaysia Development Bhd (1MDB) turned into a cash cow by former Malaysian prime minister Najib Razak.
Goldman Sachs was the financial adviser for this transaction. The New York City-based firm earned more than $600 million in fees for bonds it raised for 1MDB.
1MDB is a strategic development company totally owned by the Malaysian government. It was established by Najib when he took power in 2009 to source funding for Malaysia's long-term economic development and promote foreign direct investments.
Najib, however, embezzled $681 million from 1MDB during his years in power. He was arrested and charged in Malaysian courts for crimes related to the 1MDB scandal. He is currently out on bail.
An estimated $4.5 billion was embezzled from 1MDB by Najib and fund officials and their associates between 2009 and 2014.
The charges against Goldman Sachs on Friday were brought under a section of the Malaysian Capital Markets and Services Act, which penalizes certain senior executives responsible for any offenses that may have been committed.
"Custodial sentences and criminal fines will be sought against the accused ... given the severity of the scheme to defraud and fraudulent misappropriation of billions in bond proceeds," said Attorney General Tommy Thomas.
In 2018, Malaysia filed criminal charges against Goldman Sachs and two of the investment bank's former managers in connection with 1MDB. The U.S. Department of Justice is also investigating Goldman Sachs for its role as underwriter and arranger of the bond offer.
Tim Leissner, a former Goldman Sachs partner, pleaded guilty in August 2018 to conspiracy to launder money and conspiracy to violate the U.S. Foreign Corrupt Practices Act. He agreed to forfeit $43.7 million.
