1MDB settlement: What’s threatening the multi-billion dollar deal between Malaysia and Goldman Sachs?

Under the agreement reached in late July 2020, Goldman Sachs must make a one-time payment of US$250 million if Kuala Lumpur fails to receive at least US$500 million in assets and proceeds by end-August 2022.  

In corporate filings in the US, Goldman Sachs noted that it has refused to make the payment because it claims that “the Government of Malaysia unilaterally reduced the value of one asset previously included in its prior reports by US$80 million and declined to include substantial additional assets in its accounting of assets and proceeds recovered.”

“The bank (Goldman Sachs) is prepared to pay but it needs to understand the valuation process of the assets that have been recovered,” said a Goldman Sachs executive, who spoke on condition of anonymity, adding that there has been “an absence of communication” between the two parties.

This executive added that the “numbers that we are seeing as the information does not seem to add up.” “All we want is clarity.”

Malaysian government sources close to the situation tell CNA a different story. 

They noted that Goldman Sachs’ legal representatives have been dragging the settlement talks by disputing the valuations of certain assets. 

Goldman Sachs is also insisting that Malaysia include the collection from fines slapped on the Ambank Group, which acted as financial advisor and borrower to 1MDB, together with accounting firms KPMG and Deloitte as part of the asset recovery. The Malaysian government collected a total of US$790 million from the three parties.

“How these amounts can be considered as part of the asset recovery is something that we simply do not understand,” said a senior government official close to the situation.

Malaysian government officials also noted that Goldman Sachs has failed to honour provisions in the settlement agreement that require the US banking giant to engage an international asset recovery concern to assist Kuala Lumpur in identifying and staking claim to items, ranging from properties, luxury artwork and jewellery that were purchased with 1MDB-related funds. 

One government official involved in the settlement talks noted that Goldman Sachs has yet to identify the recovery expert or notify their Malaysian counterparts of any progress on this front.

“This was agreed but Goldman (Sachs) has done nothing and is now laying claim on monies we recovered without their help,” noted the official, who is expecting the dispute with the US banking giant to go into arbitration. 

Apart from dealing with the current legal spat with Goldman Sachs, the asset recovery committee headed by Mr Johari, who is an elected parliamentary representative and a prominent businessman with extensive interests in media companies, is focussing on recovering 1MDB-related assets that Malaysian authorities have identified with the help of their counterpart in the United States.

Malaysian government sources noted that at least 50 items have been identified, including luxury paintings, jewellery and real estate in Switzerland.