Agreement related to 1MDB asset recovery vague, not detailed, says Johari

KUALA LUMPUR:The agreement signed between the Malaysian government and Goldman Sachs Group Inc (Goldman Sachs), regarding the recovery of 1Malaysia Development Bhd (1MDB) assets in 2020, was vague and not detailed, said 1MDB Asset Recovery Taskforce chairman, Datuk Seri Johari Abdul Ghani (pic).

He said that the matter was a factor in Goldman Sachs taking advantage of not wanting to fulfil its asset recovery guarantee, amounting to US$1.4bil to the Malaysian government.

“In 2020, we had come to an agreement, we were paid US$2.5bil and then promised to be paid another US$1.4bil (recovery of assets), but the agreement signed was not clear.

“It (Goldman Sachs) took advantage by refusing to pay US$1.4bil because it said that we had collected through AmBank, a fine of US$640mil. Then, we received about US$430mil from the DOJ (Department of Justice).

He said that Goldman Sachs also included Malaysia’s settlement with Ipic (International Petroleum Investment Company) to offset it, as part of the firm’s US$1.4bil asset recovery guarantee; then claimed that its obligations under the asset recovery guarantee have been discharged (through all the fines and settlement).

“We said no, that the fine and the settlement are not encompassed within the scope of the US$$1.4bil asset recovery guarantee. Hence, there is a dispute, because the agreement is unclear,” he told BK.

Previously, Johari, who is also the Plantation and Commodities Minister, reportedly said that the settlement agreement signed in August 2020, between the Malaysian government and Goldman Sachs, required the firm to pay US$$2.5bil cash payment, and provide Malaysia with a US$$1.4bil asset recovery guarantee.

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He added that thus far, the task force is still in the process of seeking arbitration to resolve the matter.

According to him, the process to obtain the US$1.4bil recovery asset guarantee will also take some time, as it depends on Goldman Sachs’ decision on whether it wants to fight the Malaysian government’s claim regarding the matter through legal proceedings.

He said that, if Goldman Sachs decides to fight it, then the process will take time; if the firm agrees to settle it then it won’t take long. He also cautioned that the process may take a long time as it involves a huge amount of money.

1MDB paid unusually high advisory fees of US$606mil to Goldman Sachs for advising on the issuance of three bonds, totalling US$6.5bil.

Goldman Sachs’ direct involvement in the 1MDB scandal resulted in it being fined by various regulators, including the DOJ, the sum of US$$2.9bil.

The amount paid by Goldman Sachs in fines, however, surpassed the cash payment paid to the Malaysian government (US$$2.5bil), despite Malaysia suffering the greatest repercussions from the 1MDB scandal by having to pay USD$6.5bil (principal amount) and interest of US$3.2bil over 10 years, to service 1MDB debt.

The dispute currently centres on Goldman Sachs’ attempt to offset the fine imposed on AMMB Holdings BHD (Ambank; RM2.8bil), as well as the settlement agreement with IPIC (US$1.8 billion), as part of the US$1.4bil asset recovery guarantee.

Goldman Sachs contends that its obligations under the asset recovery guarantee had been discharged through the fine and settlement.

However, the Malaysian government disputes this and asserts that fine imposed on Ambank and the settlement with IPIC are not encompassed within the scope of the US$1.4bil asset recovery guarantee. – BK