KUALA LUMPUR, Sept 14 — The former head of the Goldman Sachs investment bank, Gary Cohn, had given his support to his firm’s deals with Malaysian state investment firm 1MDB, according to an upcoming book.
Bloomberg excepted the soon to be released book, Billion Dollar Whale by two Wall Street Journal reporters, to state that executives at the investment bank who were against the deals were sidelined.
Among the executives who supported the deals were Tim Leissner, the former Goldman banker who led the 1MDB bond sales, and Andrea Vella, who headed Goldman’s debt and structured finance business in Asia.
“The backing of a domineering and powerful personality like Cohn afforded significant cover to those involved in the 1MDB business and drowned out the voices of those who were uncomfortable with the plans to raise billions of dollars for the fund,” Bloomberg cited from the book.
Bloomberg said Cohn did not immediately respond to a request for comment.
It also said that Goldman Sachs’ internal committees failed to detect the fraud perpetrated at 1MDB due to insufficient due diligence.
Goldman had been under the radar for its role in raising US$6.5 billion (RM26.9 billion) for 1MDB in 2012 and 2013 and approximately US$600 million it earned as commissions through those deals.
1MDB is at the centre of a global scandal involving claims of embezzlement and money laundering, which have caused investigations in the US, Singapore, Switzerland and other countries.
In its defence, Goldman said that it raised the monies without knowing who the ultimate beneficiaries were.
The book also questioned the relationship between Leissner and Low Taek Jho aka Jho Low who is the alleged mastermind of the fraud perpetrated at 1MDB. Leissner was later suspended because he used Goldman’s letterhead without authorisation to write a reference letter for Low to another bank.
“We take issue with several characterizations in the book but it does corroborate that Tim Leissner deliberately hid certain activities from us and repeatedly violated our policies and procedures,” Bloomberg quoted Goldman Sachs spokesman Edward Naylor in Hong Kong as saying.
US prosecutors are negotiating a possible deal with Leissner and are pressing for information about whether the bank overlooked the plunder of 1MDB, Bloomberg News reported in July, citing a person familiar with the matter.
If they reach a plea agreement with Leissner, he would become a key witness against his superiors at the bank, said the person.
Malaysia has charged Low with money laundering and is seeking Interpol’s help to locate and arrest him. His whereabouts are unknown at this juncture.
Bloomberg added that Leissner and Low allegedly met with Sheikh Mansour bin Zayed al Nahyan, the chairman of Abu Dhabi sovereign wealth fund International Petroleum Investment Co (IPIC), in March 2012 to discuss guaranteeing 1MDB debt in exchange for giving IPIC rights to buy a stake in the Malaysian fund’s power assets namely from Genting and Tanjong.
Bloomberg says the move was in essence an “artificial construct” aimed at diverting more than US$1 billion from the Malaysian company.
“Even IPIC’s own finance director raised questions about why IPIC would put itself at risk over another fund’s business ― one with no track record, at that ― but was outranked.” Bloomberg quoted the book as saying.
IPIC completed a merger with sovereign wealth fund Mubadala Development Co last year. A Mubadala representative declined to comment.
Bloomberg said the main accusation against Goldman was its overcharging 1MDB for its services and failure to red flag the involvement of Jho Low and the involvement of a another country to guarantee the bonds of 1MDB.
