Abu Dhabi’s ties with Goldman Sachs sour amid 1MDB scandal

The state investment company is halting new business with Goldman

Mar.March 15, 2019 01:39 PM

Tim Leissner and and Roger Ng (Credit: Getty Images)

Abu Dhabi’s state investment company has hit pause on new business with Goldman Sachs, which has been embroiled in the multibillion-dollar fraud scandal tied to Malaysian state investment fund 1MDB.

The moves increases pressure on the bank and threatens to affect its broader relationships in the region, the Financial Times reported. Goldman had become a top investment bank in Abu Dhabi and worked on the merger of two major state-owned real estate companies.

“We have suspended any activities with Goldman Sachs pending [the] outcome of the litigation,” Brian Lott, a spokesperson for Mubadala Investment Company, said in a statement. “The only exceptions are engagements signed prior to the litigation, which will continue as per contractual terms.”

Goldman declined to comment to the FT.

The International Petroleum Investment Company, a Mubadala unit and former partner of 1MDB, sued Goldman in November, accusing the U.S. financial institution of bribing its officials during a “massive global conspiracy,” the report said. And Malaysia has filed criminal charges against Goldman subsidiaries and two former bankers — Tim Leissner and Roger Ng — accusing them of helping misappropriate $2.7 billion from 1MDB bonds.

Malaysia’s charges came after the U.S. Department of Justice indicted Leissner and Ng. Leissner has pleaded guilty to two counts of conspiracy to commit money laundering and bribe foreign officials. In 2015, IPIC guaranteed billions of dollars of bonds arranged by Goldman and issued by 1MDB. DOJ alleged that $4.5 billion had gone missing, the report said. After the Malaysian fund defaulted, the government in Kuala Lumpur at the time agreed to repay IPIC in a settlement, which has the new government has since challenged.

For its part, Goldman has disputed all the allegations and said it would defend itself against them, the report said. The bank also said the previous Malaysian lied to the bank about how the bond proceeds would be used.

Meanwhile, Jho Low, the alleged mastermind behind the scandal, is wanted by the Malaysian government and believed to be hiding in China. He allegedly used the funds to finance his lavish lifestyle, and invested in Steve Witkoff’s formerly-owned Park Lane Hotel, where Mubadala owns a stake.

Professional services firm Deloitte has also become embroiled in the scandal. The UK-based firm was fined $535,000 by the Malaysian government after it allegedly failed to report irregularities found in audits of companies linked to the 1MDB fund. [FT] — Meenal Vamburkar

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