Goldman Sachs: Just Some Bad Actors or a Criminal Enterprise?

2 | By Shah Gilani

The Goldman Sachs Group Inc. (NYSE:GS), the most prolific moneymaking machine in the history of Wall Street, was charged Monday by Malaysia’s Attorney General with criminal wrongdoing in the massive 1MDB scam.

While it’s not the first time Goldman’s boiling greed has got it in hot water, the size and scope of the bribery, fraud, theft, and money laundering in the criminal affair known as 1Malaysia Development Bhd. could permanently scald Goldman’s reputation and cause it to lose banking licenses worldwide.

This is a rather long-winded story, so I’m going to split it into two parts. You’ll get the first half today, and I’ll conclude the story on Friday.

Here’s what really happened with the whole Goldman-1MDB debacle, and if you stay tuned till the end, you’ll get a special treat…

1Malaysia Development Bhd. Meets Goldman Sachs

1Malaysia Development Bhd. (Bhd. is short for Berhad; that’s Malaysian for “public limited company”) was set up in 2009 under the guidace of Malaysia’s Prime Minister, Najib Razak, as a government investment company to drive foreign investment into Malaysia and boost the country’s overseas assets.

Najib, also head of the United Malays National Organisation (UMNO), the party that’s ruled Malaysia for the past 61 years, became the leader of 1MDB’s advisory board.

Goldman Sachs, which allegedly bribed its way into becoming 1MDB’s initial and principal debt financier, initially sold $6.5 billion worth of 1MDB bonds, launching the enterprise that would eventually accumulate $12 billion in debt.

I’ll get to what Goldman’s initial debt offerings were used to buy and how much Goldman made in fees.

But, before I get into the Goldman side of the story, understanding some of the corruption, fraud and theft that occurred through 1MDB is important to comprehend.

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The Inside of the 1MDB Operation

For starters, the U.S. Justice Department has said it believes at least $4.5 billion flowed out of 1MDB through a web of opaque transactions and fraudulent shell companies.

The Justice Department says siphoned-off money was used in spending sprees by corrupt officials and their associates, most prominently by businessman Low Taek Jho, known in offshore finance an international party circles Jho Low.

Low allegedly diverted money from 1MDB into personal accounts disguised to look like legitimate businesses and kicked back some of those funds to officials.

U.S. and Malaysian officials allege some of the money ended up with Najib Razak and his family, including $681 million found in Najib’s personal bank account, according to U.S. prosecutors.

In 2016 Malaysia’s then attorney general, backed by Saudi authorities, said the $681 million was a donation from the Saudi Arabian royal family.

U.S. investigators say the money actually came from – and was returned to – an offshore entity allegedly controlled by Jho Low.

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Malaysia’s new Prime Minister, Mahathir Mohamad, who came to power in last May’s general election, ending UMNO’s 61-year rule, says his country is seeking to recoup billions of dollars of 1MDB funds, including fees and other money it says it is owed from Goldman Sachs.

There are probes related to 1MDB in at least 10 countries, focused on possible embezzlement or money laundering.

Money diverted from 1MDB has been spent on huge real estate deals, untold millions in art, a $250 million luxury yacht, and producing the film “The Wolf of Wall Street.”

So, how did Goldman get involved and what exactly did its partners do and its compliance officers not do?

I’ll tell you on Friday.


Shah Gilani

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2 Responses to Goldman Sachs: Just Some Bad Actors or a Criminal Enterprise?

  1. Bob hill says:

    Why are you’all not focusing on finding companies that are are in trouble & going to drop in price,, stocks go dn quicker than up.

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