Bloomberg has reported yesterday that the former Chief of Goldman Sach’ s Southeast Asian operations, Tim Leissner has been subpoenaed by the Federal Bureau of Investigations (FBI) of the United States last month.
Prosecutors in the Justice Department’ s kleptocracy asset-recovery unit are investigating whether funds were embezzled from 1Malaysia Development Bhd., known as 1MDB, by politically connected people in Malaysia, the people said. The FBI’ s New York office is leading the investigation and is trying to determine if any U.S. laws were broken, according to one of the people briefed on the subpoena issued to Leissner.
Critics of the 1MDB mega-scandal, including myself, have long been calling for the bond issuance exercise carried out by Goldman Sachs for 1MDB to raise a total of US$6.5 billion to be investigated.
1MDB had via 3 international bond issuance exercise, raised US$1.75 billion, US$1.75 billion and US$3 billion in May 2012, October 2012 and March 2013 respectively. The investment bank which also acted as the underwriter of the bonds was Goldman Sachs.
The above bond issuance stunk to high heavens because of the abnormal and exorbitant “certain commissions, fees and expenses” which were paid to Goldman.
For example, 1MDB paid US$196 million and US$283 million for the “certain commissions, fees and expenses” to raise US$1.75 billion and US$3 billion respectively. These amounts worked out to a staggering 11.2% and 9.4% of the funds raised.
How is it that Tenaga Nasional and Penerbangan Malaysia Bhd were able to raise US$350 million and US$1 billion by paying only 2% and 0.5% in fees and expenses?
What is more interesting is the fact that other Goldman Sachs fund-raising exercises were substantially cheaper as well. For example, Goldman charged Sarawak government subsidiary, Equisar International Inc only 1.3% in fees.
For similarly-sized issues, the Mexican and Uruguayan governments successfully issued bonds amounting to US$3.9 billion and US$2.0 billion by deducting only 0.2% and 0.1% for fees and expenses respectively.
How could it be possible that Malaysia as a country is 100 times less credit worthy than the Uruguayan government?
Questions asked previously have not been answered in full and Malaysians have remained in the dark. Goldman Sachs insisted that other than fees paid to the professional legal advisors and accountants, the entire fees were due to the investment bank.
1MDB and the Minister of Finance however, contradicted Goldman Sachs by telling the Malaysian parliament that part of the ‘ fees’ to Goldman was actually a discount given to bond subscribers. They however, refused to disclose the “discount” which was given and the investors who subscribed to the bond.
Despite the fact that the Malaysian government and taxpayers are the biggest victims to the astronomical fee paid to Goldman Sachs, it is the US investigators who have found basis to investigate the above transactions for possible scam, conspiracy and international money laundering.
It is a disgrace that the Royal Malaysian Police has completely failed to carry any extensive investigations on the above incredulous transactions. The Attorney-General and the Inspector General of Police must expedite investigations on 1MDB’ s US$6.5 billion bond deals with Goldman Sachs in the light of Tim Leissner being subpoenaed by the FBI.
The failure of the Attorney-General and the Inspector General Police to take quick and effective action against such crimes have led to the Government carrying out a multi-billion bailout of 1MDB with emergency loans, cheap land sales and preferred contracts at the expense of the tax-payers.