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After 1MDB saga, Goldman Sachs faces more trouble

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Already under scrutiny for dealings with 1MDB, US bank is facing a lawsuit for misrepresenting itself, in a case that also threatens to drag Najib Razak’s brothers into the fray.

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Goldman

NEW YORK:
The Goldman Sachs Group Inc, under scrutiny by US prosecutors over its 1MDB dealings, is now in deeper trouble.

And with it comes added headaches for 1MDB as the issue does not want to fade away.

The latest development, a lawsuit against Goldman, also threatens to drag in other members of Prime Minister Najib Razak’s family into the saga – although unrelated to 1MDB.

The New York-based bank been accused in a lawsuit, of selling out a client to curry favour with Najib, who controlled 1MDB.

Goldman and former managing director Tim Leissner allegedly betrayed their duties as financial adviser to EON Capital Bhd, which was taken over by Hong Leong Bank Bhd for US$1.7 billion in May 2011.

Goldman used EON’s confidential information to help Hong Leong buy EON on the cheap knowing that one of Najib’s brothers served as a board member and another brother chaired the investment firm advising the bank, Primus Pacific Partners 1 LP said in the complaint, according to a Bloomberg report.

The lawsuit, the report said, came as Goldman’s fundraising activities on behalf of 1MDB have drawn the attention of US prosecutors.

In a complaint filed last week, US prosecutors laid out a road map that appeared to show how more than US$2 billion of the US$6.5 billion raised by Goldman for 1MDB was siphoned off by politically connected people and funnelled into various projects, including Hollywood movie productions, New York condominiums, famous paintings and a jet.

Without assigning any blame to the bank, the prosecutors’ complaint indicated that the documents circulated by Goldman prior to the bond sales were misleading, the Bloomberg report said.

Leissner, the former vice-chairman of Goldman’s operations in Asia, was the lead banker on the 1MDB deals. He resigned from Goldman after he was placed on leave in January over “inaccurate and unauthorised statements” in a letter of reference, according to Financial Industry Regulatory Authority records.

Neither Najib nor Leissner were accused of wrongdoing in the US Department of Justice lawsuits filed on July 20 in Los Angeles pertaining to assets “involved in and traceable to an international conspiracy to launder money misappropriated from 1MDB”.

A recent New York Times report said the Federal Reserve was preparing an enforcement action against Goldman Sachs related to confidential government information that was leaked from the Fed to one of its bankers.

And now comes the lawsuit by Primus Pacific, which was EON’s biggest shareholder after buying a stake of more than 20 per cent in 2008.

Goldman persuaded EON’s board to hire it as financial adviser by misrepresenting and hiding conflicts of interest, according to the lawsuit, filed Tuesday in a New York state court.

The conflicts stemmed from existing and potential business interests in Malaysia according to the complaint.

Primus Pacific is seeking US$510 million in damages, including a punitive award.

 

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