PETALING JAYA: A senior commercial litigation lawyer has proposed that the government immediately seek advice from foreign legal experts as to its best possible recourse against Goldman Sachs in foreign courts.
The recommendation follows reports that Prime Minister Anwar Ibrahim and 1MDB task force chief Johari Ghani are questioning the propriety of a 2020 settlement agreement entered between former prime minister Muhyiddin Yassin’s administration and the New York-based investment bank.
“There are two possible jurisdictions where the agreement can be challenged. One is New York, where Goldman Sachs is based, and the other is London, since the agreement is governed by English law,” the lawyer, who spoke on condition of anonymity, said.“Each jurisdiction has its merits.
“New York has a close connection with the facts of the case as Goldman Sachs and its principal officers reside there.
“Also, two of the bank’s senior executives, Tim Leissner and Roger Ng, have already been convicted for 1MDB-related criminal offences in New York,” he said.
London, on the other hand, may be a suitable venue as the parties are understood to have agreed that English law would govern the settlement agreement.
Choice of law versus close connection
“There also seems to be a precedent for challenging such an agreement in the United Kingdom,” the lawyer said.
In 2018, Malaysia brought proceedings in a London court to set aside a 2017 settlement agreement entered by 1MDB and the International Petroleum Investment Co (IPIC) on the ground that it was procured by fraud. The case was settled amicably in February this year.
“Given that the settlement agreement between Goldman Sachs and the government is subject to English law, the obvious first step for the government would be to seek the advice of a reputable King’s Counsel as to whether the government has valid grounds to have it set aside,” the lawyer said.
A King’s Counsel can also advise whether the government has a claim against parties involved in negotiating the settlement agreement, and whether these can be brought in the same action or by means of a separate suit, he said.
In the same way, the government should seek legal advice from a reputable New York law firm so that it can make an informed decision, the lawyer said.
‘Surprised by speed of settlement’
In a report on Tuesday, Titiwangsa MP and Government Backbencher’s Club chairman Johari said he was surprised by the speed at which the settlement was reached with Goldman Sachs.
“The principal payment of the bonds was only due in May 2022, which means there was ample time for the government to negotiate,” he told FMT.
Johari said that on June 30, 2020, he met Muhyiddin, then finance minister Tengku Zafrul Aziz and Attorney-General (AG) Idrus Harun to discuss a potential claim against Goldman Sachs.
On July 3, 2020, he put his proposal in writing to Muhyiddin, who sent it on to Idrus on July 15, 2020.
By July 24, 2020, however, the government had already signed “Points of Agreement” with Goldman Sachs.
A full settlement agreement was executed on Aug 18, 2020.
“Based on Johari’s timeline, a thorough inquiry is warranted,” the lawyer said.
Former AG Thomas questioned settlement in 2020
“Former attorney-general Tommy Thomas made a similar observation shortly after Tengku Zafrul announced the signing of the settlement agreement,” the lawyer said.
In an open letter to The Edge published in August 2020, Thomas, who in 2018 as AG brought criminal charges against Goldman Sachs and 17 of its directors, claimed that the prosecution had a strong case against all the accused.
“There are no objective reasons to have reached a settlement at this point in time,” said Thomas.
“What ought to have happened was to start the criminal trial against Goldman Sachs and its directors. From Malaysia’s perspective, any settlement should have only taken place in the middle of the trial or after the verdict (was) announced.”
Thomas also questioned the settlement sum of US$3.9 billion agreed upon and the mechanics of its recovery.
The settlement consisted of a payment by Goldman Sachs of US$2.5 billion (which includes a refund of US$606 million previously paid to the bank as fees) and a guarantee to return at least US$1.4 billion in the form of assets.
He took the view that the US$1.9 billion settlement sum (net of the fee refund) agreed upon was low.
“Malaysia’s total exposure in principal and interest on the three bonds (was) US$9.6 billion,” he noted.
He also said there was no reason for the settlement agreement to include asset recovery of RM1.4 billion as that sum was to be received from the US Department of Justice and “was not in any way dependent on the Goldman Sachs settlement”.
Last month, Anwar said he agreed with the task force’s opinion that the government should be receiving much more in compensation than was agreed.
“From the start, I thought the deal was rushed through. It has raised a lot of questions about the previous administration,” Utusan Malaysia reported him as saying.
In an interview with Bloomberg Television in January, Anwar accused Goldman Sachs of reneging on the terms of the settlement agreement and using its financial might to dictate terms.
On Feb 27, Johari told the Dewan Rakyat that Malaysia had been shortchanged in the settlement. He urged the government to review the settlement and investigate the role of those who negotiated the deal on Putrajaya’s behalf.
On March 9, Anwar told Parliament he agreed with Johari’s criticism that the settlement sum of US$2.5 billion (RM11 billion) negotiated by Muhyiddin’s government was too low given the losses were reportedly in the region of US$7 billion (RM31 billion).
The following day, the prime minister announced Johari’s appointment to lead the task force in a bid to “resolve matters” relating to the 1MDB asset recovery.
In August 2018, Leissner pleaded guilty in a New York court to conspiring to launder money in violation of the US’ Foreign Corrupt Practices Act (FCPA). He is presently awaiting sentencing for his crime.
In March this year, he was ordered by the court to forfeit US$43 million and stock valued at more than US$200 million.
Also in March, Ng was convicted by the same court for his role in looting the Malaysian fund. He has been sentenced to 10 years in jail.
The court also ordered that US$35.1 million be forfeited from Ng. - FMT
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