KUALA LUMPUR: In at least one fund-raising exercise for 1MDB, Goldman Sachs did not get the approval of International Petroleum Investment Company (IPIC), the bond’s chief guarantor, The Straits Times (ST) reported today.
This is against the norm as board resolutions are a prerequisite for corporate entities before they undertake any material transaction that introduces risk.
The report said in the case of a US$1.75 billion (RM7.1 billion) IPIC-guaranteed bond that Goldman Sachs raised for 1MDB in 2012, the bank relied mainly on approvals from senior officials of IPIC, such as its then chief executive, Khadeem Al Qubaisi.
The bank admitted, in a written response to the ST, that it did not obtain approval from Abu Dhabi’s IPIC board for the bond issue.
“The firm relied on documents provided by IPIC executives and legal opinions of outside counsel evidencing IPIC’s authority to enter into the guarantee,” Goldman Sachs told ST.
It declined further comment.
ST said the fact that Goldman Sachs decided to proceed with the international bond issue without approval from the IPIC board would increase scrutiny of the role it played in one of the world’s biggest financial scandals involving the sovereign funds of Malaysia and Abu Dhabi.
Abu Dhabi government officials, it said, did not respond to requests for comment on why IPIC committed itself to the guarantees without the board’s approval.
The ST report quoted an unnamed former executive of a listed company as saying: “The big issue Goldman (Sachs) will have to establish is whether the other supporting documentation was equal to or greater than a board’s approval. And also, why it simply did not secure one.”
The IPIC-guaranteed 1MDB bonds, between 2012 and 2013, collectively raised US$6.5 billion, for which the bank received over US$600 million in fees.
On Monday, Putrajaya filed a criminal suit in the Kuala Lumpur High Court against Goldman Sachs for alleged theft of billions of dollars that were diverted from 1MDB.
Goldman Sachs arranged bonds in two equal tranches of US$1.75 billion that were intended to finance 1MDB’s investments in the power sector and another US$3 billion to fund “strategic economic activities” for Malaysian and Abu Dhabi interests.
The US Department of Justice has alleged in civil suits against 1MDB that close to US$2.7 billion of the money raised in the bond issues was embezzled and diverted into accounts controlled by Malaysian financier Low Taek Jho, who was central in establishing the close ties between the Malaysian and Abu Dhabi governments and that some of it went into former prime minister Najib Razak’s accounts.
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