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Wednesday, July 27, 2016

Goldman accused of selling out client - curry favor with Malaysia's Najib

Goldman Sachs Group Inc is being accused in a lawsuit of selling out a client to curry favor with Prime Minister Najib Razak at a time when the bank has already been under scrutiny by regulators over its fundraising for the embattled 1Malaysia Development Bhd (1MDB).

Goldman and former managing director Tim Leissner allegedly betrayed their duties as financial adviser of EON Capital Bhd, which was taken over by Hong Leong Bank Bhd. for $1.7 billion in May 2011. Goldman used EON’s confidential information to help the bank buy EON on the cheap knowing that Najib’s brother served as a board member and another brother chaired the investment firm advising the bank, Primus Pacific Partners 1 LP said in the complaint. (Source: Bloomberg)

Spokesman for Goldman said lawsuit as "misguided"

Primus Pacific, EON’s biggest shareholder after buying a stake of more than 20 percent in 2008, unsuccessfully sued twice to block the sale, arguing that Hong Leong’s takeover price was too low.

“This plaintiff previously lost its challenge in the Malaysian courts seeking to stop the transaction at issue, which was then approved by shareholders," Andrew Williams, a spokesman for Goldman, said in a statement. 

He called the lawsuit “misguided.”

Leissner’s attorney, Jonathan Cogan, didn’t return a call for comment.

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 New York state court. 

The conflicts stemmed from existing and potential business interests in Malaysia, including its close relationship with Najib, according to the complaint.

Primus Pacific seeks $510 million in damages - said of Goldman Sach's fraud

Primus Pacific will seeks for $510 million in damages, including a punitive award.

Goldman served as the "key adviser" to 1MDB and Leissner "repeatedly engaged in misconduct" in connection with the fund before, during and after the time the company served as EON’s adviser, according to the complaint.

Goldman initially advised EON in January 2010 that the bid was below the company’s value, and four months later recommended that the board accept a bid that was 2.8 percent higher - a proposal that was approved by shareholders, Primus Pacific said.

"As a result of Goldman Sachs’s fraud, shareholders approving HLB’s takeover bid were unaware of critical facts that, if known, would have precluded approval of the HLB offer," Primus Pacific said.

RECAP of Goldman and 1MDB's recent complaint filed by US prosecutors

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

The lawsuit comes following it.

The prosecutors' complaint (without assigning any blame to the bank) indicated that the documents  circulated by Goldman prior to the bond sales were misleading. Former vice chairman of Goldman’s operations in Asia, Leissner, was the lead banker on the 1MDB deals. 

He resigned from Goldman after he was placed on leave in January over “inaccurate and unauthorized statements” in a letter of reference, according to Financial Industry Regulatory Authority records.

Najib and Leissner, both were not accused of any wrongdoing in the US complaint.

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