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Goldman Sachs’ suit against govt ‘premature’ as parties still in good faith talks over 1MDB settlement, says asset recovery taskforce chairman Johari Ghani

KUALA LUMPUR (Oct 12): Goldman Sachs Group Inc’s move to sue the Malaysian government over a multi-billion dollar settlement for its role in the 1Malaysia Development Bhd (1MDB) debacle is “premature and without due consideration of necessary prerequisites”, said 1MDB Taskforce (Asset recovery) chairman Datuk Seri Johari Abdul Ghani.

In a statement on Thursday, he said the parties are still in the middle of amicable good faith discussions following four extensions granted by the government to Goldman Sachs to settle a dispute involving an interim payment of US$250 million by the bank to Malaysia.

“The 1MDB Taskforce Committee is quite surprised at the conduct of Goldman Sachs as parties are still in the stage of good faith discussions to resolve any dispute amicably. 

“However, in light of recent events, the Government of Malaysia will be preparing to respond to this matter and ensuring that this process is done diligently and in accordance with the established legal frameworks while ensuring that the interest of the Malaysian people is safeguarded,” he said.    

The interim payment is part of a US$1.4 billion asset recovery guarantee by Goldman Sachs, which together with a US$2.5 billion cash payment forms the settlement agreement signed on Aug 18, 2020.

“Under the US$1.4 billion asset recovery guarantee by Goldman Sachs, if the Government of Malaysia did not recover the sum of US$500 million by Aug 18, 2022 (two years from the signing of the settlement agreement), Goldman Sachs would be required to pay US$250 million as interim payment to the Government of Malaysia.
“On Aug 18, 2022, the accounting provided by the Government of Malaysia to Goldman Sachs showed that it had not recovered US$500 million and hence the Government of Malaysia is entitled to the interim payment of US$250 million. This was disputed by Goldman Sachs.

“The settlement agreement allowed parties to engage in amicable good faith discussions for the period of three months if a dispute relating to the settlement agreement arose,” he said.

According to Johari, the government had granted a three-month extension sought by Goldman Sachs on Sept 8, 2022, that expired on Dec 8, 2022.

This was followed by another three-month extension that expired on Feb 8, 2023, and a subsequent one that expired on May 8, 2023.

“The last extension was given on Aug 8, 2023, and this is set to expire on Nov 8, 2023… and if a settlement is not reached between the parties by this deadline, the Government of Malaysia can commence arbitration proceedings in respect of the interim payment of US$250 million.

“Goldman Sachs’ action of initiating arbitration proceedings also appears to be an attempt to detract and divert attention away from their obligation to adhere to the interim payment of US$250 million requirement under the settlement agreement. Nevertheless, in relation to these proceedings, the Government of Malaysia will respond to this matter accordingly,” said Johari.

Goldman Sachs sued the Malaysian government in the London Court of International Arbitration for “violating its obligation to appropriately credit assets against the guarantee provided by Goldman” it its settlement agreement, and to recover other assets, a spokesperson told Reuters.

Prosecutors said the bank helped 1MDB to raise US$6.5 billion through bond sales and earned US$600 million in fees.

Source : THE EDGE

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