IPIC sues Goldman Sachs over 1MDB scandal

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KUALA LUMPUR (Nov 21): The International Petroleum Investment Company (IPIC) is suing Goldman Sachs Group Inc for playing a “central role” in the 1Malaysian Development Bhd (1MDB) scandal, which IPIC says caused it “significant financial exposure and losses”.

In a legal action filed in a New York State court today, the Abu Dhabi sovereign wealth fund claims that Goldman Sachs had conspired to bribe its former top executives.

“Goldman Sachs conspired with individuals from Malaysia to bribe and corrupt two officials, Khadem Abdulla Al Qubaisi and Mohamed Ahmed Badawy Al-Husseiny to further the business of Goldman Sachs and 1MDB at the expense of IPIC and Aabar’s business interests,” said IPIC in a statement late this evening.

Al Qubaisi is former managing director of IPIC and ex-chairman of IPIC’s subsidiary Aabar Investments PJS, while Al-Husseiny was former chief executive officer of Aabar. Both men were also named in the New York civil lawsuit.

IPIC was a one-time business partner of 1MDB and its subsidiary Aabar Investments PJS guaranteed two of 1MDB’s bond issuances worth a collective US$3.5 billion in 2012.  

The bonds issuances were arranged by Goldman Sachs, which sparked controversy with the unusually high fees it earned. Overall, Goldman Sachs was paid US$600 million in fees for arranging total bonds issuances of US$6.5 billion for 1MDB.

A separate criminal complaint had also been filed in the United Arab Emirates against both Al Qubaisi and Al-Husseiny for taking bribes and abusing their positions, said IPIC.

IPIC’s civil lawsuit adds to a growing spotlight on Goldman Sachs’ role in facilitating the international financial scandal that was 1MDB.

The IPIC lawsuit in New York has also turned attention back onto Al Qubaisi and Al-Husseiny, who had disappeared from public view after being reportedly arrested in 2016 over their roles in the 1MDB scandal.

Soon after the removal of both men, IPIC merged with Abu Dhabi State fund Mubadala.

Earlier this month, the US Department of Justice (DOJ) charged two former Goldman Sachs bankers as well as fugitive financier Low Taek Jho — better known as Jho Low — for their roles in enabling the misappropriation of funds from 1MDB.

One of the bankers, the bank’s former lead man for Southeast Asia Tim Leissner, had already pleaded guilty and implicated more Goldman Sachs employees in court, according to the New York Times.

The other ex-Goldman Sachs banker, Malaysian national Roger Ng, was arrested in Malaysia earlier this month.

“Indictments in October 2018 by the US Department of Justice reveal that the conspiracy of Goldman Sachs and individuals from Malaysia began in 2009, long before commercial activity began between 1MDB and IPIC,” said IPIC.

In its statement, IPIC also indicated that it will stand its ground against the Malaysian government’s attempt to invalidate a 2017 settlement agreement between 1MDB and IPIC.

The settlement agreement was the culmination of a dispute between 1MDB and IPIC after the former defaulted on bond payments that IPIC guaranteed, forcing IPIC to make the payment.

While 1MDB and IPIC initially went to the London Court of Arbitration to seek a decision on who should pick up the tab, both instead agreed on a settlement that compelled 1MDB to repay IPIC US$1.2 billion for payments it made as guarantor and to assume all future obligations relating to the two bonds.

On Oct 30 this year, the Malaysian attorney-general Tommy Thomas declared that the nation will file a legal challenge against the validity of the settlement agreement.

“The base of Malaysia’s legal challenge in the High Court in London is that the consent award was procured by fraud or in a manner contrary to public policy,” said Thomas.

Thomas said that under the settlement agreement, Malaysia is required to pay IPIC and the bond trustees US$5.78 billion over five years.

Of that sum, US$1.46 billion had already been paid and the Malaysian government intends to recover the monies too, Thomas added.

According to IPIC, its lawyers in the UK were served with the court application by 1MDB and the Malaysian Government on Nov 20.

“IPIC will take any and all legal action necessary, now and in the future, to protect its business interests against the financial exposure and damages it has suffered as a result of this international conspiracy,” said Michael Carlinsky, Head of Complex Litigation for Quinn Emanuel Urquhart & Sullivan, LLP, co-legal counsel for IPIC.

“We will also defend and protect the 2017 settlement concluded with and authorized by 1MDB and the Government of Malaysia,” Carlinsky added.