Malaysia’s Goldman Sachs Offer – Return The $7.5 Billion You Didn’t Steal

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Malaysia has made what we might call an interesting offer to Goldman Sachs over the 1MDB scandal – pay Malaysia the $7.5 billion that Goldman Sachs didn’t steal, that no one has stolen, and we’ll say no more about the matter. This is perhaps not the finest ever deal offered to a Wall Street firm – or, indeed, to anyone.

The background is that the Malaysian state set up a development fund. One that turned out to have rather less oversight than might be prudent with such sums of taxpayer money. The former Prime Minister is in very hot water over his possibly having dipped his ladle in the gravy, just as one example.

Goldman Sachs organised a $6.5 billion bond issue for this fund. Allegations are flying around that those executives that did the organising knew about the lax controls, that they would be evaded, therefore Goldman Sachs is responsible.

Well, yes, possibly:

Malaysia could drop Goldman Sachs’ 1MDB charges for US$7.5 billion: Finance Minister Lim Guan Eng

Interesting, no?

An apology from Goldman Sachs Group doesn’t cut it for Malaysia, which said it may consider a discussion to absolve the bank of blame for its role in the 1MDB scandal for US$7.5 billion (S$10.2 billion). The country filed criminal charges against the lender in December, the first for Goldman, and may discuss dropping those allegations if the bank pays the sum, Finance Minister Lim Guan Eng told reporters on Friday (Jan 18).

Malaysia alleges that Goldman misled investors in the three bond sales it arranged for 1MDB, or 1Malaysia Development Berhad, while knowing the money raised would be misappropriated. Units of the bank were accused of making false statements in documents submitted to a local regulator in arranging US$6.5 billion bond offers for 1MDB, from which at least US$2.7 billion was allegedly stolen.

Just for the sake of argument, imagine that the Goldman peeps did know all that is alleged and then acted as alleged. Why should Goldman therefore pay more than they raised for the fund? Why should they pay more than was stolen?

Perhaps even more, why should Goldman pay instead of the people who stole the money? This really might not be the best settlement offer that anyone has ever made.