Malaysia’s graft investigation of 1MDB appears shoddyDocuments, interviews find evidence ignored, lack of transparencyBy Tom Wright and Bradley Hope
26 May 2016
Investigations ordered by Malaysia’s leader into graft allegations at a state-development fund have been undermined by political pressure and a lack of transparency, according to documents and interviews with people involved.
Evidence possibly central to the probes was placed off limits or ignored, The Wall Street Journal found. Potentially crucial clues weren’t scrutinized. And at least one key figure, Malaysian Prime Minister Najib Razak himself, wasn’t interviewed by investigators.
The promise of a thorough and transparent accounting of what happened at the fund, 1Malaysia Development Bhd., or 1MDB, has helped Najib fend off domestic criticism. Now, though, with six foreign countries investigating allegations of corruption at 1MDB, pressure is rising at home for greater transparency.
Najib in March 2015 pledged an independent probe into 1MDB, which he founded to spur economic development. He ordered the auditor general, an investigative agency whose findings are typically public, to compile a report on the fund’s activities. And he ordered the contents to be reviewed and debated by the Public Accounts Committee, a parliamentary body.
But the auditor general’s report into 1MDB, completed in March, was classified under Malaysia’s Officials Secrets Act, shielding it from public view.
The auditor general separately provided some information in a presentation to the Public Accounts Committee, said people who were present. Tony Pua, an opposition lawmaker who sits on the committee, said in a statement this month that the auditor general “has specifically confirmed that US$7 billion of 1MDB assets and transactions overseas cannot be verified or traced.”
The committee, however, made no mention of the $7 billion estimate when it published its report on 1MDB in April and said only that an unspecified amount of money was unaccounted for.
“The issues are of such public importance that there cannot be any excuse for making the auditor general’s report an official secret,” said Razaleigh Hamzah, a senior politician with the United Malays National Organization, Najib’s ruling party.
Hasan Arifin, a ruling-party politician who heads the committee, didn’t call Najib to testify even though Najib was chairman of 1MDB’s board of advisers and also is Malaysia’s finance minister, giving him ultimate oversight over the fund. Other participants in the inquiry repeatedly asked him to seek Najib’s testimony, said Pua and two current and former ruling-party politicians on the committee.
1MDB's fine payment marks end of BNM investigationsBY Rupa Damodaran
26 May 2016
KUALA LUMPUR: Bank Negara Malaysia governor Datuk Muhammad Ibrahim said the fine paid by 1Malaysia Development Bhd (1MDB) for non-compliance marks the end of the central bank's investigation.
"There are other laws administered by other authorities and we will continue to give our cooperation on this matter,"he said at a media briefing on the sidelines of the 20th Banking Summit today.
On Wednesday, 1MDB announced its full payment of a fine following a letter of administrative compound to the fund for non-compliance with certain directions of BNM.
On whether Bank Negara is working with Singapore's Monetary Authority of Singapore, Muhammad responded "we have done our investigations".
MAS withdrew the licence of Swiss merchant bank BSI Bank following investigations on its links with 1MDB.
Asked to comment on the ongoing BSI Bank investigation, Muhammad said regulatory authorities will make the investigation based on the rules and regulations based on the jurisdiction. "As far as we are concerned, there are other laws administered by other authorities."
Meanwhile AmBank Group chairman Tan Sri Azman Hashim described the RM53.7 millon fine by BNM as an expensive lesson and the financial institution is working hard to ensure `it does not happen again'.
The penalty which was imposed in November last year was due to a breach of regulations under Section 234 of the Financial Services Act 2013 and Sect 245 of the Islamic Financial Services Act 2013 by AmBank (M) Bhd and AmBank Islamic Bhd.
Azman, who is also chairman of the Financial Services Professional Board (FSPB), said compliance in the current environment is a difficult issue as even global banks with the best systems in place have also been fined millions due to non-compliance.
On the impact of the woes of troubled 1MDB to the banking system, he said regulations are getting tougher and money launderers are also getting smarter.
The human factor cannot be overlooked too, he said, pointing to his 12,000 staff strength.
"It is a costly thing but we need to upgrade and train our staff to be knowledgeable."
Following the penalty, the sixth largest lender agreed to a four-year programme of work towards achieving market best practices and announced it would set aside an average of RM25 million annually for four years for investment in systems, infrastructure and training.
Goldman Sachs sees Malaysian deals evaporate amid 1MDB concernsBy Elffie Chew and Joyce Koh May 25, 2016 7:31 pm ET
(Bloomberg) -- When Malaysia's largest sovereign wealth fund asked bankers to pitch for work arranging a US$750 million bond sale in December, one big name was conspicuous by its absence: Goldman Sachs.
Khazanah Nasional Bhd omitted the Wall Street firm from the list of banks invited to bid on that and other bond transactions in the past three years, according to a person familiar with the matter. During that time, Goldman slid down the Malaysian deal league tables, cold-shouldered by potential clients concerned about negative publicity from its dealings with 1Malaysia Development Bank Bhd (1MDB), another government entity.
Chief executive officer Lloyd Blankfein guided Goldman deeper into emerging markets over the past decade, arguing that their rising influence in the global economy justified the higher risks involved. Malaysia, where Goldman Sachs collected eye-popping fees from 1MDB about three years ago, has come to symbolize the potential outsize rewards of developing economies - but also the perils.
Fallout from working with 1MDB, the embattled investment fund at the center of investigations from the US to Singapore, has led to a wider collapse in Goldman's once-thriving business in Malaysia, which it said a few years ago offered "very positive" prospects. Work advising Malaysian clients on mergers and acquisitions, share offerings and bond issues has all but evaporated over the past few years, according to data compiled by Bloomberg, and several senior bankers involved in Malaysian deal-making have left since 2013.
"I'm not sure how long it'll take for Goldman to recover from this," said Ang Ser Keng, a senior lecturer in finance at the Singapore Management University. "They will definitely hurt from this," Ang said, referring to Goldman Sachs's association with 1MDB.
The bank's fall from grace in Malaysia stands in stark contrast with its prosperous run under Tim Leissner, the former star Goldman banker who drew many Malaysian clients to the firm and helped oversee three bond offerings for 1MDB in 2012 and 2013.
Those deals proved the turning point for the bank's fortunes. Soon after, Goldman got unwanted publicity over the above-average fees and commissions it earned on the bond sales. More recently, 1MDB has found itself at the centre of a complex scandal over its ballooning debts and financial ties with Malaysian Prime Minister Najib Razak.
Mr Leissner left Goldman in February and now lives in Los Angeles with his wife, the former US model and fashion designer Kimora Lee Simmons. He has been subpoenaed by the US Department of Justice in connection with its investigation into the Malaysian fund, according to people familiar with the matter. US prosecutors are examining an alleged transfer of hundreds of thousands of dollars from a former 1MDB employee to a start-up company which Leissner was backing, according to other people briefed on the matter.
The deepening global fallout of the 1MDB scandal was underscored on Tuesday, when Singapore took the rare step of ordering Swiss private bank BSI SA to shut its unit in the city- state because of its ties with the Malaysian fund.
Mr Leissner hasn't been accused of wrongdoing. Malaysia's premier and 1MDB have consistently denied any wrongdoing. Goldman is working with an outside law firm to conduct an internal examination and is reviewing its own role in helping 1MDB raise capital, according to people with knowledge of the matter. There is no indication that the firm engaged in any wrongdoing, the people said.
Goldman expressed confidence in its Malaysian business.
"Malaysian deal activity has been generally quiet but our dialogue with clients is positive and we are seeing a growing pipeline of transactions," said Hong Kong-based spokesman Edward Naylor. An official from Khazanah declined to comment.
Last year, Goldman didn't arrange a single share sale in Malaysia. In mergers advisory involving companies from the country, it ranked 18th, behind global rivals such as HSBC Holdings, JPMorgan Chase & Co and UBS Group, Bloomberg-compiled data show. In 2012, the last full year before reports emerged about its commissions from the 1MDB bond sales, Goldman was second in advising on M&A, trailing only local lender Malayan Banking Bhd.
Goldman led the league tables for arranging dollar bond sales by Malaysian companies from 2011 to 2013, bolstered by the 1MDB debt offerings. The firm hasn't worked on any such offerings since then, the data show.
The lowly ranking in Malaysia is also a contrast to Goldman's wider investment banking success in the Asia-Pacific region, where it typically is among the top arrangers of initial public offerings and advisers on corporate mergers. At the same time, Malaysia's investment-banking fees have dwindled since 2012 as deal-making slowed.
In 2009, Mr Leissner was quoted as saying that the outlook for Malaysia's capital markets and asset management industry is "very positive." Goldman looked forward "to playing a larger role in their development," Mr Leissner said in a press release issued by the Malaysian Securities Commission when it approved the bank's application to set up fund management and corporate finance advisory operations in the country.
Goldman played multiple roles during its business relationship with 1MDB. In 2012, it advised the firm on its US$2.8 billion acquisition of power assets from Ananda Krishnan, Malaysia's second-richest man with interests in telecommunications, media, energy and real estate. The following year, the bank helped 1MDB purchase the Jimah power plant in Selangor, Malaysia, a deal that was completed in 2014.
In 2012 and 2013, Goldman handled three 1MDB bond sales totaling US$6.5 billion that yielded fees, commissions and expenses of US$593 million, or about 9 per cent of the money raised, well above the industry norm. The bond deals involved the bank putting its own capital at risk.
Those transactions also coincided with the end of Goldman's bull run in Malaysia. Yusof Annuar Yaacob, the deal- maker who ran its investment banking business there from Kuala Lumpur for three years, joined Deutsche Bank in early 2014. Roger Ng, another Goldman Sachs banker focused on Malaysia, also left that year. Singapore-based Udhay Furtado now oversees those operations.
Though Goldman Sachs remains a dominant force in deal-making across the Asia-Pacific region, like other banks it has suffered from the wider downturn in business in Southeast Asia in recent years. Last year, it reduced the size of its investment-banking team in Singapore by about 30 per cent. Standard Chartered, Malaysia's CIMB Group and Nomura Holdings have also cut staff in the region.
So far this year, Goldman ranks third for mergers and acquisitions in Malaysia, according to data compiled by Bloomberg. The US bank is advising two foreign companies - Skyscanner Ltd in the UK and Garena Interactive Holdings Ltd in Singapore - in which Khazanah bought minority stakes.
Goldman was last invited to bid on a Khazanah bond issue in 2012, though that mandate eventually went to CIMB, Deutsche Bank and JPMorgan. For the December pitch for which Goldman wasn't invited, the bidders included Barclays Bank, UBS, Morgan Stanley, Deutsche Bank and CIMB.
Standard Chartered, CIMB and DBS Group won the mandate. The funds were used to refinance other bonds that came due in March.
Ringgit slides with Malaysian stocks as 1MDB woes come back into focus2 Feb 2016
(Bloomberg) -- The ringgit led declines in Asia and Malaysian stocks fell as state-investment company 1Malaysia Development Bhd came back to haunt the currency just as a pickup in oil was stoking a recovery.
A week after Prime Minister Najib Razak, who chairs the company's advisory board, was cleared in a probe over any wrong doing related to a political donation, the Singapore authorities said on Monday (Feb 1) they had seized many bank accounts related to possible money laundering associated with the firm, which was in the limelight last year due to concern about its rising debt.
This followed an announcement days ago by Swiss Attorney-General that it's pursuing an investigation into alleged diversion of funds from 1MDB.
The ringgit weakened 0.7 per cent to 4.1845 per US dollar as of 9.56am in Kuala Lumpur, after last week posting its biggest rally since October as the outlook for the oil-exporting nation's finances improved amid a recovery in Brent crude. Oil fell for a second day on Tuesday as Malaysian markets reopened after a holiday on Monday.
The ringgit also weakened to 2.9393 to the Singapore dollar as of 10.41am, 0.7 per cent lower than its close on Monday.
"It appears that the dust is being kicked up on 1MDB all over again," said Mr Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. "Downside pressures for the ringgit could re-emerge."
The ringgit climbed 3.3 per cent in January, more than any other in emerging markets, on speculation 2015's 19 per cent decline was overdone.
Malaysia's benchmark stock index fell 0.5 per cent after climbing 2.6 per cent in the five days through Jan 29. Government bonds due in 2020 rose, with the yield falling two basis points to 3.36 per cent, Bursa Malaysia prices show.
1MDB has been the subject of overlapping investigations at home plus Switzerland and Hong Kong amid allegations of financial irregularities. Singapore has seized "a large number" of bank accounts in connection with possible money laundering, the Monetary Authority of Singapore and Commercial Affairs Department said in a joint e-mailed statement on Monday in response to queries on the company.
A statement from Swiss prosecutors last week said they are seeking legal assistance from Malaysia after a probe they conducted into 1MDB revealed "serious indications" that about US$4 billion (S$5.69 billion) may have been misappropriated. Datuk Seri Najib is "not one of the public officials under accusation" in that investigation, Mr Andre Marty, a spokesman for the Swiss Attorney-General's office, said on Monday in a statement.