New particulars of Malaysia’s 1MDB settlement with Goldman Sachs emerge as arbitration dispute drags on | USAEMALL.com

MILESTONES FOR ASSET RECOVERY 

Government officials and lawyers close to the 1MDB asset recovery campaign told CNA that shortly after Goldman Sachs settled the upfront US$2.5 billion payment under the settlement agreement with Malaysia, the bank appointed US-based StoneTurn in October 2020 as the so-called asset recovery specialist.

Under the settlement agreement, StoneTurn, an advisory outfit founded in 2004 and specialising in investigations, cybersecurity and risk compliance, was tasked with assisting the Malaysian government in the recovery of assets that were acquired with funds tied directly to the US$6.5 billion that Goldman raised in three separate bond issues for 1MDB.

Lawyers close to the 1MDB recovery efforts also noted that the asset recovery process featured bi-annual reporting by the Malaysian government to Goldman Sachs and set milestones for the full settlement of the remaining US$1.4 billion.

These are the milestones, according to lawyers familiar with the settlement agreement and the ongoing arbitration:

• If the asset recovery efforts failed to secure at least US$5OO million before Aug 18, 2022, exactly two years after the settlement agreement was signed, Goldman Sachs would be required to advance US$250 million as a form of an interim payment to the Malaysian government.
• In year five (Aug 18, 2025), should total asset recoveries including the US$250 million interim payment fall below US$1.4 billion, Goldman Sachs would need to meet the shortfall.

This confidential asset recovery arrangement ran into trouble.

Sources close to the ongoing dispute said the Malaysian government had declared to Goldman Sachs in August 2022 that roughly US$365 million had been recouped under the asset recovery programme. 

Since it was below the minimum US$500 million target set under the settlement agreement, sources said Kuala Lumpur had demanded that Goldman Sachs honour the interim payment of US$250 million.

“That was when the dispute came up. Goldman’s lawyers said that Malaysia was lowballing the recovery figures,” said a senior Malaysian lawyer close to the situation, referring to New York-based law firm Sullivan & Cromwell.

The sources added that the US banking giant had argued that the Malaysian government’s accounting of the recovered assets had omitted luxury items and funds from two ex-Goldman Sachs employees amounting to US$179 million, and another US$666 million (RM2.8 billion) that Kuala Lumpur received from Ambank Group, the local financial institution that was used as the central financial conduit for 1MDB.

Malaysia has disputed Goldman Sachs’ contention, arguing that the disputed assets recovered were in no way tied directly to funds raised from the three bond issues.

The dispute led Goldman to file a suit against the Malaysian government at the London Centre for International Arbitration on Oct 11, 2023.