Malaysia Demands $7.5 Billion from Goldman Sachs in 1MDB Scandal

Unruly traffic on a road in New Delhi, India. Photo: Rakesh Raman / RMN News Service (Representational image)
Unruly traffic on a road in New Delhi, India. Photo: Rakesh Raman / RMN News Service (Representational image)

Malaysian Prime Minister (PM), Mahathir Mohamad, has rejected Goldman Sachs offer of $2 billion in damages over 1MDB scandal, although he said his government is ready to negotiate for a more meaningful deal of a higher amount.

Malaysia might drop its demand for $7.5 billion of compensation in the event of a better offer from the American multinational investment bank which is embroiled in an ongoing multi-billion dollar 1Malaysia Development Bhd (or 1MDB) scandal.

Malaysia has accused Goldman Sachs and 17 current and former directors for allegedly misleading investors over bond sales totaling $6.5 billion that the bank helped raise for the sovereign wealth fund 1MDB.

Reports suggest that the financial misappropriation amounts to nearly $4.5 billion in 1MDB, which was introduced in 2009 by the then Malaysian PM, Najib Razak. The scandal became one of the major factors that helped Mahathir defeat Najib in the election last year.

It is alleged that in 2015, PM Razak had misappropriated nearly $700 million from 1MDB, which was established as a government-run strategic development company. The U.S. Department of Justice has also launched an anti-corruption probe in this case.

The U.S. Foreign Corrupt Practices Act (FCPA) prohibits companies and their officials from influencing foreign officials with any personal payments or rewards. The FCPA applies to U.S. people who engage in corrupt practices abroad.

In particular, FCPA deals with U.S. businesses, foreign corporations trading securities in the U.S., American nationals, citizens, and residents acting in furtherance of a foreign corrupt practice, whether or not they are physically present in the U.S. Any individuals involved in these activities may face prison time.

Meanwhile, a similar $4 billion scandal – called Rafale scam – in which Indian PM Narendra Modi was an accused had triggered nationwide protests in India. However, because of weak political opposition, scared judiciary, corrupt media, and complicit law-enforcement agencies, a probe could not happen in the Rafale scandal.

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Rakesh Raman