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Malaysian law firms involved in 1MDB settlement with Goldman Sachs fight court orders to surrender documents

KUALA LUMPUR: Malaysia’s campaign against US banking giant Goldman Sachs is now expanding into the role played by local law firms that were involved in the negotiations of two highly secretive multi-billion-dollar settlement agreements tied to the 1Malaysia Development Bhd (1MDB) scandal.

Rosli Dahlan Sarvana Partnership (RDS Partnership) and Chetan Jetwani & Company are now locked in a potentially messy legal confrontation with the Malaysian Anti-Corruption Commission (MACC) over the surrender of documents and banking account details tied to the 1MDB matter.

The MACC raided the offices of the law firms two weeks ago, but the agency’s demands for documents related to the settlement negotiations were rebuffed on grounds of the client’s confidentiality. That in turn, forced the MACC to refer the matter to the courts.

Lawyers involved in the legal dispute said that the Malaysian High Court will hear arguments from both sides sometime in early November.

NEW QUESTIONS

But disclosures in court filings ahead of next week’s hearings reviewed by CNA are already raising more questions over the handling of the settlement deals by the previous government headed by former premier Muhyiddin Yassin with US banking giant Goldman Sachs and the country’s sixth largest banking institution AmBank Group.

Chief among them is why the Muhyiddin administration entered into a settlement with Goldman Sachs more than two months before the US banking giant entered into a deferred prosecution agreement with the Department of Justice in October 2020 where it pleaded guilty to conspiracy to violate the Foreign Corrupt Practices Act in the 1MDB scandal.  

The court filings have also revealed previously undisclosed information on the government’s settlement with AmBank, which was the principal local financial institution handling all 1MDB-related matters.

RDS Partnership had represented the Malaysian government in the Goldman Sachs and AmBank settlements, while Chetan Jetwani and Company was the counsel for the US banking giant in the settlement agreement negotiations.

A letter by RDS Partnership that was filed in court noted that the central bank, Bank Negara Malaysia, had cautioned Mr Muhyiddin, who served as premier for 17 months beginning March 2020, that publicly-listed AmBank should not be penalised more than RM600 million (US$125.9 million) “as anything more could cause the collapse of the banking system”.

The RDS Partnership letter further stated that its senior partner, lawyer Rosli Dahlan, who was the government’s chief private-sector negotiator, had entered into direct talks with AmBank’s management and succeeded in securing the payment of a fine amounting to RM2.8 billion as settlement in February 2021 for its role in the 1MDB scandal.

The letter did not state why AmBank agreed to a much higher fine.

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Mr Charles Santiago, a three-term former Member of Parliament from the Democratic Action Party (DAP) who has been closely following the 1MDB debacle, said the government should have waited for the DOJ to take the lead with Goldman. 

He also noted that the government should have considered the extent of the involvement of the US banking giant in 1MDB before reaching a settlement. 

“There are simply too many questions emerging from this saga and what is needed is a parliamentary select committee hearing or a public inquiry,” he added.

Goldman Sachs completed its settlement negotiations with Malaysia in the third week of August 2020.

On Oct 22 that year, the DOJ announced that the US bank and its Malaysian subsidiary “had admitted to conspiring to violate the Foreign Corrupt Practices Act in connection with a scheme to pay over US$1 billion to Malaysian and Abu Dhabi officials”. Goldman Sachs was charged a US$2.9 billion fine by the DOJ.

Prime Minister Anwar Ibrahim’s government has publicly declared that Kuala Lumpur’s settlement with Goldman Sachs, which was completed two months before the DOJ-Goldman deal, was poorly negotiated.

He has also insisted that the country was short-changed by the US bank that played lead roles in arranging US$6.5 billion in 1MDB bonds in 2012 and 2013. 

Layering, which is a financial crime, refers to the movement of funds from one bank account to another in a separate financial institution to add layers of legitimate owners to avoid the detection of the actual source of funds that are potentially illicit.

Mr Chetan Lachman Jethwani, who is the partner of Chetan Jetwani & Co and counsel for Goldman Sachs, is challenging the MACC court action. 

“I state that it is clear that the only purpose to be served by securing these privileged materials is to obtain an unfair advantage against my client in the ongoing civil dispute relating to the quantum of the assets the Government of Malaysia was obliged to make best efforts to recover under the terms of the Settlement Agreement,” he stated in an affidavit filed in the High Court.

Separately, RDS Partnership noted in its response to the MACC action that it had written to the government-owned 1MDB “seeking for consent and authority to disclose the privileged and confidential material”.

In its court filings, RDS Partnership also noted that “the allegation that RDS was in a position to manipulate the negotiation is frivolous and without basis,” and added that “the negotiations were conducted by a task force comprising the Attorney General Chambers, the Ministry of Finance, MACC, the Securities Commission and the National Anti-Financial Crime Centre”.

A senior official at the 1MDB Asset Recovery Taskforce told CNA that its lawyers are keeping a close watch on developments. 

Related:

Malaysia not 'some banana republic', will go 'very far' to recover stolen 1MDB funds: PM Anwar

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