Goldman Sachs in the dock again
Prime Minister Mahathir Mohamad has not pulled any punches
in accusing Goldman Sachs of having ‘cheated’ Malaysia. He aired the accusation
in an interview with CNBC. Two former bankers from the Wall Street giant firm,
Tim Leissner and Ng Chong Hwa have been charged this month by the US Justice
Department of working with a Malaysian financier Low Taek Jho to launder huge
sums allegedly stolen from sovereign wealth fund 1MDB. All three are accused of
involvement in a sophisticated fraud linked to former prime minister Najib
Razak, who suffered a shock defeat of his long-ruling government in elections
in May because of the scandal. Prime Minister Mahathir Mohamad has suggested
Malaysia could take action against Goldman Sachs if it was found to have broken
the law. As it is, the US Justice Department has filed civil suits seeking to
recover assets in the US allegedly bought with stolen 1MBD funds. It has estimated
that about $ 4.5 billion was looted from the sovereign wealth fund. Mahathir
says it could take time but US officials have promised to return any money they
recover. Tim Leissner and Ng Chong Hwa have been charged with money laundering
and conspiring to bribe officials in Malaysia and Abu Dhabi to hire Goldman
Sachs for lucrative consulting contracts. Of the $ 6.5 billion worth of bonds
1MBD issued and which were underwritten by Goldman Sachs, US authorities allege
$ 2.7 billion were siphoned off. Goldman Sachs earned $ 600 million in fees for
the bond issue, which Malaysia’s finance minister wants fully refunded. Tim Leissner
has pleaded guilty and agreed to pay $ 43.7 million as restitution of
ill-gotten gains. Meanwhile Ng Chong Hwa has been arrested in Malaysia but Low
Taek Jho remains at large. Goldman Sachs has not been charged with any
wrongdoing as yet.
In the world of high flying global finance, scandals surface
with monotonous regularity. Of course the mother of all scandals was the
2007-08 financial crisis stemming from the sub-prime mortgage collapse and
whose spreading eddies took down such iconic names in banking as Lehman
Brothers. Goldman Sachs was in the centre of that crisis too for defrauding
investors and had to pay $ 5.06 billion on account of the sale of
mortgage-backed securities. Since most banks considered ‘too big to fail’ were
bailed out by taxpayers’ money, Goldman Sachs weathered the storm. However, the
Malaysian scandal seems to indicate it has not mended its ways. Surely the time
has come to put banks like Goldman Sachs in the dock again, this time with a
view to ensuring this kind of hanky panky does not occur again. In the case of
Goldman Sachs, it appears a culture of playing fast and loose without any
ethics or principles still rules the roost, or as Malaysian Prime Minister
Mahathir Mohamad put it more politely, the bank’s compliance controls “do not
work very well”. The financialisation of the global capitalist system has put
enormous clout in the hands of the few who control the commanding heights of the
global financial system. Their unfettered power poses a threat not only to the
unsuspecting investor, it could bring the whole system into disrepute if not
crashing down unless steps are taken to correct the exposed anomalies and
downright criminal intent and practice of this elite, of which Goldman Sachs is
proving to be a negative living embodiment.
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