Over the past 2 weeks, the new Malaysia government had gone after Goldman Sachs (GS) very aggressively as the 1MDB scandal unravels. The latest salvo was the lawsuit to get back $7.5 billion from the bank.
It stems from bonds issued for 1MDB by GS totalling $6.5 billion in 2012-2013 which the bank reportedly earned more than $600 million in fees… The fee as a percentage of the bond issuance was really very high by normal bond issuance standards at that time.
Most of the funds received from the bonds that were guaranteed by the Malaysia government and subsequently misappropriated. They were channelled to the pockets of a few persons, namely Jho Low who used it for crazy parties, art pieces, a mega yacht and even to fund a successful film (“Wolf of Wall Street”…. ah, the irony of it all). A large sum was also used to win political votes in Malaysia.
A number of best seller books have already been written on 1MDB. I read one recently: “Billion Dollar Whale” by the Wall Street Journal WSJ journalists who were covering this case a few years back and exposing it to the world then. They had so much material to work with anyway during their WSJ articles, so they might as well write a whole book (300+ pages).
This fascinating book totally exposes how deep the corruption was in Malaysia in detail, starting from the very top. Talk in the movie world now is that Michelle Yeoh (of Crazy Rich Asians fame) has recently bought the rights to the book. It should be a great crazy but true movie to watch when it comes out!!!
In the last 2 months, detailed information has emerged that GS individuals were more involved than previously thought. One was charged in US courts and pleaded guilty (Tim Leissner). The other senior guy was a Malaysian called Roger Ng who was the GS ASEAN head at that time. He is currently fighting extradition request by the US courts to face charges in America. His assets in S’pore of $29 million had just been frozen too.
This is where my story begins on my close call with this messy blowup. I had left my job in another American bank after 19 years in Jan 2012 when I was given the pink slip. The following 10 months was a difficult time for me as I went for multiple interviews to try to secure a new job. In total, I did more than 60 one-on-one interviews with various banks.
One of the banks was GS. Roger Ng was the supervisor that was looking for a new person to work in his team. It was around mid-2012 and he wanted to hire someone to drive the GS business in S’pore.
We had a number of one-on-one sessions during that time and I remembered some of the conversations we had then. He was saying that it was easy to do business once you had direct connections with the right decision maker, especially in Malaysia. He hinted to me about knowing a person in his sixties whom he was close with in order to successfully close deals. Little did I know then that it was Najib!
Eventually, I had to complete a total of 12 separate one-on-one interviews with various GS partners, either in person or on video conference. Ironically, one of them was also Andrea Vella, the partner that was also just suspended in recent months for his involvement in 1MDB.
In the GS hiring process, it is required that all the interviewers unanimously agree that they want to hire the interviewee. Getting 12 persons to agree that they like me was a tall order… Luckily or unluckily, I did not get the job in the end.
If I had joined Roger’s team then, I would have jumped into the midst of the 1MDB bond issuances at that time, which was at the heart of the scandal. Would I have been implicated? I will never know as my GS career did not materialize. The acts to illegally redirect the bond proceeds happened and court filings now show that the senior GS bankers were very involved.
As an aside, I had heard about these 1MDB deals in the market during that time. One of the reason for the big fee GS had earned was that Najib needed the money fast in order to use it to sway the upcoming elections to his favour by greasing the palms of a lot of politicians.
GS was unable to offload the bonds fast enough to institutional investors given the short time frame required. Hence they proposed that Najib compensate GS for buying over the bonds first at a huge discount and taking the risk into their bank portfolio first. Najib was so desperate to get the money that he agreed to do it at 90 cents to the dollar. Eventually, GS was able to offload the bonds at above par ($1) to overwhelming investor demand for a “high quality” name with a government guarantee.
This probably accounted for a lion’s share of the $600 million of fees that GS eventually earned. It was not unreasonable then for banks to assume the risk of the whole bond issuance into their books before selling them to the 3rd party investors later. What was unusual was the huge 10 cent spread that was agreed upon. But it was on a willing buyer and willing seller basis, right?
Eventually, the people in the GS team I was supposed to work under had all left the bank within 18 months. One of them even went to work for VTB, the Russian bank that Trump is now embroiled in for kickbacks. His did not last long there.
My close (was it even close?) shave with getting famous in the wrong way did not happen in the end, but it still a good story to tell, no?
Leave a Reply