Private equity firm sues Goldman Sachs on ties to Malaysia’s Najib Razak

NEW YORK — A private equity firm is suing Goldman Sachs, accusing it in court documents filed on Tuesday (July 26) of improperly trying to curry favour with the scandal-plagued prime minister of Malaysia.

The firm, Primus Pacific Partners, said Goldman provided bad advice to one of its clients to help the financial fortunes of the Malaysian prime minister, Mr Najib Razak.

The prime minister and people close to him have been previously accused by US authorities of embezzling billions of dollars from a Malaysian state investment fund, 1Malaysia Development Berhad, or 1MDB.

Last week, US authorities moved to seize multiple luxury properties that were believed to have been bought with the embezzled money by people close to Mr Razak. Some of the money also went to finance the film The Wolf Of Wall Street and to buy paintings by Van Gogh and Monet, authorities said.

Mr Razak has denied the accusations of impropriety and shut down investigations within Malaysia, but multiple inquiries are moving forward in other countries.

Goldman is already being questioned for helping run bond offerings that the prime minister used to raise some of the money he is accused of embezzling, according to news reports.

Goldman’s star banker in the region, Mr Tim Leissner, was a close financial adviser to Mr Razak’s administration. Mr Leissner left Goldman this year as accusations of improper activity related to 1MDB were raised. Mr Leissner is married to Ms Kimora Lee Simmons, a fashion designer and former model.

Primus Pacific Partners filed the lawsuit against Mr Leissner and Goldman in New York state Supreme Court in Manhattan.

Primus “previously lost its challenge in the Malaysian courts seeking to stop a transaction involving a Malaysian company, which was then approved by shareholders”, Mr Andrew Williams, a Goldman spokesman, said in an email on Tuesday. “We will vigorously contest this misguided additional lawsuit in New York court.”

The complaint said that in 2010, Mr Leissner and Goldman advised one of the bank’s clients, the Malaysian bank EON Capital, that it should sell itself to another bank, Hong Leong Bank, which had financial ties to the Malaysian prime minister. The lawsuit says that Goldman used information acquired through its work advising EON Capital to help Hong Leong Bank submit a successful bid for EON. The suit also says that Goldman advised EON to accept the bid even though it could have received more money from other bidders.

The lawsuit said that at the time, Goldman concealed its close relations “and incentive to curry favour with the prime minister of Malaysia”.

One of the prime minister’s brothers was on the board of Hong Leong Bank, and another brother worked for a firm advising Hong Leong in its bid to acquire EON Capital.

In the year before the EON deal, Goldman acquired a license to operate in Malaysia, and it quickly rose to become one of the top banks advising the government and 1MDB.

Goldman helped 1MDB raise US$6.5 billion (S$8.9 billion) through bond offerings and received unusually large fees to do so, The Wall Street Journal has reported.

US authorities are looking at whether Goldman helped Mr Razak move some of the bond proceeds to a personal bank account without alerting authorities, The Journal has reported.

The complaint filed this week says that Goldman did not reveal its close relationship with Mr Razak to EON Capital and argues that EON Capital would not have kept Goldman on as an adviser if the information had been public.

Primus Pacific Partners was a shareholder in EON Capital at the time and says in the complaint that it lost out on US$170 million that it could have received if EON had sold itself to the highest bidder. Primus says in its suit that it opposed the deal at the time but failed to stop it from going through. A Malaysian court blocked its attempt to stop the deal in 2011. The lawsuit is seeking US$510 million, which includes damages.

“Goldman Sachs’ egregious misconduct here apparently was part of a broad pattern of corruptly winning favour with the prime minister in order to further Goldman Sachs’s business opportunities in Malaysia,” the suit said. NEW YORK TIMES