In a new development linked to the 1MDB corruption scandal, a former Hong Kong-based investment fund is suing Goldman Sachs for conflict of interest in advising a 2011 Malaysian bank merger.
Primus Pacific Partners said on Tuesday that Goldman and its then managing director in Southeast Asia, Tim Leissner, concealed its close relationship with Malaysian Prime Minister Najib Razak when the bank was recruited to advise EON Capital, partly owned by Primus, in its US$1.7 billion sale to Malaysia’s Hong Leong Bank (HLB).
Najib “had close family and business ties with HLB” giving him an interest in the success of HLB’s takeover of EON, Primus charged in a statement.
At the same time that Goldman was advising EON on the merger, though, the New York investment bank was also the key advisor to 1MDB, the government investment fund established and chaired by Najib.
Goldman used its role advising EON to “secretly curry favour with the Prime Minister by using the (EON) board’s confidential information” to help Hong Leong’s bid for EON, it said.
Goldman allegedly convinced EON’s board that Hong Leong’s bid was fair, “even though Goldman Sachs knew that the bid in fact was well below the fair intrinsic value of the company”.
Primus, which held 20 per cent of EON at the time, asked a New York court to award it US$510 million for fraud and breach of fiduciary duty by Goldman Sachs.
That includes US$170 million for what Primus said Goldman’s alleged misconduct cost it in the deal, and another US$340 million in punitive damages.
The lawsuit came after a move by US authorities to seize US$1 billion in properties bought with money allegedly siphoned off from 1MDB, which placed a spotlight on Goldman Sachs’ role in the burgeoning scandal.
With Leissner its main contact with the Malaysian authorities, Goldman had raised billions of dollars for 1MDB.
One month after he left Goldman, in March Leissner was subpoenaed by the US Justice Department in its investigation into the scandal.
Goldman said it would fight the lawsuit, noting that Primus had lost a 2011 legal challenge to the merger in Malaysian courts.
“This plaintiff previously lost its challenge in the Malaysian courts seeking to stop a transaction involving a Malaysian company, which was then approved by shareholders. We will vigorously contest this misguided additional lawsuit in New York court,” it said in a statement.