As negotiators from
The storied U.S. bank, needing to turn the page on one of the biggest scandals in its history, started with the same offer it made to the previous government: $1.75 billion.
While this was a step up from the 1 billion ringgit ($235 million) that former leader
With that glaring $5.25 billion gap, the two sides dug in to negotiate in a meeting room at the Kuala Lumpur five-star hotel, a favorite of the country’s
This account of the talks is from people familiar with the negotiations who declined to be identified discussing private matters. A representative for Goldman declined to comment, while the prime minister’s office couldn’t immediately comment on the matter.
Goldman flew some heavy hitters 9,400 miles (15,200 kilometers) from New York to sit at the table. Chief of Staff
On the other side, Malaysia brought its top lawyers including Prime Minister
Negotiations dragged on through the week. Long days stretched into night, with hotel staff delivering boxed meals including local rice dishes, in keeping with Covid-19 measures. The talks stalled a few times as Malaysia pressed Goldman to cough up more toward the billions the country alleges were siphoned away to buy condos, jewelry and art.
Goldman’s investment-banking group, led at the time by now-Chief Executive Officer
When a $2.2 billion offer was put on the table, Malaysia said it wasn’t enough.
Yet the two sides kept at it, both highly motivated to reach a deal. For Goldman, a Malaysia settlement would go a long way in securing a resolution with the U.S. Department of Justice, which is also probing the 1MDB affair. Attorney General
Several Goldman bankers have already paid a price for the scandal. Former Southeast Asia Chairman
The Goldman side also felt this five-month old Muhyiddin government was easier to deal with than the previous administration, increasing the odds of a settlement.
Muhyiddin needed to prove his anti-corruption mettle, even while counting on the backing of a rival party that was in power during the scandal over the fund formally known as 1Malaysia Development Bhd. With his razor-thin majority in parliament, Muhyiddin’s attacks on corruption could help win allies across the aisle.
As talks wore on, Goldman proposed a novel solution to break the impasse: A guarantee that Malaysia would get $1.4 billion from the seizure of missing 1MDB assets. The sweetener wasn’t dreamed up on the spot: Goldman had the offer in its back pocket all along in case it was needed to reach a deal.
Any additional money recovered would go to the country, while Goldman stood ready to bridge any gap.
The assets, many of which were allegedly purchased using 1MDB funds by fugitive businessman
To seal the deal, Goldman also agreed to boost the cash portion of the settlement to $2.5 billion, ending five days of marathon talks. Negotiators put ink to paper late afternoon on July 24.
In the end, both sides can at least claim victory with the settlement.
Goldman gets to move on, ending the reputational hit from the scandal and ensuring there are no further legal claims from Malaysia after the nation agreed to drop all criminal charges against the bank and its executives. The lender may not have to pay a dime above the $2.5 billion in cash. Based on its
Malaysia, meanwhile, says the deal is worth more than $4.5 billion, including the money it already received from the U.S. That’s a sizable amount -- worth more than 1% of GDP -- for a country that stood up to one of Wall Street’s iconic banks.
--With assistance from
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David Scanlan, Yudith Ho
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