My favourite scandal…

The quote above comes from the excellent Billion Dollar Whale. The culmination of some excellent investigative reporting that broke the original 1MBD scandal story in the WSJ and then later published in the book… [I am sure most people are aware but if you are not in one of the great ironies of the scandal the stolen funds were invested in The Wolf of Wall Street].

1MBD has everything: the sheer scale of the graft ($5bn), the arrogance and incompetence, the Saudis, the purchase of a yacht beyond luxury (cost $250m), a Times Square apartment, the entrenchment of the local elite and then a grovelling apology,  and the Malaysian election with Mahathir Mohamad coming from behind to win… And then it get’s interestingJust one of many outrageous uses of the money:

Nearly US$30 million (S$41.5 million) of funds stolen from scandal-hit 1Malaysia Development Berhad (1MDB) was used to buy jewellery for the prime minister’s wife, including a rare 22-carat pink diamond set in a necklace, according to latest filings by the United States Justice Department in a civil lawsuit.

And yet the 1MBD scandal just keeps on giving… and now it is getting serious because the US Dept of Justice clearly has Goldman Sachs & Co in its sights (the “unamed bank”. Goldman made $600m from selling three bond issues worth $6.5bn for 1MBD, fee rates that could be considered egregious … Ex-head of Goldman Asia, the colorful Tim Leissner, boasted of a PhD from The Univeristy of Somerset (where they could be purchased via mail for ~£2500) , as the FT acerbically noted “[w]hile an institution of that precise name does not appear to exist, one called Somerset University was fined in the UK in 1992 for selling unrecognised degrees” … Leissner appears to be co-operating… a current MD of Goldman is on leave and the current CEO was on the committee that approved the deals at the time.

Tim Liessner PHD.jpg

There are going to be documents galore here. Funds moved via US correspondent banks are subject to wire fraud regulations, a federal crime that brings the almost unlimited resources of the Department of Justice and the FBI, and encompasses communications made via email, phones etc in addition to just moving the funds. Once you are in that embrace it is very hard to leave and it seems certain now that there is a lot more to come…

Quite how much money the people of Malaysia get back remains to be seen.

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