Duvally insists, however, that the firm has no evidence of any contact more extensive than that.
“Mr. Blankfein does not recall any one-on-one meeting with Mr. Low, nor have we seen any record to suggest such a meeting occurred.”
In December, outside analysts predicted the bank might need to set aside $1 billion or more for penalties. The company is having ongoing conversations with the Justice Department, but has not discussed numbers yet.
In addition to the Malaysian action seeking $7.5 billion, the company is facing two more class-action lawsuits filed by investors, and a significant amount of negative press.
For all that, the scandal is still not well understood. 1MDB was a twist on third-world kleptocracy, one that exposed a new flaw in the global financial system.
Dictators have always plundered national riches. But they could only steal assets that existed. For instance, in former Zaire, now the Democratic Republic of Congo, Mobutu Sese Seko shifted profitsof mineral sales to private accounts. In the Philippines, Ferdinand and Imelda Marcos swiped proceeds of sales of sugar, tobacco, bananas, coconuts and everything else they could get their hands on. Saddam Hussein stole oil revenues.
Malaysia is rich in copper, timber and oil. But Najib and his cohorts didn’t have to steal any of those resources.
“He didn’t steal diamonds or bananas. He stole debt,” says Pang. “This is something completely new. And he couldn’t have done it without a bank the size of Goldman.”
The Stanford-educated Pang was inadvertently thrust into the 2016 campaign news cycle when a memo he wrote to White House officials questioning Barack Obama’s support of Najib was outed by Wikileaks. His memo is in the Podesta emails.
He’s now living in the U.S. for fear of his safety after speaking out against 1MDB, around which, on top of everything else, there has been considerable violence.
Pang believes the public still hasn’t grasped the significance of 1MDB. The scandal showed that all it takes is a corrupt official and a morally flexible bank office to generate billions in public losses.
“All [Najib] needed was a signature and a couple of Goldman bankers,” he says.
1MDB was a sovereign wealth fund, “owned and controlled by the Malaysian government, through its Ministry of Finance,” as our Justice Department put it in one of its court filings.
This fund was ostensibly created for development projects on behalf of the Malaysian people, in areas like “energy, real estate, tourism and agribusiness.”
Over the course of three major bond issues, 1MDB raised about $6.5 billion from investors around the world. According to the U.S. government, about $2.7 billion of that money was misappropriated and “distributed, in part, as bribes and kickbacks” to help keep the scheme going.
Other monies reportedly ended up in the hands of a small group of corrupt insiders close to Najib, who then laundered the cash via one of the great spending sprees of our time.
The key figure was Jho Low, who is currently an international fugitive and allegedly spent awesome sums ripped from the 1MDB pot. The chubby-cheeked Low, tabbed the “Billion Dollar Whale” in a book about the scandal by Tom Wright and Bradley Hope, is said to have used 1MDB funds to become an instant “Asian Great Gatsby,” traveling the planet and hurling cash in all directions, including parties in Vegas and London. The book claims he spent up to $500,000 on single parties that featured performances by the likes of Lady Gaga and Dr. Dre. Low was basically the Malaysian version of Jeff Spicoli hiring Van Halen to play his birthday party.
The idea that a figure as prominent as Blankfein might have granted a meeting to so incautious a figure as Low – who reportedly once used stationary from the Sultan of Brunei to procure seats at the London nightclub Chinawhite – is part of what has Wall Street so shaken. It’s a little like hearing the Pope was taking selfies at the Adult Video awards.
“It explodes the myth of the solemnity of these guys,” is how Pang puts it.
Until recently, conventional wisdom held 1MDB was a scheme cooked up by the two Goldman bankers on the ground: Malaysian-born Roger Ng and German-born Tim Leissner, the husband of “hip hop’s original first lady,” Kimora Lee Simmons.
Ng has already agreed to return about $29 million. Leissner has already pleaded guilty and agreed to return $43.7 million, while also admitting that upwards of $200 million flowed from 1MDB to accounts that he and a relative of his controlled.