Goldman Sachs Misled Clients About Conflicts Of Interest With Malaysian Prime Minister To Further Role As Advisor To 1MDB

NEW YORK, July 26, 2016 /PRNewswire/ -- Goldman Sachs and Tim Leissner, the former Goldman Sachs Managing Director at the center of the 1MDB scandal, have been sued by a shareholder of a former Goldman Sachs client for alleged fraudulent misrepresentations and breaches of fiduciary duties.  According to a lawsuit filed in New York State court today, Goldman Sachs and Leissner "fraudulently induced the Board of EON Capital (the seventh largest domestic bank in Malaysia) to retain it as financial advisor in connection with a takeover bid by Hong Leong Bank, another Malaysian Bank," by concealing "its close relationship and incentive to curry favor with the Prime Minister of Malaysia, who, in turn, had close family and business ties with HLB and others with an interest in the success of HLB's bid for EON Capital."  The lawsuit alleges that the Malaysian Prime Minister's personal ties to HLB included the fact that one of his brothers served on the Board of Directors of HLB and another of his brothers was the Chairman of the Board of Directors, Chief Executive Officer and Managing Director of CIMB, the investment firm advising HLB on its offer to acquire EON Capital. 

According to the lawsuit, Goldman Sachs was the key advisor to the 1MDB, the Malaysian-government investment fund established by the Prime Minister, "before, during and after the time it acted as advisor to the Board of EON Capital," and Goldman Sachs used the engagement with EON Capital to "secretly curry favor with the Prime Minister by using the [EON Capital] Board's confidential information to conspire with and position HLB to submit a successful bid to acquire EON Capital, which Goldman Sachs convinced the Board was fair, even though Goldman Sachs knew that the bid in fact was well below the fair intrinsic value of the Company."  The lawsuit alleges that "Goldman Sachs's egregious misconduct here apparently was part of a broad pattern of corruptly winning favor with the Prime Minister in order to further Goldman Sachs's business opportunities in Malaysia."

The lawsuit alleges that Goldman Sachs initially advised the EON Capital Board that the HLB takeover bid was "unfair and below the fundamental value of EON Capital" but reversed course just weeks later, providing the Board with "a new, much lower valuation and advis[ing] the EON Capital Board that the HLB offer was fair."  As a result, the price at which HLB acquired EON Capital was hundreds of millions of dollars below fair value, the lawsuit alleges. 

The lawsuit was brought by Primus Pacific Partners, a private equity firm that was the single largest shareholder of EON, with a 20% stake.

According to the lawsuit, "Primus became aware of Goldman Sachs's fraud only in March 2016 from press reports that revealed previously unknown business and personal relationships and extensive dealings between Leissner, on behalf of Goldman Sachs, and the Prime Minister" in connection with the 1MDB scandal.

The lawsuit, filed in the Supreme Court of the State of New York in the County of New York, says Goldman Sachs' misconduct cost Primus $170 million.  Primus is seeking to recover the $170 million as well as $340 million in punitive damages.

SOURCE Primus Pacific Partners