In an interview with Bloomberg Markets
, reporter and analyst Max Abelson said that the corruption scandal is threatening to plunge the Malaysian government into in-fighting.
Abelson said that the magnitude of the issue should not be underestimated.
“Imagine if President Obama suddenly had something like $600 million in his bank account and he was in charge of a pseudo-sovereign wealth fund in the U.S., and that seemed to have missing money. And on top of that, if that fund had worked with Goldman Sachs, and Goldman got something like $500 million from their dealings with [the fund],” Abelson explained.
The scandal centered around Malaysian prime minister Najib Razak’s state fund, 1Malaysia Development Berhad (1MDB). Former premier Mahathir Mohamad has already filed a lawsuit against Najib on grounds of misuse of power.
“A former prime minister is feuding with him over the case, and what it comes down to is that this pseudo-sovereign wealth fund—which is called 1MDB—issued billions of dollars’ worth of debt with the help of Goldman Sachs,” Abelson said.
The money was initially meant for turning Kuala Lumpur into a global financial center, but the lead-up to the current chaos involved 1MDB missing payments to lenders last year.
“Now that has not gotten off the ground. At first people were upset that Goldman Sachs had made so much money off of these bond deals, but that’s been overshadowed by a sense of, ‘Has money been taken from 1MDB? Where is it?’” Abelson added.
Almost $700 million was allegedly funneled to Najib’s accounts, with global investigators estimating that as much as $1 billion ended up in the Malaysian PM’s personal funds.
Najib denied the claims, saying that the unexplained wealth was actually a “gift” from the Saudi royal family. Meanwhile, the then-chairman of Goldman’s Southeast Asia operations, Tim Leissner, has left Goldman Sachs.
“Goldman Sachs’ connections with money and power can be a very good thing when they’re making a lot of profit from it, but they can also lead to a lot of complications,” Abelson said of Leissner, who forged strong connections with plenty of regional leaders during his tenure.
Amid a multi-billion-dollar political crisis that has thrown the Malaysian one-party regime into disarray, the state investment company involved said that it would be releasing a tranche of funds for a $1.5 billion repayment over the next few weeks.