Goldman Sachs Group Inc. (GS) is a defendant in a securities lawsuit brought by Primus Pacific Partners. Primus used to own 20% of Eon Capital, a Malaysian lender. In its complaint, brought in the New York State Supreme Court, Primus accused Goldman and ex-Managing Director Tim Leissner of hiding that there were conflicts of interest involving Malaysian Prime Minister Najib Razak and the 1Malaysia Development Berhad (1MDB), which is a sovereign wealth fund.
Goldman had been advising Eon Capital when the latter was considering a takeover offer from Hong Leong Bank Bhd, which is a Malaysian bank. According to Primus, in January ’10, Goldman and Leissner determined that Hong Leong’s first bid wasn’t fair. A few months later later, however, they decided that a revised offer that was only 2.8% greater was fair and recommended that Eon Capital take the deal.
The plaintiff believes that Goldman approved of the higher bid because it was seeking to impress the Malaysian Prime Minster whose brothers would benefit from a merger. Nazim Rajak worked for Hong Leong as a director while Nazir Rajak was chairman of CIMB Group Holdings Bhd, which advised Hong Leong about its takeover bid of EON Capital.
Primus said that Goldman Sachs breached its fiduciary obligations and the price it was recommending for the acquisition was “hundreds of millions of dollars” under the fair value. The plaintiff said that an investment bank that had no conflicts of interest would not have not found the second bid fair or recommended that it be accepted.
Primus wants at least $340M in punitive damages and $170M in damages.
In 2010, Primus sued to block Hong Leong’s $1.7B takeover of Eon Capital. However, the Malaysian court dismissed the case. Now, Goldman Sachs says it will challenge this lawsuit.
Last month, the US government took steps to seize over $1B in assets that may have stolen from 1MDB by individuals with close ties to Najib. The Prime Minister set up the sovereign wealth fund in 2009 to boost Malaysia’s economy.
Goldman Sachs Is Sued Over Ties to Malaysia’s Prime Minister, New York Times, July 26, 2016
Goldman Accused of Betrayal to Curry Malaysian PM’s Favor, The Washington Post/Bloomberg, August 5, 2016