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Malaysia seeks $7.5B in reparations from Goldman Sachs (reuters.com)
354 points by lawrenceyan 88 days ago | hide | past | web | favorite | 186 comments



In case we forget: Here's Matt Taibbi's epic, and fact-checked, rant against that investment bank.

https://www.rollingstone.com/politics/politics-news/the-grea...

Taibbi's lede? "The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. "


> fact-checked

Apparently not, since vampire squids feed on marine snow, not blood [1].

[1] https://www.wired.com/2012/09/vampire-squid-video/


Don’t know why you’re being downvoted, it’s not like HN was above pedantry in the past.


Fish blood is a component of marine snow, so anything that eats marine snow must be eating at least some amount of blood.


I've no intent on defending Goldman but taibbi is an idealogue not a journalist. He belongs in a commentary page not given credit as a journalist


Ideological bias does not negate his standing as a journalist. There is no requirement in journalism to be strictly neutral, to have no opinion, to only report facts dispassionately.

His colleagues are journalists, they consider him a journalist, and he's won awards you'd only get if you're a journalist, and his process of information gathering and writing meets the definition of journalism. His style is highly editorialized, but his stories aren't devoid of facts while containing only opinion, and the facts presented aren't often wrong. You can certainly argue from a contrarian perspective that his editorial conclusions are all wrong, but that still wouldn't make him not a journalist.

If someone's primary goal is entertainment, you can call it newsertainment or perhaps comedy.


Yes, but he's not a good journalist, he's a polemicist. He omits information that's important for his audience to know in order to understand the issue. Chomsky does the same thing. I broadly agree with his conclusions in this example but I trust Taibbi about as much as any other salesman, ie not at all.


He most certainly does not report facts dispassionately.

He consistently leaves out important data that runs counter to his narrative and exaggerates data that supports it.


Not only is it possible to be both at the same time, it’s a time honored tradition.

Laudable examples who have also greatly enriched society include HL Mencken, Upton Sinclair, and Hunter S. Thompson.


.. Émile Zola ..


Pure ad hominem. This comment has no place on HN.




'I was obviously joking' is the go-to defense of people who are acutely embarrassed. I've lost count of the number of times I've seen that excuse trotted out. As I always say when someone tries this in person 'if only one of us is laughing it wasn't a joke.'


> 'I was obviously joking'

That's not at all reflective of the cited text.

First off, he never even implied 'obvious' - which is used to blame the reader/listener for not getting it.

Second, while he does refer to his view of the material (at the time) as satire, his current view (at least in the cited text) is clearly, and solely, regret.


I'm sorry, this is ridiculous, both in terms of misrepresenting Taibbi's statement and in terms of a general attitude. It's a joke if a statement doesn't actually represent your beliefs. That has nothing to do with whether other people find it funny.


Or, to paraphrase the tweet you're citing more accurately, they wrote it "as fiction".


Doing a shit job of imitating Hunter S Thompson 20 years ago doesn't automatically make you a "piece of trash human" today. That's going way too far.


Wasn't that satire?


Thanks for that link. On another note I am curious if you have an opinion or thought as to what the attorneys for Goldman Sachs will make as a result of a case like this? Not saying this is the type of work you do but just would like to know your (or anyone else's) thoughts.


With "fact checked", you grabbed my attention.

But if words like "great vampire squid" appear in the lede, then the author is surely biased.


A metaphor is a good literally tool, just because it's quoted without support doesn't mean he doesn't support said assertion in the article.

If you say he's biased you need to support that statement.


Yes but not always a good journalistic one. I especially don't like it when conclusions are offered as premises, and it's not because I'm any fan of Goldman Sachs - quite the opposite.


Unbiased authors are mythical beasts last seen before the fall of Atlantis.


1MDB is the most bizarre scandals I’ve ever heard. A 27-year-old convinces the Prime Minister of Malaysia to let him manage country’s sovereign wealth fund, and then he proceeds to fritter almost $2 billion away throwing multi-million dollar parties and funding the Wolf of Wall Street. How did he get away with all of it for so long?


> How did he get away with all of it for so long?

Corruption. He fritter'ed a great deal of this money to precisely the same Prime Minister who selected him.

This wasn't unique, either. This sort of corruption is much more pervasive than most people believe. In China many of the top party officials are billionaires. Vladimir Putin is widely believed to have massively enriched himself during his reign.

Frankly, the biggest surprise is that the corruption in this case was caught.


"massively enriched" is a bit of an understatement. He's believed to be one of the wealthiest people in the world and it's why Obama put those sanctions on him and his buddies.


He's been robbing his country blind to make him and his allies extremely rich.


Source?

As opposed to US politicians like the Bushes, Clintons and Obamas? Or any of the countless corrupt puppet dictators that the US installed around the world?

Listen, I know they're pushing really hard for a war right now; but unless you're right up there at the top of the pyramid, war is hell.

The only thing that will ever get us out of this hole is truth, and truth starts with not spreading BS.


If you've ever wondered what gaslighting is, this comment serves as a great example.


Really now? So appealing to truth and common sense is now gaslighting. Newspeak much?


The Bushes/Clintons/Obamas make their money from because people want to hear what they have to say (e.g. speeches, books), not because they steal money from the public coffers.


I'm too lazy to grab the links, but take a look at when Bill did his speeches and how much he got paid, and when Hillary voted and pushed for legislation greatly benefiting the people paying him for those speeches. It's some crazy shit.


Right :)

The Clinton's Uranium deal with Rosatom is a nice example of how this works; of course you can't just give politicians piles of money, it needs to come with a bedtime story for the voters.


You've done zero research about this, then.

A Canadian company owned uranium reserves and wanted to sell the ownership of them to Rosatom. Not the physical resources, which cannot leave the country, just the ownership.

This still requires government oversight, so 8 different agencies had to sign off on it. All agencies did, including the state department. Hillary was not involved in the decision to approve the sale, apart from in charge of one of the many departments overseeing it.


One last bit that people ignore -- The Clinton Foundation Initiative is a Public Charity (as opposed to a private foundation like the DJT Foundation) managed by a team of professionals subject to regular audits. Everyone one of their financial reports is posted on their website (by law), it would be public knowledge and it would be illegal if the Clintons benefitted financially in any way from the activities of the charity. They didn't. There are reams of pages of IRS guidance around private inurement in 501c groups (aka what was going on at the Trump Family Foundation -- a different type of nonprofit charity).

You can safely ignore anyone who claims that the Clintons took money from anyone if they're claiming that money donated to their charity ends up in their pockets. They don't know what they're talking about.


Right :) I do hope they pay you well.

Basically everyone outside of their little communist bubble know what the Clintons are all about. More power, at any cost. But it's ending any second now, mark my words. The stuff that's been trickling out so far is the tip of the iceberg.



How is this even up for debate? It's hardly a secret unless you live under Putin's control I guess. [1]

Sounds like you got a bad case of Whataboutism [2], I suggest seeing a doctor right a way.

[1] https://www.pbs.org/wgbh/frontline/film/putins-way/

[2] https://en.wikipedia.org/wiki/Whataboutism


All because of a whistlerblower. http://www.theedgemarkets.com/article/justo-world-needs-good...

The world needs more whistlerblowers. Or at least better tools and protection for those who plan to do it


In America, our politicians are orders of magnitude more clever about their self enrichment.


If you can live the life of great wealth, without actually amassing said wealth, why bother?


I’m actually fine with public seevants living decently if it was in line with the quality of our government.

Given that our government is literally off right now, you can guess my current opinion.


> How did he get away with all of it for so long?

By claiming that all of that was legal. Plainly and simple, until some prosecutor does not walk over facts and not file a charge, no crime is being prosecuted. In such cases, the very reason for starting a process is prosecutorial discretion.

(Anti)Nepotism laws are notoriously hard to act upon: unless somebody got caught red handed (taped, stinged,) any accusation of appointment beyond merit is just a lot of speculation and rhetoric.

The same way ... Boston Consulting Group, and PWC have decades long record of employing 20 something scions of officials for well paid senior positions in every major country you can think of.


> any accusation of appointment beyond merit is just a lot of speculation and rhetoric.

Juxtaposed with:

> Boston Consulting Group, and PWC have decades long record of employing 20 something scions of officials for well paid senior positions in every major country you can think of.

Asks for some citation or proof.


There's a decent moneystuff article about how this is assumed to happen (with email evidence) https://www.bloomberg.com/opinion/articles/2015-09-21/bad-in...


Neither PWC or BCG are named.


I think you missed the point. GGP was saying it’s hard to prove legally or otherwise in specific cases despite it obviously happening at scale. The point was not that when you look at the trends it’s hard to prove. The juxtaposition was intentional.


No that is not the case. It was a corruption scandal managed by the prime minister. Jho Low was "just" the guy who implemented it (and profited greatly from it). Malaysia is a very corrupt country and the PM and other top officials likely has many other schemes to enrich themselves.


Coincidently, The prime miniser of Malaysia somehow increases his bank account to the tune of 700m during the same period.


Didn’t he just get arrested for this?


The prime minister profited handsomely from this affair. Probably a billion or two himself.


The commenters saying GS could just withdraw from Malaysia to sidestep any repercussions are mistaken.

First, US prosecutors are also investigating this (and ironically so is the Federal Reserve). Now US banks might get soft glove treatment in their home country but so far the American authorities have shown some teeth in this scandal.

Second, GS executives are personally named in law suits. Malaysia has foreign assistance treaties in other countries where GS operates so that'd be sticky.

Finally, the reputation damage from GS withdrawing from a country to avoid a lawsuit would be hugely damaging.


GS already has a rotten reputation. I don’t think they care.

As for the executives, they will probably hide behind limited liability. Getting the US to hand them over will not be easy.


Why do you say that GS has a rotten reputation? They are probably the most respected bank on Wall St.

Also, I know for a fact that they really care about their reputation, and that internally, they are stressing about this.


On main street, GS is known as the "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money"


Their reputation "on main street" is largely irrelevant to them.


Well they took a huge hit with their investors when leading up to the 2008 real estate bubble they were pushing and selling toxic assets to their clients, while they were liquidating their own positions of those very assets.

Initially they claimed there was no conflict of interest and that’s simply how finance works, but then internal communication leaks showed they knew the assets they were selling clients were not just shit (but knew the underlying mortgages were fraudulent themselves going back to 2005) and they were doing that in mass as part of an effort to artificially prop the asset value up as they were liquidating their own.

It all came out in a case they settled for $5B with the government. From the department of justice : “This $5 billion settlement includes a $1.8 billion commitment to help repair the damage to homeowners and communities that Goldman acknowledges resulted from its conduct, and it makes clear that no institution may inflict this type of harm on investors and the American public without serious consequences.”

yet they still operate, are more powerful than ever, and there is a revolving door with them and top levels of government...so I agree with you reputation is irrelevant to them. Plain and simple everyone knows they are scumbag oligarchs at the top of that organization, but they are oligarchs nonetheless.

https://www.justice.gov/opa/pr/goldman-sachs-agrees-pay-more...


Their stock price is down ~40% YTD.


> irrelevant

And so is Malaysia


Why does anyone care then?


Some people take the ferengi viewpoint - if you made a profit and got away with it, you are successful HARD STOP.


Well on "main st," Trump is the messiah. So maybe we shouldn't really care what they think.


Are you aware that the major players on Wall Street and Mainstreet all donated to Clinton far more than Trump? Clinton’s corporate contributions dwafted Trumps.

I mean, I’m not fan of Trump but to say he is looked upon favorably by corporations over his opponent is verifiably untrue. Let alone claims of “the messiah”.


FYI for those not getting the reference, "Main Street" is typically used to refer to investors who aren't large institutions, in contrast to "Wall Street". https://www.investopedia.com/terms/m/mainstreet.asp

(Neither of these terms are particularly accurate—I used to work a block away from Wall Street, and all the actual trading happened by ssh to New Jersey—but they're metonyms with specific meanings.)


mruts said the opposite.


"We" ? You are probably underestimating the number of trump supporters on HN (and in the tech scene in general)


Funny how a news article can influence forum dialogue almost a decade later.

Good journalists are worth gold


Catchy soundbites != good journalism.


Let's see, where to begin. Their role in 2008 crisis, the commodities bubbles (food, metals, oil) they deliberately created, their role in the collapse of the Greek economy, countless examples of stock price manipulation, insider trading, securities fraud, ripping off their own customers repeatedly and so on.

I don't think there is another investment bank on Wall St that has had its short term greed and disregard for society exposed to the degree that GS has.


>"Why do you say that GS has a rotten reputation?"

Do you not know about the subprime mortgage product they sold ? It was notable in that it was designed to fail i.e they defrauded investors

see:

http://fortune.com/2016/04/11/goldman-sachs-doj-settlement/

http://www.washingtonpost.com/wp-dyn/content/article/2010/07...

http://content.time.com/time/magazine/article/0,9171,1983886...

>"They are probably the most respected bank on Wall St"

Respected by who exactly? Other investment banks constantly mired in their own scandals and white collar crime.

Here's some other Goldman highlights:

https://en.wikipedia.org/wiki/Goldman_Sachs_controversies


There reputation on Main Street has been bad for a while now.


But is it justified? Do people actually know what Wall St does?

I would expect people to have more animosity for consumer facing banks like Wells Fargo or Bank of America as their nickel and diming practices actually hurt average people.

I doubt your average joe even knows what GS does beyond being a “vampire squid.”


Those are two different questions.

I don't think we can reasonably expect everybody to really know everything. Wall Street in particular is a highly complex world, where only some of that complexity is really necessary. I've been reading the financial press since before I was in high school and spent years working in the industry. I don't feel like I fully understand it, and I'm sure I never will.

That said, I think the reputation is reasonably justified. Many smart people have pointed out that the financial sector has increased drastically in size, soaking up an awful lot of money relative to the value it creates in the economy. I'm sure people do dislike their banks, but at least those banks do something for them. Goldman Sachs extracts billions from the economy and doesn't do jack for average people. If those average people hear from people closer to the problem that Goldman Sachs is a vampire squid, I don't think it's unreasonable of them to trust that and tie it to their very reasonable economic resentments.


Neither does Oracle, MemSQL, Mongo, MSSQL, C#, Java, or anything we technical folk talk about. That doesn’t mean it doesn’t create value for the world.


It doesn't mean it doesn't, but it doesn't mean it does.

Oracle in particular is an interesting example here. Their revenues are $40 billion per year. I know for a fact that some of that revenue is from companies that are stuck using Oracle for historical reasons; they wouldn't use it if they were starting fresh today with, say, Postegres. Oracle surely knows this, and so has an extractive, rentier approach to pricing.

Are they a company that creates $40 billion in value every year? I doubt it. Is it possible that net of costs, they are a net negative? Definitely.

This is even more true with financial companies, who act as intermediaries or are external actors to transactions. I used to work for a proprietary trading firm. We had no customers. Our job was to go into the markets and turn a pile of money into a bigger pile of money. As market-makers, we provided a little more liquidity to the markets. But did we create societal value in line with how much money we extracted? I sure don't think so. Which is part of why after a few years I got out and never went back.


Why does it matter if Goldman Sachs doesn't do jack for average people? Neither does SpaceX, or Virgin Galactic, or Tesla Motors. Companies specialize in whatever field they want, and some make the conscious decision to cater to a certain clientele.


We're talking about public perception of a company, so whether people find them personally useful is definitely one factor in that.

Another factor surely is notional utility. Even if somebody buys a different car, they can understand what Tesla might do for them. They might never fly on Virgin Galactic, but they could imagine doing it. What Goldman does is something most people will not only never need, but would have a very hard time imagining that they need.


But they do. They provide services people pay for.

GS OTOH is a meta entity that moves your assets around in a never ending quest to find bigger fools willing to pay more than they did to acquire them. There is literally nothing useful about it and eventually it destroys the value of your assets once there are no more fools left. But it’s legal because they seek out and fund, make rich (IPO), or (apparently) pay off enough socially important people that the practice is allowed to slide. And it’s sure nice when you get the modest kick backs to your account, amirite? Let’s just hope the supply of fools never runs out and we can keep growing money forever. Not an unsafe bet either, unfortunately.

Put another way, what the corporations you cited do is called produce goods. It’s the economic model in many places and despit capitalism having its own set of problems at least companies produce things that people pay for. There are many useful services the financial industry supplies but here we are talking about the guts of how the investment banking subsector operates. If the industry was honest 2008 wouldn’t have happened. When was the last time Tesla royally fucked over your personal assets?


>"But is it justified?"

Yes, any time you defraud investors the damage done to your reputation is more than justified:

http://fortune.com/2016/04/11/goldman-sachs-doj-settlement/

>"I doubt your average joe even knows what GS does beyond being a “vampire squid.”"

Yes and even sophisticated investors(hedgefunds) did not know what GS does when they bought their Abacus synthetic CDO product and were hookwinked:

https://sevenpillarsinstitute.org/case-studies/goldman-sachs...


> I doubt your average joe even knows what GS does beyond being a “vampire squid.”

..which is a prime example of bad reputation. Reputation, does not care about justification, it just exists once it started existing.

It must be tempting for GS to just not care about their reputation on main street since they don't engage in that kind of business, but the business they do engage in does not get easier when everyone they might want to interact with is carefully weighing the benefits against the risk of getting tainted by association.


Well, strangely enough a recent study seems to indicate that a reputation for being evil is actually good for attracting investment banking type business https://insight.jbs.cam.ac.uk/2018/beneficial-wrongdoing/


Why am I not surprised :(

(sorry for the low effort answer)


>I doubt your average joe even knows what GS does beyond being a “vampire squid.”

I guess the question is whether it matters what the average joe thinks. If it does, then GS is in a bad place because all the joes I know wouldn't touch them with a 10ft pole. If not, then we only need to consider what the financial folks think (which I can't speak to).


Well, it's not just Main Street that dislikes GS. They've done plenty wrong, benefited from the bailout, and are accused of being crony capitalists(1).

1-https://theintercept.com/2016/12/09/trump-makes-america-gold...


> what GS does beyond being a “vampire squid.”

Did anyone know what actually GS do anyway? Yes, they are an investment bank, they are dealing with money, they are going after ever bigger margin for profit. But how they get there is anyone's guess, and doubt there are that many people in the whole world understand what exactly GS did to get those money.

Average joes might not know what GS is, as with most of us here on HN, but they surely feel pain that the investment bankings brought to them. In that sense, 'vampire squid' is actually quite useful metaphor: It is mystical, it is malicious.


Speaking as a somewhat average joe, we dislike Bank of America for giving us terrible service and hitting us with obnoxious fees, but we really hate Goldman Sachs & friends for torpedoing the entire American economy with their greedy fraud.

Wall Street investment banks have a much, much worse reputation than ordinary retail banks.


The hypocrisy of this site is staggering. Any one of these “growth hackers” would jump at the chance of Goldman running their IPO.


Sure, but how many Main Streeters need to securitize their bond offering, hedge their massive foreign currency holdings or take their startup public in Hong Kong?

The only consumer product I know of is a savings account from Marcus.com, and since it’s a brand new product, the growth is strongly positive.


That respect, I think, is more for its success than its probity.


On wall street they are the most respected bank for making money, but as for whether the other banks trust them...


Goldman Sachs may be a popular whipping boy for politicians, but within the sphere of high finance that isn't the case.


Yeah. 250,000 people apply for summer internships at Goldman Sachs each year. They are a highly sought employer.


As Adam Smith said in "The Wealth of Nations":

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

This description fits Goldman Sachs to a "T". And I think they would probably like the description, given its origin.

So, to be clear, Goldman Sachs are capitalists.


One of my favorite quotes. To think someone wrote something so specific and valid for centuries.


Interpol warrants will imprison them in the US.


GS already has a rotten reputation. I don’t think they care.

Both point are also true for Facebook, if you want an example closer to our industry, to understand the people and motives involved.


A life contained only to the US is still miserable for the jet set spoiled. There is good chance they will leave US eventually and be Huaweied to Malaysia.


Has "Huaweied" entered our common lexicon already?


The strange thing is that there’s already a word for it: “extradited”.


Or "shanghaied" for ironic flair.


Seems it has.


Don't think so. I'm having a hard time figuring out what it actually means. No urbandictionary entry, and the only other time it seems to have been used was another HN thread last month.


In case you actually don't know (not an insult, just not sure)...

The CFO of Huawei was arrested in Canada for extradition to the US.

https://www.nytimes.com/2018/12/05/business/huawei-cfo-arres...


"Extradited", re: recent news about their CFO being detained in Canada on a US charge


As much as I dislike GS, I find their interpretation of the story to be far more believable. US government is a paragon of honesty and virtue compared to a lot of foreign governments. Stealing government money is the main goal of those who "serve" in those governments, with the actual job description coming in a distant second or third. GS should have known this would backfire, it's not like they didn't know the money would immediately disappear into the pockets of government officials. They probably counted on those officials not being quite so brazen as to turn around and sue GS.


GS made about 10% on this deal which is an order of magnitude more than market. This almost certainly means that either it was not shopped to other banks or that the other banks wouldn't touch it with a 10 foot pole. So while it's probably true that they lied to GS it was with a wink.


According to the book billion dollar whale, the average price to create an relase of government backed corporate bonds was $1 million in fees. 1mdb did 3 rounds of bonds so it should of cost $3 million. 1mdb paid $700mm.


Supposedly, they bought the bonds on their balance sheet before selling them because 1mdb wanted the money fast, giving them an order of magnitude more risk, hence the higher fees.

Also, the average fees for a bond issuance might be $1m because most bond issuances are small. It's usually higher on a percentage basis.


Malaysia was a single party democracy since it's independence, the probability of new party coming into power was very very low since all the democratic institutions like election commission, judiciary were almost destroyed by the previous regime, so based on this GS would have done their risk/reward calculation. But this May, another party came to power and currently the previous prime Minister and lot of officials are charged for corruption in 1MDB.


I did not know that their was a changing of the guard.

That explains more


I read the Billion Dollar Whale book about the scandal and there are a lot of references to western/global financial companies sending up red flags about 1MDB for years and years, but then some companies (or parts) would turn their head for a contract. Goldman Sachs private banking wouldn't give Jho Low (the apparent mastermind behind it all) a private banking account b/c they thought he was going to launder money through it. 1MDB fired one of the Big 4 auditors every year, because their books were shady.

Giant investment firms like Goldman Sachs do their own due diligence before entering in any deals. They did several deals with 1MDB over the years, and the corruption should have been obvious earlier if they actually cared to check for it.


Goldman knew 1MDB was doing something corrupt. Other parts of Goldman didn't want to do business with 1MDB. Goldman looked away because 1MDB paid $700MM for some bonds that should have cost $3MM to issue. No government entity would pay 10% to create some bonds.


It is not the same officials. It is the new administration that is trying to claw back the money.


> I find their interpretation of the story to be far more believable

I don't think the Malaysian prosecutors are disputing that the (previous) Malaysian government was corrupt. They arrested Najib Razak (the PM during the 1MDB project), as well as other officials. But they're also saying that GS has a partial responsibility. And given the numbers provided in the news article I don't find it hard to believe.


My more cynical take: the current government is also corrupt, and GS won't do their money laundering anymore. So they'll take $7.5B from it (if they figure out how) and then it will also disappear into their pockets. Just watch.


Any reason to believe this, or just Devil's advocating?


Because there's simply no way an honest person will ever become a member of that government. And even if, by miracle, they do, the pay is so laughably bad, they won't be able to survive, let alone prosper. The entire structure of the government is based on the "understanding" that money will just "disappear" from time to time. Merely changing the top bosses changes nothing, and if anything the new ones have a more ravenous appetite.

I know it might be difficult for US or Canadian natives to understand this. But people from most of the rest of the world know exactly what I'm talking about.


I agree with you. I venture this has always been the case with a lot of leaders/kings and governments. The problem we face in the current age is that things have been automated and so much power is vested in a few individuals. A few individuals working for the Energy utility of country or the rail governing body can do massive damage by being corrupt. I really worry Africa will never develop because we have very few individuals making such bad decisions that the whole country gets affected. South Africa is reeling with power cuts because of the decisions of a few individuals[0][1].

Just to make my point clear, a few decades ago (in Africa), we didn't have electricity (quite a lot still don't) we used candles and lamps. Apart from shutting down a candle factory, there wasn't much an individual could do to affect the whole country (other factories can open and candles can be imported). Now we use electricity for lighting and it is provided by one government-owned entity. It makes the head of the entity very powerful giving him/her access to billions and billions of dollars. They also able to screw the whole country up.

[0]http://www.702.co.za/articles/329758/sorry-south-africa-for-... [1]https://mg.co.za/article/2018-01-12-00-eskom-has-a-problem-a...


Concerned South Africans fought Bell Pottinger, a UK PR firm that was known for spreading nastiness around the world; driving it to bankruptcy, after it tried to destabilise the country, as party of a programme of looting being carried out by its clients in South Africa.[1] KPMG has suffered extensive reputational damage for similar reasons, and its international parent had to intervene to contain the contagion.

Malaysia is taking on Goldman Sachs, going where faint-hearted and fearful first-world regulators fear to tread.

Perhaps we'll see more justice coming from unexpected sources.

[1] I don't think Bell Pottinger's erstwhile members have stopped interfering with South Africa but that's a conspiracy theory for another day.


We (South Africa) are not (yet) bankrupt.

Bell Pottinger cannot be blamed for our problems. The problem is pure and simple that the state is spending too much money on civil servants and inefficient state owned companies.


You're correct, Bell Pottinger is not to blame for the structural problems in the South African economy, and I never said otherwise. However, many of these issues date back decades (apart from a period of economic liberalisation from the late 80s to early 2000s, South African governments have favoured a large degree of state control over the economy). My comment was referring to the bankruptcy of Bell Pottinger, not South Africa.

What Bell Pottinger did, is provide cover for a state capture programme, that, over a short period, funneled money from state owned companies and other parts of the state to the Gupta and Zuma families, and in doing so tried to foment a race war.


Probably not a bad thing for Malaysia if GS didn't operate in their country.


what would be most scary is if they for some reason pay the fine to continue to operate there.


Isn't scary now if we entertain the idea that Malaysia wouldn't had done that if they had nothing to gain in some form or another from it ?


The allegation is that people in the Malaysian government criminally contracted GS. Of course the criminals profited. There’s no reason to assume Malaysia did.


Anyone can shed light on Goldman's chances to get fair trial from the Malaysian courts?

7.5b is more than 10 times the fee collected by Goldman, why stop there?


If you steal 100$, and the punishment is to return 100$, then it's worth it for you to keep stealing.

The punishment has to be 5000$ and personal punishment such as imprisonment.


Risk vs. Reward. Fraudsters and thieves can easily return the amount stolen. The fact that they rarely get caught works for them. Now make them pay 10x, jail or ban them from doing business and they're likely to think 10x before doing it again.


Because that is the rough amount of 1MDB bonds that Goldman helped sold. They government just wants to unravel that mess without paying money.


Likely to be as ethical as the financial system GS gamed. All in all I think it is fair.


Even the Romans worried. About "who would be there to clean after the janitors" Time for a financial death penalty: state imposed maximum impoverishment as penalty for such corruptions. It's GS types only real fear...


10 fold punishments for proceeds of crime are not that rare, why stop there?


10x was legit in Babylon, circa 1754 BC, with the oldest written law concerning this:

Ex. Law #265: "If a herdsman, to whose care cattle or sheep have been entrusted, be guilty of fraud and make false returns of the natural increase, or sell them for money, then shall he be convicted and pay the owner ten times the loss.

https://en.wikipedia.org/wiki/Code_of_Hammurabi

Innocent until proven guilty was also in the Code of Hammurabi, not sure about the 'eye for an eye' bit or the treatment of slaves though. Nonetheless the precedent of 10x is there.


The eye for an eye bit was in there[1], but apparently only for men of the same class:

> 196. If a superior man should blind the eye of another superior man, they shall blind his eye.

> 198. If he should blind the eye [...] of a commoner, he shall weigh and deliver 60 shekels of silver.

> 199. If he should blind the eye of a slave of a superior man [...], he shall weigh and deliver one half of the slave's value (in silver).

[1]: From page 106 of "Sapiens: A Brief History of Humankind" which I was just coincidentally reading on the bus and would def recommend.


Thanks for the tip, I will go for the YouTube talk before investing in the book.

baybal2 - sibling comment - was correct and unfairly modded down. A well known leader referenced the Law of Hammurabi the other day.

Coincidentally I was listening to this press conference whilst procrastinating on HN, to come across this story. New to the Law of Hammurabi, I had to check out the Wikipedia page, to read the 'ten times' bit, enabling me to conveniently cut 'n' paste the above comment.

Despite going to school I had not ever heard of Law of Hammurabi before. I have not read it in depth but just that small bit of knowledge regarding the history of written laws has changed how I see and understand the world.


I'm surprised that somebody caught that line on a forum like HN :)


It seems to me that the prosecutor and finance minister are probably just as corrupt. They just see a pot of money and want to steal it, masquerading it as reparations.

I don’t think GS did anything wrong and I hope they tell the Malaysians to fuck off.


> It seems to me that the prosecutor and finance minister are probably just as corrupt. They just see a pot of money and want to steal it, masquerading it as reparations.

Could you provide some data to substantiate these accusations? The prosecutor is the first non-Muslim Attorney General in Malaysia's history, picked right after a historic election for Malaysia where the opposition party won for the first time. I don't see any evidence of corruption from what I scanned.

https://en.wikipedia.org/wiki/Tommy_Thomas_(barrister)

The finance minister is Lim Guan Eng. A politician who was previously imprisoned for defending a rape victim. Allegations of corruption against him were proven to be false and planned by, ironically, a corruption-funded organization under the former regime (the one that was partnered with GS). https://en.wikipedia.org/wiki/Lim_Guan_Eng

> I don’t think GS did anything wrong and I hope they tell the Malaysians to fuck off.

You seem to have very strong opinions. I'm wondering if you realize that Tim Leissner, Goldman's VP already pled guilty to money laundering. https://www.forbes.com/sites/korihale/2018/11/08/goldman-sac...

I'm very curious about your motivations for your post.


I do think that the two partners Leissner and Ng are probably complicit to some degree. They probably do deserve to get prosecuted by the justice department.

But GS are just the underwriters of the bond, they aren't guaranteeing the bonds. They didn't steal the money either. The Malaysian government is claiming that because the fee was large (around 10%) that it's clear evidence that the organization as a whole was complicit and guilty. I don't think that's a very strong argument.

But the Malaysians don't seem as interested in justice (certainly the two partners should be jailed) as they are in finding someway to get their money back. So instead of looking at the people in their own country who stole the money, an investigation that might implicate other powerful people besides Jho Low, they turn their eyes to easiest target they have, GS, a foreign company.

It might even be reasonable to ask for the underwriting fee back (though I'm on the fence about that), but 7.5 Billion USD? Do you think that number of motivated by justice? Do you think it's motivated by "teaching them a lesson?" Or do you think that the number is so high because Malaysia wants the money and they see an easy way to get it?

7.5 Billion is almost 10% of the entire company's shareholder equity, truly a staggering sum for GS to pay. Total revenue for GS in 2017 was around 30 Billion, net profits were just 4 billion. How is almost 2 years of net profits in the least bit fair as a punishment?

And if it is fair, why stop at that? Why not 15 billion? Or 30 billion? Why not just take all their equity and turn it into a state corporation. Surely Goldman Sachs, the blood sucking squid, deserves a comeuppance for all the proletariat ire they have received over the years.

Maybe that last paragraph is a little much, but the point still stands. I think people irrationally hate banks and hate wall st, and their view of justice for the banks is colored by that discrimination.


Perhaps it would help if we clarified some terms first. "An underwriter is the party that evaluates and assumes another party's risk for a fee, such as a commission, premium, spread or interest.". Note, the part about taking on the risk. GS underwrote the huge 1MDB bond, but allegedly in cahoots with corrupt individuals, while allegedly intentionally ignoring red flags (raised by their own internal compliance department) and then knowingly passing all the risk and subsequent losses to the Malaysian tax payers.

> 7.5 Billion is almost 10% of the entire company's shareholder equity, truly a staggering sum for GS to pay.

Apparently the 1MDB losses have cost Malaysian taxpayers around USD $12 billion. Given that GS was the underwriter and allegedly the key enabler of the scandal, punishing GS by making them pay at least the majority of those taxpayer losses seems unjustified or unfair to you? What amount do you believe is fair?

For example, if a "fence" helps a thief sell off some "gear" and the thief is caught. How much should the "fence" be liable for? How much should the victims get back?


In a bond issue i think the underwriter normally promises to buy securities if they are not sold and evaluates the risk for potential buyers. I'm not sure what claim the Malaysian tax payer has. Maybe Malaysia should default on all these bonds and then hope the people that bought them from GS sue GS if they want to punish GS.


Where the $12 billion figure is coming from? $6 billion is what GS raised. Also, not all the said $6 billion disappeared.

[edit: added 'Also, not all the $6 billion disappeared']


> Where the $12 billion figure is coming from?

Wikipedia. https://en.wikipedia.org/wiki/1Malaysia_Development_Berhad_s...

"According to its publicly filed accounts, 1MDB has nearly RM 42 billion (USD 11.73 billion) in debt"

The Malaysian taxpayer got finangled into guaranteeing all of that debt allegedly by GS.


Well, "it is stated that at least US$3.5 billion has been stolen from Malaysia's 1MDB state-owned fund" (https://en.wikipedia.org/wiki/1Malaysia_Development_Berhad)

Even if guilty, what GS has to do with any debt beyond what it raised for 1mdb (us$6b)?

You write: "Given that GS was the underwriter and allegedly the key enabler of the scandal, punishing GS by making them pay at least the majority of those taxpayer losses seems unjustified or unfair to you? What amount do you believe is fair?"

But from reading the first paragraph under the History section here:

https://en.wikipedia.org/wiki/1Malaysia_Development_Berhad

it is clear that by the time Goldman started raising money for 1mdb (2012 if i am not mistaken), a lot of money been raised already, i.e. GS wasn't the key enabler.

So why blame Goldman for all the debt accumulated under 1mdb?


Can you elaborate on why you think the large fee isn't a clear evidence the organisation as a whole was complicit?


you don't gtake back just the money that they stole. always you get more to convince others to not try it again. they should try and get as much as possible.


Needle in the haystack thanks for this insight


Key question about this, to me: who has more credibility, Goldman Sachs or the Malaysian government?

I think the answer is Goldman Sachs. That's not praise for them. If it were Singapore filing charges -- and the article suggests they are looking into it -- then I"d believe Singapore.

But the scandal itself tells you a lot about the Malaysian government's credibility and honesty.


It's fair to say GS has credibility for running a profitable business, not necessarily doing so while adhering to any given ethical (or in some cases legal, since 2008) code.

Also, as pointed out elsewhere in the comments, Malaysia has changed government quite recently.

https://en.wikipedia.org/wiki/2018_Malaysian_general_electio...


> But the scandal itself tells you a lot about the Malaysian government's credibility and honesty.

So if it's scandal, you believe the media, otherwise, you believe the opposite.

What's the logic?


I would say Malaysian government, since they need to be responsible for 10s of millions of people's life.


> I would say Malaysian government, since they need to be responsible for 10s of millions of people's life.

This is very funny. It’s like saying Stalin or Mao commanded superior credibility because they were responsible for tens of millions of lives.


I didn't see it that way. Malaysian government is elected democratically, so unlike Stalin/Mao, they are bestowed with power to fulfill the will of the people.


Replace with any corrupt elected government then.

> they are bestowed with power to fulfill the will of the people

Bestowed with power != using it properly.


GS is offering $1.8 billion

   “Their figure is $1.8 billion. Ours is $7.5 billion,” Lim said.


As far as I understand it, he refers to Goldman's maximum assumed losses from all the litigations they are involved in, not just 1mdb.

So, no, gs are offering nothing at the moment.

From Goldman's q3 report: 'As of the date hereof, the firm has estimated the upper end of the range of reasonably possible aggregate loss for such matters and for any other matters described below where management has been able to estimate a range of reasonably possible aggregate loss to be approximately $1.8 billion in excess of the aggregate reserves for such matters.'


so they'll pay around $4 Billion. The funny part is that people involved in the scam will probably keep their long-ago-issued bonuses. It serves everyone (but the shareholders) right...scam, make money and have the company pay 8 years later.


I take it GS will just walk away. It might not be worth to pay that much to operate in Malaysia.

Not to mention, people could just start a separate company if they absolutely need to do business in Malaysia.


Singapore and US are also investigating GS. There will most likely not be a "walk away".

> Singapore’s widened probe opens a potential new battle front for Goldman less than a week after Malaysia filed the first criminal charges against the firm over a relationship that spawned one of the biggest scandals in its history. Singapore is coordinating closely with the U.S. Justice Department, which is also investigating Goldman and has filed criminal charges against two former senior bankers at the firm, the people said.

https://www.bloomberg.com/news/articles/2018-12-21/singapore...


They might get nailed in the US but I don’t think Malaysia is going to see any of that 7.5B they are asking for.


They very well may. SDNY isn't going to let customers get screwed when settling with a bank.


I don't think it's quite as simple as that:

https://en.wikipedia.org/wiki/Enforcement_of_foreign_judgmen...


They don't get to walk away from criminal prosecution.


They are prosecuting the company though, not the staff.

If GS refuses to pay, the best they can do is ban them from the country. What else can they do, seriously?


They can seize their CEO's jet while fueling in, say, France, or a GS building in China or whatever. Their life will be miserable, they'd have to navigate hundreds of jurisdictions and they are "bounty hunter" types that take these cases after judgments.

But fraud is fraud, Malaysia can sue them in good, old, USA. Who thinks that GS, the paragon of integrity, behaved correctly, raise their hands. Right, zero hands.


When "too big to fail" goes to the head and gets too boisterous and risky.

Goldman Sachs did have to pay 5.1B for the Great Recession scams [1].

As long as GS can keep the "financial innovation" in Malaysia they will probably pay it after trying to reduce it, if they can't gain from it further in the future they won't.

[1] http://fortune.com/2016/04/11/goldman-sachs-doj-settlement/


Take it up at a political level I expect


Hoping the current administration would side with foreigners against one of its own banks is rather optimistic.


Putin and China has shown that they don't mind getting their hands dirty in foreign countries. Not see why any government could not hire some private operators if they are pissed enough to deliver the to Kuala Lumpur


Most likely they'll settle for a lower sum if they want to continue to operate there, otherwise it might be simpler and cheaper to just pull out of Malaysia.


its damages not "reparations", inflammatory no?


Am currently reading the book about this scandal "Billion Dollar Whale". Am about 1/3 of the way through it, but thus far i'd put the entirety of the blame here on the Malaysian prime minister, Jho Low, and the willfully incompetent executives hired to stage-manage the 1MDB fund. I don't see any reason to blame GS given what I know so far, though that may change as I make my way through the book.


Id blame GS because they arent idiots and would have been fully aware it was fraud, thus are accomplisses and complicit.


You should get further than 1/3rd into the book before you comment on the very subject the book addresses.


Keep reading. GS’s internal controls failed.


In China many of the top party officials are billionaires. Vladimir Putin is widely believed to have massively enriched himself during his reign.

Even in the US many politicians are far, far wealthier than their official salaries would suggest is plausible.

Update: By the downvoting I know that you all know I mean the Clintons.


We detached this subthread from https://news.ycombinator.com/item?id=18740561 and marked it off-topic.


Chinese too officials are billionaires, American top officials are millionaires at best unless they have money coming in before. You can only make so much on speaking fees and book royalties, while red families like Xi’s own and control significant portions of the Chinese economy.

Just reporting on such issues is why most western newspapers have been blocked. They don’t even bother trying to refute it, because princeling dominance of the economy an open dirty secret. It also puts better into perspective how the economy is managed in favor of their own interests.


Chinese officials are not at billionaires level, millionaires at most. It’ll be a huge risk to their political life if they and their families possess billions. It’s very likely they could control multiple billionaires though


No it isn't. You simply shutdown all discussion about it.

https://www.smh.com.au/world/chinese-leaders-family-worth-a-...

https://www.nytimes.com/2014/06/18/world/asia/chinas-preside...

And do you remember that discussion about Wen Jiabao's mom controlling a good chunk of China's jewelry industry that got the new york times banned:

https://www.nytimes.com/2012/10/26/business/global/family-of...

I think Chinese officials are genuinely surprised in how poor western politicians are and how many of them even lack xiaosans.


> Update: By the downvoting I know that you all know I mean the Clintons.

Except for the late-1970s cattle futures investment (which was legal and documented, just surprisingly unlikely), I think everything about the Clintons can be explained by their straightforward participation in private business like speaking engagements, consulting, and selling books. If you count their "official salaries" as salaries just from their jobs as public servants, you'd get a lower number, yes, but you don't need to speculate about bribery or corruption to figure out where the rest of the money comes from.

(I suppose you could construct an argument that these forms of private business are in fact morally equivalent to overt corruption, but I'd be curious to hear the details of that argument, especially as basically all of them were after Bill left office. There's a huge difference between bribing a current politician and a former one, in that the current one can meaningfully look the other way or send you kickbacks.)


I mean, it's no shocker why bankers were eager to pay the Clintons hundreds of thousands of dollars for speaking engagements, and it's not because of the Clintons' keen market insight.


You can clearly see both speakers fees and "donations" to the Clinton Foundation fall off a cliff after she lost the election.

Goldman's paid her a lot, didn't they?


> There's a huge difference between bribing a current politician and a former one, in that the current one can meaningfully look the other way or send you kickbacks.

Actually there isn't[0], because the former one can have looked the other way or sent you kickbacks while they were in office, in the knowledge that you would bribe them later, when it no longer officially 'counts' as corruption. This is the standard way that corruption works in the US, since there are laws against just directly bribing a politician the way you would in some other countries.

0: Edit: isn't a huge difference; obviously there is a little difference, just not enough to do more than slow down the development of corruption.


>>Update: By the downvoting I know that you all know I mean the Clintons.

Putin or a Chinese Politburo member can get as much a Clintons ever made (all public--books, speech fees) by calling /blackmailing an oligarch or an exec of their big corps. In one shot. You simply do not exist unless the state allows you to in those countries.

Over there, every project has a corruption tax added to it and it goes to the top officials. Now think of that when it comes to hundred of billion projects a year.




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