This article first appeared in The Edge Malaysia Weekly on March 14, 2022 - March 20, 2022

THE name of reclusive tycoon T Ananda Krishnan surfaced on several occasions during the testimony of Timothy Leissner, the star witness in the trial of his former Goldman Sachs colleague Roger Ng Chong Hwa in a New York court.

Leissner, who is awaiting sentencing after pleading guilty to various charges of fraud and money laundering pertaining to three bonds totalling US$6.75 billion Goldman Sachs raised for 1Malaysia Development Bhd (1MDB) between 2011 and 2013, said Ananda was an important client even before 1MDB was a client.

Ananda, through his private vehicle Usaha Tegas Sdn Bhd, controls Astro Malaysia Holdings Bhd. Goldman Sachs was involved in the listing of Astro.

Leissner said he had dinner a few times with Ananda over the years, including once on his yacht.

In March 2012, Goldman Sachs helped 1MDB raise US$1.75 billion via a global bond issue. The money was used to buy the power assets of Usaha Tegas for RM8.25 billion, under what Leissner and fugitive financier Low Taek Jho (Jho Low) codenamed Project Magnolia.

This was the first business deal Goldman Sachs did for 1MDB and Leissner said he and Ng were deemed stars in the giant US investment bank for their success in getting 1MDB as a client.

Goldman earned around US$200 million in fees from Project Magnolia after successfully placing out all the bonds. Leissner told the court Ananda himself took around US$600 million of the high-yielding 1MDB bonds.

In April the following year, Goldman raised another US$3 billion for 1MDB (in a bond issuance codenamed Project Catalyze) for the development of the Tun Razak Exchange (TRX). Leissner said these bonds were not fully taken up by global investors because there was an oversupply of 1MDB bonds in the market by then.

In August 2012, 1MDB had issued another US$1.75 billion tranche of bonds to buy a power station from Genting Bhd. In just 16 months, US$6.5 billion in 1MDB bonds had flooded the market.

As result, Leissner said, Goldman Sachs ended up holding around US$700 million of unsold bonds from Project Catalyze.

He further testified that he was asked by his bosses to approach Ananda to take these new bonds in exchange for those from the first tranche, but there was no response from the tycoon.

Leissner added that he and Ng were also asked by their bosses to try and get local Malaysian institutions to buy the unsold bonds.  The following are his answers to questions from prosecutor Drew Rolle:

Drew Rolle: Goldman Sachs has on its balance sheet [bonds] that it couldn’t sell?

Leissner: I believe it was somewhere in the order of US$700 million, sir, after the closing of Project Catalyze.

Rolle: Did you understand that to be a problem?

Leissner: Yes, sir. That’s not what we wanted to do. We kept saying as a firm, as Goldman Sachs, we don’t want to hold inventory, we want to move inventory. It means that rather than having what I described, holding those bonds on our balance sheet, we wanted to sell them. That was the intention, as fast as we could.

Therefore, in Project Catalyze, the desk — the PFI (principal funding and investment) desk of [former senior Goldman executive] Toby Watson — was concerned that we were holding those US$700 million bonds. They called me and it is my understanding that they called Roger as well because they were somewhat in a panic with that kind of exposure, meaning, that many bonds.

From me, they wanted me to ask Ananda Krishnan — who was a seller on Project Magnolia who had agreed to hold US$600 million worth of those bonds — to exchange those bonds essentially for Project Catalyze bonds. That’s what they asked me to help with.

Rolle: I’m sorry. That would help sell some of the bonds to Ananda Krishnan?

Leissner: Correct. By exchanging one bond for another.

Rolle: Did you also speak to Jho Low about this problem with the bonds?

Leissner: I did put one call in to ask him for help to sell into the Malaysian institutions. My job really was more [of] trying to convince Mr Krishnan and his team to allow us to swap, to actually exchange those Magnolia and Catalyze bonds.

Apart from selling his power assets to 1MDB and buying US$600 million of 1MDB bonds in 2012, in February 2015, by which time 1MDB had run out of cash and could not meet interest payments on the bonds, Ananda provided a RM2 billion loan to 1MDB via an offshore company called Marstan Investments NV. Members of parliament from the opposition kicked up a storm when it was revealed that the interest on the loan was 8.5%. 1MDB paid off the loan a year later.

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