This article first appeared in The Edge Malaysia Weekly on October 23, 2023 - October 29, 2023

A tug of war over legal documents pertaining to a settlement agreement between 1Malaysia Development Bhd (1MDB) and Goldman Sachs is the subject of current court proceedings between the country’s anti-corruption agency and two law firms.

On Oct 6, the Malaysian Anti-Corruption Commission (MACC) raided two law firms involved in the settlement agreement between 1MDB and the US financial institution but it did not get what it wanted, prompting the graft agency earlier last week to seek a court order for the two firms to furnish related documents on the deal.

MACC’s action appears to be a follow-on to Putrajaya’s disquiet over the settlement agreement.

In an interview with a foreign television station in August, Prime Minister Datuk Seri Anwar Ibrahim said the federal government was considering suing Goldman Sachs Group over the US bank’s role in the misappropriation of billions of dollars from 1MDB, even though a global settlement agreement had been reached in August 2020 between the bank and the previous administration led by Tan Sri Muh­yiddin Yassin.

Goldman also appears dissatisfied with matters because the bank announced on Oct 12 that it had filed for arbitration at the London Court of International Arbitration over the Malaysian government’s purported violation of its obligations to appropriately credit assets recovered against the guarantee the US financial institution made in the settlement agreement.

Messrs Rosli Dahlan Saravana Partnership (RDS) and Messrs Chethan Jethwani & Co were the two law firms raided by MACC. RDS had represented 1MDB in the global settlement agreement while Chethan had represented Goldman.

Both firms denied giving any documents to the enforcement agency, citing solicitor-client privilege. Subsequently, on Oct 13, Malaysian Bar president Karen Cheah issued a statement criticising the raid, which she noted was without proper authorisation and in non-respect of lawyer-client privilege.

On Oct 11, MACC filed a notice of motion at the High Court against the two firms to compel them to produce documents related to the settlement between 1MDB, Goldman and local financial institution AmBank.

In its suit, MACC claimed that it was investigating the firms under Section 17(a) of the MACC Act for the offence of giving or accepting gratification and Section 4(1) of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activity 2001 (AMLATFPUA) for purported money laundering offences.

MACC contended that the defence of privileged communication under Section 46(2) of the MACC Act and Section 126(1) of the Evidence Act 1950 does not apply to the two offences being investigated.

MACC is seeking a court order for the production of, among others, the two law firms’ accounts and all correspondence with their clients pertaining to the settlement deal.

The anti-graft agency also claimed it was seeking the documents from RDS to determine purported transactions of gratification and money “layering” between Goldman and RDS.

Layering is a term that suggests money-laundering activities to make tracking the money trail more difficult.

In its reply to the MACC application for the production of documents, Chethan said he was bound by legal professional privilege and that he was alarmed by the action as Goldman is currently in dispute with the Malaysian government and 1MDB in particular over the global settlement agreement.

He noted that Goldman had commenced arbitration proceedings against the government and 1MDB on Oct 11, which indicates that there are pending disputes between the parties.

He also pointed out that MACC’s money laundering unit director Datuk Mohamad Zamri Zainul Abidin was personally involved in the settlement negotiations, as were representatives from the Attorney-General’s Chambers, the Securities Commission, the National Anti-Financial Crime Centre, Inland Revenue Board and the Treasury Department.

“The MACC should first be interviewing all these people before attempting to get privileged documents from my client (Goldman). These individuals would be able to provide full information as to how this settlement sum was reached without breaching my client’s privilege,” Chethan said in an affidavit in reply sighted by The Edge.

He said that the allegations made against him and his firm were false and without any basis; he also denied any involvement in the AmBank settlement.

RDS, in its affidavit in reply to MACC’s motion, said it had written to Treasury secretary-general Datuk Johan Mahmood Merican, who is also 1MDB chairman, to seek 1MDB’s permission to release the documents sought.

It said news of MACC’s raid of RDS and Johan’s silence on the matter had been detrimental to the firm.

“The allegation that RDS was in a position to manipulate the negotiation is frivolous and without any basis,” it said, adding that many parties, including the enforcement agencies above were also part of the negotiations.

RDS said its partner Rosli Dahlan had successfully negotiated the AmBank settlement.

“Everyone in the 1MDB task force is aware that the then Bank Negara Malaysia governor, supported by MACC, had advised the then prime minister and finance minister that AmBank should not be penalised more than RM600 million as anything more could cause a collapse of the banking system.”

It added that Rosli’s swift and direct negotiations with AmBank’s solicitors and its senior management had resulted in the bank agreeing to pay RM2.83 billion in settlement to 1MDB.

The firm added that pursuant to the settlement agreements (with Goldman and AmBank), amounts paid and accounted for to date were paid directly by Goldman and AmBank into the designation (1MDB recovery) bank account.

RDS further denied receiving any portion of the said settlement proceeds from either Goldman, AmBank, Chethan Jethwani & Co or 1MDB. The letter from the law firm to Johan sighted by The Edge added that the legal fees paid by 1MDB to the firm were for time costs only.

Both notices of motion requiring the two law firms to produce the documents sought are still pending at two separate High Courts. MACC has requested that both applications be heard before Judge K Muniandy.

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