On a yacht moored at Saint-Tropez, Malaysian Prime Minister Najib Razak talked business with Abu Dhabi's crown prince. Included in the horseshoe of chairs set up for the July 2013 gathering was a partner from Goldman Sachs Group Inc.
The bank earned its place through years of cultivating Mr. Najib and a state investment fund he founded. Goldman had raised US$6.5 billion (S$9.4 billion) for the fund and earned nearly US$600 million in fees, making the Malaysian client among its most lucrative.
Mr. Najib lavished praise on Goldman, said people familiar with the meeting. "Do you see any other bankers on this boat?" one recalls him saying.
Today Mr. Najib and the state fund, 1Malaysia Development Bhd., or 1MDB, are at the centre of what investigators consider one of the largest financial frauds in history. Investigators have said 1MDB was used by the prime minister as a political slush fund and by associates of his to buy more than US$1 billion of real estate, art and other luxuries from London to Beverly Hills, California.
Among all the firms touched by the scandal, which include banks around the world, Goldman holds a unique position for its closeness to 1MDB and the principals.
When the Malaysian fund, which Swiss investigators have labelled a Ponzi scheme, ran into roadblocks in its quest to raise cash, Goldman helped keep the money flowing through bond sales.
US Justice Department investigators are trying to determine whether Goldman had reason to suspect that money it helped 1MDB raise was misused and, if so, whether the bank was obligated to report any concerns to authorities.
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