One of Abu Dhabi’s sovereign wealth funds has dropped a lawsuit alleging Goldman Sachs bribed its officials as part of a “massive global conspiracy” that led to billions of dollars being embezzled from Malaysia’s 1MDB.
The news comes the day before the expected announcement of a long-awaited global regulatory settlement that includes more than $2bn of new fines for Goldman and a guilty plea from one of its Asian subsidiaries to close a chapter in a scandal that has cast a shadow over the bank for nearly five years.
“Following collaborative discussions, the International Petroleum Investment Company [Ipic] is dismissing its lawsuit against Goldman Sachs, related to issues regarding 1MDB,” Ipic said.
Goldman could not immediately comment but a person familiar with the matter confirmed papers requesting to dismiss the lawsuit had been filed in New York and that no financial settlement had been made.
The Abu Dhabi fund guaranteed around $3.5bn of the $6.5bn of debt issued by Goldman Sachs on behalf of 1MDB between 2012 and 2013.
As much as $4.5bn of the money that was raised for 1MDB was looted and channelled into everything from high end art and property to financing the Wolf of Wall Street movie, leaving Ipic out of pocket by an undisclosed amount.
The fund sued Goldman in November 2018, asking a New York court to grant unspecified damages against the US bank and individuals including Tim Leissner, a former Goldman partner who had already pleaded guilty to conspiracy charges over the affair.
Ipic claimed Goldman and its bankers bribed two former Ipic executives — its former managing director Khadem al-Qubaisi and Mohammed al-Husseiny, former chief executive of Aabar, an Ipic subsidiary — to participate in a “massive, international conspiracy to embezzle billions of dollars” from 1MDB.
At the time, Goldman vowed to “contest the claim vigorously”.
Ipic’s New York-based lawyers at Quinn Emanuel did not immediately respond to requests for comment.
In response to the lawsuit, Ipic’s parent Mubadala, one of the emirate’s investment vehicles, suspended business with the US bank last year.
Bankers in the Gulf said Goldman had been preparing to resolve the case over the past few months in a bid to ease strained relations with the emirate and its wealthy sovereign funds.
Abu Dhabi institutions have increased dealmaking since the coronavirus crisis, seeking to capitalise on bargain valuations. The Gulf emirate is also focusing on investments in food security, healthcare and technology in response to the pandemic.
“We have been getting ready for more competition in the coming months,” said one banker who competes with Goldman.
“All the action is in the capital,” said an adviser based in the United Arab Emirates.
A person familiar with Goldman’s position said the bank had continued doing business in the region in recent years, despite the lawsuit.
Meanwhile, analysts are circumspect about whether finally putting 1MDB to rest will be enough to lift the bank’s valuation from its current level of just over three-quarter’s of the accounting value of the bank’s net assets.
“Clearly it will be a positive to put the issue in the rear view, remove any additional uncertainty, and free up management (and other firm resources) from focusing on the issue,” said Devin Ryan, analyst at JMP Securities.
“That said, because we think the recent news around the settlement is now in the market and in the ballpark of current market expectations (and where the firm appears to be reserved), we are not expecting a significant reaction in the stock once finalised.”