Goldman Sachs 'cheated' Malaysia over 1 MDB from state coffers: Mahathir

Goldman Sachs "cheated" Malaysia, leader Mahathir Mohamad said, after two former bankers from the Wall Street titan were charged over a scandal that allegedly saw billions looted from state coffers.

The US Justice Department unveiled criminal charges this month against ex-Goldman bankers Tim Leissner and Ng Chong Hwa, accusing them of working with a Malaysian financier to launder huge sums allegedly stolen from Malaysian sovereign wealth fund 1MDB.

They are accused of involvement in a sophisticated fraud linked to former leader Najib Razak, allegations that played a big factor in the shock defeat of his long-ruling government at polls in May.

In an interview with broadcaster CNBC, Prime Minister Mahathir said that "obviously we've been cheated", when asked about Goldman's dealings in Malaysia. "There is evidence that Goldman Sachs has done things which are wrong," said the 93-year-old, who is in his second stint as premier after coming out of retirement to take on Najib, his former protege.

Asked about Goldman's compliance controls - which are supposed to monitor and prevent risky behaviour at the bank - Mahathir responded: "It does not work very well." Goldman Sachs did not immediately respond to requests for comment.

Leissner and Ng have been charged with money-laundering and conspiring to bribe officials in Malaysia and Abu Dhabi to hire Goldman for lucrative consulting contracts.

Goldman underwrote USD 6.5 billion of bonds issued by 1MDB but US authorities allege that more than USD 2.7 billion was siphoned off.

Goldman earned USD 600 million in fees for the bond issue.

Leissner pleaded guilty and has agreed to pay USD 43.7 million in restitution of ill-gotten gains. Ng has been arrested in Malaysia.

Malaysian financier Low Taek Jho was also charged by the DoJ. Low, allegedly a central figure in looting 1MDB, remains at large.

Goldman Sachs has not been charged over the scandal but its shares fell heavily this week after Malaysia's finance minister said he wanted a full refund of fees paid to the bank.

In a further blow to the bank's image, it has emerged that former chief Lloyd Blankfein met with Low at a private reception in a New York hotel in 2009.