A Hong Kong-based private equity firm, Primus Pacific Partners, has filed suit against Goldman Sachs and its former managing director, Tim Leissner, accusing them of “egregious and fraudulent betrayal” and breach of their duties as financial advisors to EON Capital, a Malaysian bank in which Primus was the largest shareholder.
Primus focuses on China, Hong Kong and Malaysia, and targets investments in the financial sector of between $500 million and $3 billion, according to Bloomberg.
In documents filed July 26 at the New York Supreme Court, Primus alleges that Goldman Sachs hid its conflicts of interest relating to its “close relationship” with Malaysia's Prime Minister, Najib Razak. In its suit, Primus said that Goldman was the “key advisor” to 1Malaysia Development Berhad – known as 1MDB, a government investment fund set up by Najib – while it was also advising the board of EON Capital. In addition, Goldman's Leissner “repeatedly engaged in misconduct in connection with 1MDB” at the time when the bank was advising EON Capital, allegedly because Leissner was trying to “curry favour” with Najib, Primus said.
The suit focuses on Goldman's role when it advised EON Capital over a December 2009 bid from another Malaysian bank, Hong Leong Bank (HLB). The Malaysian Prime Minister had “close family and business ties” with HLB, Primus said. The private equity firm accused Goldman Sachs of using confidential information that it was privy to as an advisor to EON Capital to help HLB prepare a successful bid, and then persuading the EON Capital Board that HLB's offer was fair even though it was “well below” EON Capital's “fair intrinsic value”.
EON Capital was acquired by HLB in April 2011 for $1.7 billion, making HLB Malaysia's fourth biggest banking group by assets under management.
Primus is seeking $510 million of damages from Goldman and Leissner. The firm said it became aware of Goldman Sachs's alleged fraud through various media reports in March in relation to 1MDB, which is currently the focus of investigations in at least seven countries for misappropriating almost $3.5 billion of Malaysian taxpayers' money. Last week, the US Department of Justice filed lawsuits against 1MDB, seeking to seize dozens of assets tied to the state fund.
In a statement in response to the lawsuit, Goldman said the lawsuit was misguided. “This plaintiff previously lost its challenge in the Malaysian courts seeking to stop a transaction involving a Malaysian company, which was then approved by shareholders,” the investment bank said. “We will vigorously contest this misguided additional lawsuit in New York court.”