Press Release / April 29, 2013

Goldman Sachs underwrites US$1.6 billion of ‘under the radar’ bonds for corrupt Sarawak regime, and wins business award for it

US investment bank Goldman Sachs appears to have turned a blind eye to glaring corruption risks and conflicts of interest in order to underwrite US$1.6 billion in bonds for the Sarawak State Government, Malaysia, said Global Witness today (1). The bank’s approach in Sarawak helped it win ‘Bank of the Year 2012’ by International Financing Review Asia for “breaking with tradition to win new business in difficult conditions” (2).

The bond structure uses offshore companies owned by the notoriously corrupt Sarawak regime to borrow large sums from international investors. Described by one analyst as “unusual” and “under the radar” (3), the bonds are nominally used to finance the state development project known as the Sarawak Corridor of Renewable Energy (SCORE). However, the Sarawak government has never disclosed the bond listing to its State Assembly, while Chief Minister Taib Mahmud has sidestepped questions from an elected assemblyman enquiring as to the use of a secretive trust fund linked to the bonds. Documents on the Financial Exchange of Labuan, Malaysia’s offshore financial centre, clearly show that this trust fund is used for bond repayment.

Basic checks on SCORE projects reveal significant anomalies in their purported investment structures, and conflicts of interest involving the family of Taib, who is the subject of a federal probe into corruption (4). In addition to being state premier for the past 31 years, Taib is Minister of Finance and Minister of Resources, and therefore presides over SCORE development projects. Members of Taib’s family have major stakes in companies which are prime beneficiaries of SCORE (5).

“Goldman Sachs is at serious risk of facilitating corruption by doing business with the Sarawak State Government. If you drew up a list of the most corrupt regimes in the region, this one would be near the top. Goldman Sachs either failed to do proper checks on its clients, or it did them and failed to highlight the risks to prospective buyers of the bonds. The bank has some serious explaining to do,” said Alex Helan, Campaigner at Global Witness.

One of the projects listed as a recipient of the funds raised by the bonds is the Tanjung Manis Halal Hub (TMHH), a major SCORE project to develop 77,000 hectares of mangrove forest into a processing and export hub for palm oil and other agricultural commodities. Rudimentary checks on the project’s official ‘investment structure’ reveal irregularities, including apparent conflicts of interest involving the MP for the constituency, Norah Abdul Rahman. Norah is executive chairman of TMHH and Chief Minister Taib's first cousin. Global Witness’ recent film Inside Malaysia’s Shadow State – based on an undercover sting operation – implicated Norah and her political aide and sister Norlia Abdul Rahman as beneficiaries of an oil palm lease offered for sale through an illegal transaction.

The official investment brochure for TMHH states that the agency responsible for implementation of the project and managing “land bank & development capital” is a “government linked company” called Tanjung Manis Food & Industrial Park Sdn Bhd, whilst another company, Tanjung Manis Investment Corp Sdn Bhd, is named as the recipient of “business capital funds” and delegator of “management contracts” (6). The latter company does not exist on Malaysia’s company register, whilst the former is not a government linked company as claimed, since company records show that the government has no equity in it (7).

These records show that the sole shareholder in Tanjung Manis Food & Industrial Park Sdn Bhd is a company called Malaysia Food & Industrial Park. This company’s shareholders are two individuals registered to the same residential address as Norah Abdul Rahman, whom Global Witness believes to be her sons, as well as three other individuals registered next door to them (8).

“There are potentially billions of dollars being pumped into the TMHH project yet the proposed investment structure is riddled with inconsistencies and conflicts of interest. A sophisticated organisation like Goldman Sachs should have picked up on this in a matter of hours if it had done meaningful due diligence,” said Helan.

Global Witness also believes that Chief Minister Taib has overseen the issuance of the bonds in a secretive manner, whilst saddling the people of Sarawak with billions of dollars worth of debts in the process.

A bond offering document circulated by Goldman Sachs stated that bondholders will be repaid through the ‘Approved Agencies Trust Fund’. This fund is overseen by Taib and six individuals that he appoints. It has absorbed a large portion of Sarawak’s development budget over recent years and is shrouded in secrecy. The Sarawak Government has not provided any substantive answers to questions from an elected state assemblyman as to what the fund is being used for (9), simply responding that an ‘approved agency’ is effectively any transaction or investment that the Chief Minister stipulates in writing. The government has recently issued a libel suit against the state assemblyman, who alleged that this fund constitutes a ‘black hole’ in the state budget.

Documents for the 2011 bond sale state that the company charged with issuing the bonds is Equisar International Incorporated, a company in Malaysia’s offshore secrecy jurisdiction, Labuan (10). These documents clearly state that this company is one such ‘approved agency' (11).

“Taib and Goldman Sachs should open up the books and disclose who has purchased these bonds, who has been paid what fees, and exactly where the money raised by the bonds is going. This deal should be investigated by the authorities in Malaysia and the United States and if corruption is found then Goldman Sachs should forfeit any bonds they may have purchased as part of the deal,” said Helan.

Goldman Sachs declined to comment on Global Witness’ specific allegations. Instead, Edward Naylor, Managing Director of Corporate Communications (Asia Pacific), stated, “We perform the same consistently high global standards of due diligence in connection with all securities offerings.”


Contact in London:

Oliver Courtney +44 (0)7912 517147 [email protected]

Alex Helan +44 (0)7739 324962 [email protected]

Notes to editors:

(1)     Beginning in July 2011, Goldman Sachs obtained the sole mandate to underwrite US$1.6 billion in bonds for the Sarawak State Government, through companies incorporated in Labuan, Malaysia's offshore financial centre and secrecy jurisdiction. The Labuan Financial Exchange details the bonds issued by the Sarawak State Government, which total US$2.75 billion, with previous tranches underwritten by investment banks other than Goldman Sachs. Companies owned by the Sarawak Financial Secretary are Sarawak International Incorporated (listed 2005), Sarawak Capital Incorporated (2006) Equisar International Incorporated (2011) and SSG Resources Limited (2012). See Labuan Financial Exchange,  

(2)     Goldman Sachs’ role in the issuance of Sarawak government bonds has been praised as an example of its success in the region, and helped its nomination as Bank of the Year 2012 by IFR Asia. Dan Dees, co-head of investment banking for Goldman Sachs in Asia-Pacific, stated that “the story is really adapting your approach to the business to whatever the market gives you, and leading your clients in the right direction…It’s been an incredibly tricky market and, as a result, the theme ends up being ‘how to get in and out fast’”. See IFR Asia,

(3)     IFR Asia, 9/07/2011, ‘Goldman flexes its muscle on rare Malaysian bond’.

(4)     Chief Minister Taib is currently the subject of an official probe by the Malaysian Anti-Corruption Commission (MACC) which was announced on 3rd June 2011, more than a month before Goldman Sachs underwrote the first tranche of bonds, worth US$800 million.

(5)     Taib Mahmud’s family has a 42% stake in Sarawak’s largest conglomerate Cahya Mata Sarawak Bhd (CMSB). CMSB has a 20% stake in a joint venture with OM Minerals to develop a manganese and ferro alloy smelter powered by state-subsidised hydroelectricity, and a 51% stake in the company developing real estate at the new Samalaju Industrial Park. Taib Mahmud’s son Abu Bekir Mahmud is chairman and 31% shareholder of Sarawak Cable Bhd which has won major electrical transmission contracts under the SCORE programme. These are examples and by no means exhaustive.

(6)     See Tanjung Manis Halal Hub, 'Get the facts on the world's most advanced halal hub', pages 89-90,

(7)     A government linked company is a company in which the Malaysian government has a controlling stake; see Putrajaya Committee on GLC High Performance, 2005.

(8)     Several news sources report that Norah’s husband is Nik Sulaiman Datuk Nik Hassan, see Bernama, 24/02/2008, Victorious Norah Pledges to Help Fellow BN Candidates’, and that they have three sons, see New Straits Times, 23/02/2008, Continuing a Political Legacy. Company documents from Companies Commission of Malaysia shows that Tanjung Manis Food & Industrial Park Sdn Bhd is wholly owned by Malaysia Food & Industrial Park Sdn Bhd, and that the shareholders of this company include two male individuals registered to the same residential address as Norah Abdul Rahman, and whose names indicate they are sons of her husband. The other three shareholders are registered to the neighbouring address.

(9)     Question submitted by YB Chong Chieng Jen on 25/04/2012.

(10) The Financial Secrecy Index states that Malaysia (through Labuan) must still make major progress in offering satisfactory financial transparency “if it wishes to play a full part in the modern financial community and to impede and deter illicit financial flows, including flows originating from tax evasion, aggressive tax avoidance practices, corrupt practices and criminal activities, it should take action on the points noted where it falls short of acceptable international standards”. See Financial Secrecy Index,

(11)  Offer Circular for Equisar International Incorporated,