New York-based bank Goldman Sachs Group and its former managing director Tim Leissner, who have been accused of “egregious and fraudulent betrayal” by Hong Kong-based private equity firm Primus Pacific Partners, are seeking dismissal of the complaint on the grounds that the New York Supreme Court lacks jurisdiction to hear the matter.
In a lawsuit filed in New York on 26 July, Primus Pacific alleges that Goldman and Leissner breached their fiduciary duties as financial advisors to EON Capital, a Malaysian bank in which Primus was the largest shareholder. In its suit, Primus claims that Goldman hid conflicts of interest relating to its “close relationship” with Malaysia's Prime Minister, Najib Razak.
Primus said Goldman was the “key advisor” to 1Malaysia Development Berhad, known as1MDB – a state fund launched by Najib in 2009 – while it was also advising the board of EON Capital. 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.
EON Capital was taken over in April 2011 by Malaysia’s Hong Leong Bank (HLB), where one of the prime minister’s brothers worked as a director; another brother was chairman of the firm advising Hong Leong on its bid to buy EON Capital. Primus alleges that Goldman and Leissner used confidential information known to them as advisors to EON Capital in order to help HLB buy the company for a price that was “well below its fair intrinsic value”. HLB paid $1.7 billion for EON Capital.
Primus is seeking $510 million of damages from Goldman and Leissner.
Goldman said in an earlier statement: “Primus previously lost its challenge in the Malaysian courts seeking to stop a transaction involving a Malaysian company, which was then approved by shareholders. We will vigorously contest this misguided additional lawsuit in New York court.”
In a document filed on 4 August, New York law firm Sullivan & Cromwell, which represents Goldman, requested a preliminary conference to discuss whether the New York state court had jurisdiction over the case as the complaint “identifies no relevant action or conduct in New York”. Goldman also questions “whether it [the New York court] is an appropriate forum for a dispute between a Cayman entity and a Singapore financial firm over events that took place in Malaysia”.
In a response submitted on 8 August, Kasowitz, Benson, Torres & Friedman LLP, which represents Primus Pacific, said “Goldman Sachs's attempt to minimise the complaint's ‘nexus’ to New York is misplaced”. Several reasons were cited, including the point that Goldman is a New York-headquartered entity, and Leissner is a resident of New York.
Primus Pacific’s lawyers also pointed out that an internal investigation initiated by Goldman was led by a New York-based legal team, and that in light of recent media coverage, both the New York Department of Financial Services and the Federal Bureau of Investigations in New York have launched investigations into Goldman’s activities in Malaysia.
On 9 August, Leissner’s lawyers, Wilson, Sonsini, Goodrich & Rosati, submitted a request that the court dismiss the case on the grounds of lack of jurisdiction.
A preliminary briefing was held on 23 August, when the court ruled that the complaint will be bifurcated to address jurisdiction matters first before proceeding on the other matters.
Goldman and Leissner have until 11 October to file their motion to dismiss the complaint.
Primus Pacific can no longer be reached at their number and repeated attempts to contact by email failed. Goldman Sachs declined to comment.