Goldman Sachs Trader
A trader works at the Goldman Sachs stall on the floor of the New York Stock Exchange, April 16, 2012. REUTERS/Brendan McDermid

Dealings with embattled Malaysian state-run fund 1Malaysia Development Berhad could have risked Goldman Sachs’ reputation, according to the U.S. Federal Reserve, the Wall Street Journal reported Wednesday. U.S. investigators are probing whether Goldman misled bondholders when it sold securities issued by 1MDB.

Tim Leissner, the former chairman of the Southeast Asian division of the investment bank, was issued a subpoena last month by U.S. investigators after he resigned in February. Goldman had suspended Leissner after reviewing his emails which showed he sent an unauthorized and inaccurate reference letter on behalf of Jho Low, a Malaysian investor who helped establish 1MDB and was involved in some transactions done by the fund, the Journal reported. This could push Goldman deeper into the corruption allegations surrounding 1MDB, lawyers told the newspaper. Leissner had included details on Low’s finances in the reference letter, sources told the Journal.

Goldman is withholding unvested stock worth millions of dollars from Leissner till the internal investigation against him is completed, the Journal reported. Goldman and Leissner have reportedly been negotiating over his compensation after he resigned.

Meanwhile, a Malaysian parliamentary inquiry into the 1MDB scandal said Thursday the fund’s board did not carry out its responsibilities and its former CEO Shahrol Halmi should be probed. The report from the bipartisan Public Accounts Committee (PAC) said 1MDB’s financing and performance was “unsatisfactory” and told Halmi to take responsibility, Reuters reported.

Furthermore, the PAC report stated that the fund’s advisory board — headed by Prime Minister Najib Razak — should be abolished and any reference to the prime minister must be changed to finance minister in 1MDB’s memo and related documents.

However, the 1MDB board said in a statement that it carried out its responsibility well and it was not involved in any corruption.

“The board believes it has carried out its role and responsibility to the best of its ability, including the implementation of various corporate governance measures such as establishing standard operating procedures for the company and setting up a board audit and risk management committee,” 1MDB’s statement read.

“More importantly, the funds of 1MDB have been fully accounted … It has also been confirmed that 1MDB did not transfer RM 2.6 billion [nearly $700 million] to the personal accounts of the Prime Minister as had been alleged,” the board said.

Najib, who set up 1MDB in 2009 to boost economic growth in Malaysia, has been linked to the corruption scandal at the fund from which $681 million was traced to his bank accounts. The prime minister has consistently denied the corruption allegations, first made in a July 2015 report by the Journal, which said that investigators tracked the money from an account at Falcon Private Bank in Singapore to accounts in Malaysia.

In January, Malaysia's Attorney General Mohamed Apandi Ali declined to prosecute Najib in the case, saying the money was a “personal donation” from the Saudi royal family. However, Apandi did not elaborate on why the royal family donated the money or what it was used for.