Ex-Goldman Bankers face US charges in 1MDB Fund scandal
Ex-Goldman Bankers face US charges in 1MDB Fund scandal
The bankers paid bribes and stole and laundered money from a sovereign wealth fund in Malaysia, prosecutors in the United States claim, placing the bank at the center of one of the biggest financial frauds in history.
Former Goldman partner Timothy Leissner, then your Southeast Asian chiefHe pleaded guilty to conspiring to launder money and violating foreign laws against bribery by helping to divert billions of dollars from the fund, known as 1Malaysia Development Bhd, or 1MDB, according to documents filed Thursday.
Former Goldman managing director Roger Ng and the alleged mastermind of the fraud, Malaysian financier Jho Low, were charged with three counts of conspiracy to violate foreign laws against bribery and money laundering.
For Goldman, the charges, as well as an ongoing investigation into the bank's own behavior, reach a turning point. Executives have spent years sporting a reputation stained by the 2008 crisis and reforming the elite firm as a Main Street bank.
Goldman subscribed about $ 6.5 billion in bonds for 1MDB. The indictment alleges that the bankers bribed government officials to obtain bond deals, controlled accounts abroad where the stolen money was channeled and helped to launder the profits.
Goldman received $ 600 million in 1MDB fees for the transactions, which made the investment fund one of Goldman's most profitable clients in those years. Senior officials, including former CEO Lloyd Blankfein and President Gary Cohn, had previously praised the bankers for their work.
A second Goldman partner is cited as an anonymous conspirator by prosecutors, who allege that he knew that bribes were paid and helped Mr. Leissner bypass Goldman's internal compliance officers. The accusation documents refer to an "Italian national". People familiar with the matter confirmed their identity as Andrea Vella.
Mr. Vella was dismissed on Thursday, according to a person familiar with the matter, two weeks after having been stripped of its management responsibilities as co-director of Goldman's investment banking division in Asia.
A lawyer for Mr. Leissner declined to comment. Mr. Ng could not be reached. Goldman declined to make Mr. Vella available. A spokesman for Mr. Low said he maintains his innocence.
Starting in Malaysia, a scandal related to the 1MDB fund established by Prime Minister Najib Razak now involves at least 10 countries, including the United States. This animation shows how the allegedly embezzled 1MDB money moved through the global wealth centers before being used to buy real estate and other assets around the world, including in New York and Beverly Hills. Illustration: Oliver Osborne for The Wall Street Journal. (Originally published on January 12, 2017)
The cases of the Justice Department describe a cowboy atmosphere in Goldman's operations in Asia, where bankers were "very focused on consummating agreements, sometimes prioritizing this objective before the proper functioning of their compliance functions."
The accusations, the first criminal charges in the US UU In the 1MDB scandal, they occur when prosecutors negotiate with Goldman about the bank's own culpability, according to people familiar with the matter. "The firm continues to cooperate with all the authorities investigating this matter," said a Goldman spokesman.
In recent discussions, Goldman has blamed dishonest employees and pushed to avoid criminal liability, the people said.
The bankers repeatedly concealed their relations with Mr. Low from Goldman's compliance officers, who had expressed concern about the source of Malaysia's mysterious wealth.
Leissner's guilty plea is the biggest black eye for a Goldman partner since 1989, when executive Robert Freeman was removed from the wives' trade market, then convicted of a crime related to insider trading.
The bankers linked to the scandal were among Goldman's most important executives in Asia, and the 1MDB bonus agreements were blessed by the senior managers in New York. Messrs. Leissner and Vella are among the 435 Goldman partners, a rank awarded to approximately 1% of employees.
Mr. Leissner is cooperating with the investigators, according to a person familiar with the matter, and the details included in Thursday's allegations suggest that he has provided evidence against others. Mr. Leissner, 48, will lose $ 43.7 million and is scheduled to be sentenced in January.
Mr. Ng, 51, was arrested in Malaysia, while Mr. Low, 36, is released and was last seen in ChinaAccording to the Malaysian authorities.
Goldman signed three bond sales for 1MDB, code-named Projects Magnolia, Maximus and Catalyze, according to the indictment. More than $ 2.7 billion of the approximately $ 6.5 billion raised was diverted to accounts controlled by Messrs. Low, Leissner and others, according to prosecutors.
The money from those accounts was used to pay bribes to government officials to pay for a muddy fund controlled by Malaysian Prime Minister Najib Razak. and buy jewelry For his wife Rosmah Mansor, court documents show. Only more than $ 200 million went to Mr. Leissner and another alleged co-conspirator. A relative of Mr. Ng received $ 24 million from a ghost company financed with 1MDB stolen money, prosecutors say.
When using a chat messenger in 2014, Messrs. Low and Leissner spoke about the need to "suck" a government official and send "cakes" to a person that prosecutors believe is Ms. Rosmah to get another agreement of 1MDB. Mr. Ng referred to Ms. Rosmah as "Madam Boss," according to prosecutors.
Excerpts from Leissner's accusation
- "Low and Leissner spoke about the need to" aspire to "a 1MDB official and send" cakes "to a person who is believed to be the wife of Officer 1 of Malaysia."
- "... A bank account owned and controlled by Leissner and his relative was used to transfer approximately $ 4.1 million to a high-end jeweler in New York, in part, to pay for gold jewelry for the wife of Officer No. 1 of Malaysia".
- "... More than $ 2.7 billion were embezzled by the defendant Tim Leissner and his co-conspirators and distributed as bribes and bribes to government officials in Malaysia and Abu Dhabi."
A few months later, prosecutors said, a bank account controlled by Mr. Leissner transferred approximately $ 4.1 million to a luxury jeweler in New York, in part to pay for Ms. Rosmah's gold jewelry.
Mr. Najib was expelled from his post earlier this year. When Malaysian authorities raided their homes, Found $ 266 million in bags, luxury watches, jewelry and other goods. Mr. Najib and Ms. Rosmah, who were arrested, claimed that the assets were gifts from wealthy foreign leaders. Both have denied the irregularities.
The 1MDB money was used by Mr. Low and others to finance luxurious lifestyles, buy luxury homes, yachts and works of art and finance the movie "The Wolf of Wall Street".
The scandal marks a test for CEO David Solomon, who took the job just a month ago. He led the investment banking division during the dealings of the company with 1MDB.
After the financial crisis, his predecessor, Blankfein, pushed Goldman into emerging markets after the financial crisis, as the US economy slowed and regulation increased. In a 2010 presentation to investors, he said the bank's biggest opportunity was to be "Goldman Sachs in more places."
"Look at what Tim and Andrea did in Malaysia," Blankfein said at a 2014 meeting focused on emerging markets, where Goldman was looking to grow. "We have to do more of that." Mr. Leissner earned more than $ 10 million a year at the time of his dealings with 1MDB, according to people familiar with the subject.
A bank account controlled by Tim Leissner transferred nearly $ 4.1 million to a high-end jeweler in New York, prosecutors said.
Photo:
Rodin Eckenroth / Getty Images
Federal prosecutors in Brooklyn filed a sealed complaint against Mr. Leissner in June, seeking an order for his arrest. According to court documents, Mr. Leissner was arraigned in federal court in Brooklyn, under the alias "John Doe," on June 14. Mr. Leissner and his lawyers spent the summer negotiating a plea agreement with US prosecutors UU., And made his statement on August 28, according to the documents presented.
After Goldman paid a fine of $ 550 million in 2010 for its mortgage trading activities, the bank set new standards for how it interacts with customers and what kind of agreements it pursues, and created a new committee to enforce them. Mr. Blankfein conducted an 18-month tour, dubbed the President's Forum, visited Goldman's offices around the world and urged employees to protect the company's reputation.
The 1MDB scandal shows the challenges of controlling the remote bankers, whose compensation depends on getting big deals. Goldman's partnership culture further confuses reporting lines; The partners of the firm have historically had great freedom to do business.
-Aruna Viswanatha, Justin Baer and Tom Wright contributed to this article.
Write to Nicole Hong in nicole.hong@wsj.com, Liz Hoffman in liz.hoffman@wsj.com and Bradley Hope in bradley.hope@wsj.com
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