Goldman Sachs disclosed in a Nov. 2 quarterly filing this month that it has received subpoenas and requests for documents and information from various governmental and regulatory bodies and self-regulatory organizations as part of investigations and reviews relating to financing transactions and other matters involving 1MDB, Malaysian government’s sovereign wealth fund. “Subsidiaries of the firm acted as arrangers or purchasers of approximately $6.5 billion of debt securities of 1MDB,” the company said. The announcement was first discovered by FCPA Tracker.
On Nov. 1, the U.S. Department of Justice unsealed a criminal information and guilty plea by Tim Leissner, a former participating managing director of the firm, and an indictment against Ng Chong Hwa, a former managing director of the firm, and Malaysian financier Low Taek Jho. Leissner pleaded guilty to a two-count criminal information charging him with conspiring to launder money and conspiring to violate the U.S. Foreign Corrupt Practices Act’s anti-bribery and internal accounting controls provisions.
Low and Ng were charged in a three-count indictment with conspiring to launder money and conspiring to violate the FCPA’s anti-bribery provisions. Ng was also charged in this indictment with conspiring to violate the FCPA’s internal accounting controls provisions. The charging documents state, among other things, that Leissner and Ng participated in a conspiracy to misappropriate proceeds of the 1MDB offerings for themselves and to pay bribes to various government officials to obtain and retain 1MDB business for the firm.
The plea and charging documents state that Leissner and Ng “knowingly and willfully” circumvented the firm’s system of internal FCPA and accounting controls, in part by repeatedly lying to control personnel and internal committees that reviewed these offerings.
At Goldman, such controls were overseen and enforced by its compliance function and legal department. “These groups worked in conjunction with, and as part of, various committees in reviewing transactions, including the three lMDB bond deals, for approval,” court documents state.
Court documents further state that this conduct by Leissner continued, even after the compliance and legal group “refused to approve the business relationship with co-conspirator #1 based, in part, on concerns that they had about the source of co-conspirator #1’s wealth.”
Ng and Low indictments
The indictment of Ng and Low alleges that the firm’s system of internal accounting controls could be easily circumvented and that the firm’s business culture, particularly in Southeast Asia, at times prioritized consummation of deals ahead of the proper operation of its compliance functions.
In addition, an unnamed participating managing director of the firm is alleged to have been aware of the bribery scheme and to have agreed not to disclose this information to the firm’s compliance and control personnel. That employee, who was identified as a co-conspirator, has been put on leave.
Goldman Sachs said it is “cooperating with the DOJ and all other governmental and regulatory investigations relating to 1MDB.”
The Financial Times reported that Mark Filip, former deputy attorney general, is on Goldman’s legal team. Filip, who penned the “Filip Memo,” is a partner at law firm Kirkland & Ellis, where he leads the firm’s government enforcement defense and internal investigations group. According to FT, Goldman will meet later this month in Washington with Department officials to argue against criminal charges in relation to the 1MDB affair.