Goldman Sachs charged over scheme to pay over RM4.2bn bribes to Malaysian, Abu Dhabi officials – DoJ

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The company will pay more than US$2.9bn (RM12bn) as part of a coordinated resolution with criminal and civil authorities in the US, the UK, Singapore and elsewhere, the US Department of Justice reports.

The Goldman Sachs Group Inc, a global financial institution headquartered in New York, New York, and Goldman Sachs (Malaysia) Sdn Bhd, its Malaysian subsidiary, have admitted to conspiring to violate the Foreign Corrupt Practices Act (FCPA) in connection with a scheme to pay over $1bn (RM4.2bn) in bribes to Malaysian and Abu Dhabi officials to obtain lucrative business for Goldman Sachs, including its role in underwriting approximately $6.5bn in three bond deals for 1MDB, for which the bank earned hundreds of millions in fees.

Goldman Sachs will pay more than $2.9bn (RM12bn) as part of a coordinated resolution with criminal and civil authorities in the US, the UK, Singapore and elsewhere.

Goldman Sachs entered into a deferred prosecution agreement with the department in connection with a criminal information filed today in the Eastern District of New York charging the company with conspiracy to violate the anti-bribery provisions of the FCPA.

GS Malaysia pleaded guilty in the US District Court for the Eastern District of New York to a one-count criminal information charging it with conspiracy to violate the anti-bribery provisions of the FCPA.

Previously, Tim Leissner, the former South East Asia chairman and participating managing director of Goldman Sachs, pleaded guilty to conspiring to launder money and to violate the FCPA.

Ng Chong Hwa, also known as “Roger Ng”, former managing director of Goldman and head of investment banking for GS Malaysia, has been charged with conspiring to launder money and to violate the FCPA. Ng was extradited from Malaysia to face these charges and is scheduled to stand trial in March 2021. The cases are assigned to US. District Judge Margo K Brodie of the Eastern District of New York.

In addition to these criminal charges, the department has recovered or assisted in the recovery of in excess of $1bn in assets for Malaysia associated with and traceable to the 1MDB money laundering and bribery scheme.

“Goldman Sachs today accepted responsibility for its role in a conspiracy to bribe high-ranking foreign officials to obtain lucrative underwriting and other business relating to 1MDB,” said Acting Assistant Attorney General Brian C Rabbitt of the Justice Department’s criminal division.

“Today’s resolution, which requires Goldman Sachs to admit wrongdoing and pay nearly $3bn in penalties, fines, and disgorgement, holds the bank accountable for this criminal scheme and demonstrates the department’s continuing commitment to combating corruption and protecting the US financial system.”

“Over a period of five years, Goldman Sachs participated in a sweeping international corruption scheme, conspiring to avail itself of more than $1.6bn in bribes to multiple high-level government officials across several countries so that the company could reap hundreds of millions of dollars in fees, all to the detriment of the people of Malaysia and the reputation of American financial institutions operating abroad,” said Acting US Attorney Seth D DuCharme of the Eastern District of New York.

“Today’s resolution, which includes a criminal guilty plea by Goldman Sachs’ subsidiary in Malaysia, demonstrates that the department will hold accountable any institution that violates US law anywhere in the world by unfairly tilting the scales through corrupt practices.”

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“When government officials and business executives secretly work together behind the scenes for their own illegal benefit, and not that of their citizens and shareholders, their behaviour lends credibility to the narrative that businesses don’t succeed based on the quality of their products, but rather their willingness to play dirty,” said assistant director in charge William F Sweeney Jr of the FBI’s New York field office.

“Greed eventually exacts an immense cost on society, and unchecked corrupt behavior erodes trust in public institutions and government entities alike. This case represents the largest ever penalty paid to US authorities in an FCPA case. Our investigation into the looting of funds from 1MDB remains ongoing. If anyone has information that could assist the case, call us at 1-800-CALLFBI.”

“1MDB was established to drive strategic initiatives for the long-term economic development of Malaysia. Goldman Sachs admitted today that one billion dollars of the money earmarked to help the people of Malaysia was actually diverted and used to pay bribes to Malaysian and Abu Dhabi officials to obtain their business,” said special agent in charge Ryan L Korner of the IRS criminal investigation’s Los Angeles field office.

“Today’s guilty pleas demonstrate that the law applies to everyone, including large investment banks like Goldman Sachs. IRS criminal investigation will work tirelessly alongside our law enforcement partners to identify and bring to justice those who engage in fraud and deceit around the globe. When the American financial system is misused for corruption, the IRS will take notice and we will take action.”

According to Goldman’s admissions and court documents, between approximately 2009 and 2014, Goldman conspired with others to violate the FCPA by engaging in a scheme to pay more than $1.6bn in bribes, directly and indirectly, to foreign officials in Malaysia and Abu Dhabi in order to obtain and retain business for Goldman from 1MDB, a Malaysian state-owned and state-controlled fund created to pursue investment and development projects for the economic benefit of Malaysia and its people.

Specifically, the company admitted to engaging in the bribery scheme through certain of its employees and agents, including Leissner, Ng, and a former executive who was a participating managing director and held leadership positions in Asia (Employee 1), in exchange for lucrative business and other advantages and opportunities.

These included, among other things, securing Goldman’s role as an advisor on energy acquisitions, as underwriter on three lucrative bond deals with a total value of $6.5bn, and a potential role in a highly anticipated and even more lucrative initial public offering for 1MDB’s energy assets.

As Goldman admitted – and as alleged in the indictment pending in the Eastern District of New York against Ng and Low – in furtherance of the scheme, Leissner, Ng, Employee 1, and others conspired to pay bribes to numerous foreign officials, including high-ranking officials in the Malaysian government, 1MDB, Abu Dhabi’s state-owned and state-controlled sovereign wealth fund, International Petroleum Investment Company (Ipic), and Abu Dhabi’s state-owned and state-controlled joint stock company, Aabar Investments PJS (Aabar).

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Goldman admitted today that, in order to effectuate the scheme, Leissner, Ng, Employee 1, and others conspired with Low Taek Jho, aka Jho Low, to promise and pay over $1.6bn in bribes to Malaysian, 1MDB, IPIC, and Aabar officials.

The co-conspirators allegedly paid these bribes using more than $2.7bn in funds that Low, Leissner, and other members of the conspiracy diverted and misappropriated from the bond offerings underwritten by Goldman.

Leissner, Ng and Low also retained a portion of the misappropriated funds for themselves and other co-conspirators.

Goldman admitted that, through Leissner, Ng, Employee 1 and others, the bank used Low’s connections to advance and further the bribery scheme, ultimately ensuring that 1MDB awarded Goldman a role on three bond transactions between 2012 and 2013, known internally at Goldman as “Project Magnolia,” “Project Maximus,” and “Project Catalyze.”

Goldman also admitted that, although employees serving as part of Goldman’s control functions knew that any transaction involving Low posed a significant risk, and although they were on notice that Low was involved in the transactions, they did not take reasonable steps to ensure that Low was not involved.

Goldman further admitted that there were significant red flags raised during the due diligence process and afterward – including but not limited to Low’s involvement – that either were ignored or only nominally addressed so that the transactions would be approved and Goldman could continue to do business with 1MDB.

As a result of the scheme, Goldman received approximately $606m in fees and revenue, and increased its stature and presence in South East Asia.

Under the terms of the agreements, Goldman will pay a criminal penalty and disgorgement of over $2.9bn.

Goldman also has reached separate parallel resolutions with foreign authorities in the UK, Singapore, Malaysia and elsewhere, along with domestic authorities in the United States.

The department will credit over $1.6bn in payments with respect to those resolutions.

The department reached this resolution with Goldman based on a number of factors, including:

  • the company’s failure to voluntarily disclose the conduct to the department
  • the nature and seriousness of the offence, which included the involvement of high-level employees within the company’s investment bank and others who ignored significant red flags
  • the involvement of various Goldman subsidiaries across the world
  • the amount of the bribes, which totalled over $1.6bn
  • the number and high-level nature of the bribe recipients, which included at least 11 foreign officials, including high-ranking officials of the Malaysian government and
  • the significant amount of actual loss incurred by 1MDB as a result of the co-conspirators’ conduct

Goldman received partial credit for its cooperation with the department’s investigation, but did not receive full credit for cooperation because it significantly delayed producing relevant evidence, including recorded phone calls in which the company’s bankers, executives, and control function personnel discussed allegations of bribery and misconduct relating to the conduct in the statement of facts.

Accordingly, the total criminal penalty reflects a 10% reduction off the bottom of the applicable US sentencing guidelines fine range.

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Low has also been indicted for conspiracy to commit money laundering and violate the FCPA, along with Ng, E.D.N.Y. Docket No. 18-CR-538 (MKB). Low remains a fugitive. The charges in the indictment as to Low and Ng are merely allegations, and those defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The investigation was conducted by the FBI’s international corruption unit and IRS-CI.

The prosecution is being handled by the Criminal Division’s fraud section and the money laundering and asset recovery section (MLARS), and the business and securities fraud section of the US Attorney’s Office for the eastern district of New York.

Trial attorneys Katherine Nielsen, Nikhila Raj, Jennifer E Ambuehl, Woo S Lee, Mary Ann McCarthy, Leo Tsao, and David Last of the Criminal Division, and assistant US attorneys Jacquelyn M Kasulis, Alixandra Smith and Drew Rolle of the Eastern District of New York are prosecuting the case.

Additional criminal division trial attorneys and assistant US attorneys within US Attorney’s offices for the eastern district of New York and central district of California have provided valuable assistance with various aspects of this investigation, including with civil and criminal forfeitures.

The Justice Department’s office of international affairs of the criminal division provided critical assistance in this case.

The department also appreciates the significant assistance provided by the US Securities and Exchange Commission; the board of governors of the Federal Reserve System, including the Federal Reserve Bank of New York; the New York State Department of Financial Services, the United Kingdom Financial Conduct Authority; the United Kingdom Prudential Regulation Authority; the Attorney General’s Chambers of Singapore; the Singapore Police Force-Commercial Affairs Division; the Monetary Authority of Singapore; the Office of the Attorney General and the Federal Office of Justice of Switzerland; the judicial investigating authority of the Grand Duchy of Luxembourg and the Criminal Investigation Department of the Grand-Ducal Police of Luxembourg; the Attorney General’s Chambers of Malaysia; the Royal Malaysian Police; and the Malaysian Anti-Corruption Commission.

The department also expresses its appreciation for the assistance provided by the Ministry of Justice of France; the Attorney General’s Office of the Bailiwick of Guernsey and the Guernsey Economic Crime Division.

The Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found here.

MLARS’s bank integrity unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system.

MLARS’s kleptocracy asset recovery initiative, in partnership with federal law enforcement agencies, and often with US Attorney’s Offices, seeks to forfeit the proceeds of foreign official corruption and, where appropriate, to use those recovered assets to benefit the people harmed by these acts of corruption and abuse of office.

Relevant court documents will be uploaded throughout the day and are available at the following links: The Goldman Sachs Group Inc and Goldman Sachs Sdn Bhd

Source: US Department of Justice

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