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Financial Services/Private Equity
New York, New York, United States
Nationality of Foreign Officials: Malaysia
Summary of Allegations:
The Malaysian government created the 1Malaysia Development Berhad ("1MDB") in 2009 to finance investment and development projects for the benefit of the country’s development and people’s livelihood. 1MDB performed government functions and was under government oversight.
Between 2009 and 2014, former senior employees of Goldman Sachs Malaysia and Goldman Sachs Tim Leissner (“Leissner”), Ng Chong Hwa (“Ng”), and others acting as agents of Goldman Sachs embezzled more than US$2.7 billion from the US$6.5 billion bond proceeds of 1MDB.
The diverted proceeds were used to pay bribes and kickbacks to government officials in Malaysia and the Emirate of Abu Dhabi (“Abu Dhabi”) to secure 1MDB business for Goldman Sachs and personal benefits. Leissner and Ng wired the diverted funds to their shell companies and utilized intermediary Jho Low (“Low”) who had significant ties with government officials in both countries to orchestrate the bribery schemes.
Starting in 2009, Leissner, Ng, and other senior Goldman Sachs employees suggested the company establish formal business relation with Low, but received repeated declinations from the company’s compliance and intelligence group based on concerns over Low’s wealth source.
Leissner, Ng, and others circumscribed the internal control and continued utilizing Low as an intermediary in all transactions. Leissner denied Low’s role in subsequent Goldman Sachs internal inquiries.
Goldman Sachs failed to exercise adequate internal control by accepting Leissner’s response as facts without further investigations, ignoring red flags of Low’s involvement and possible payment of bribes, failing to escalate as required under the internal policy or verify the unidentified use of bond proceeds.
Leissner’s concealment of Low’s role and Goldman Sachs’ lack of follow-up caused the company’s failure to accurately record the transactions and the involvement of intermediary Low.
In 2010, Leissner allegedly recommended that Goldman Sachs hire Anis Jamaludin, daughter of Jarjis Jamaludin, as a bank analyst in Singapore in 2010. At the time, Jarjis Jamaludin was a ruling-party politician and key strategist for Najib Razak's 2013 election, Malaysian Prime Minister, and head of 1MDB’s board of advisers. Anis Jamaludin was allegedly hired and worked for Goldman Sachs for few months during the time Goldman Sachs was allegedly looking for business from 1MDB.
In total, the conspirators paid bribes over US$ 1.6 billion in exchange for Goldman Sachs’ significant roles in three 1MDB projects, which generated revenue totaling US$ 600 million.
In a few projects, Goldman Sachs was the 1MDB’s underwriter and utilized its own fund to purchase the 1MDB bonds.
Project Magnolia, Project Maximus, Project Catalyze, and Project Condor
Project Magnolia refers to the 1MDB’s finance of purchasing a local energy company Tanjong Energy Holding Sdn Bhd (“Tanjong”). The finance was conditioned on a guarantee from Abu Dahbi’s state-controlled Middle Eastern Sovereign Wealth Fund (“Wealth Fund”) and the Malaysian government’s approval on Goldman Sachs to execute the financing project. Low promised to bribe officials in both governments to meet the precondition and secure the business for Goldman Sachs.
Leissner and Ng were aware of the bribery plan, arranged meetings for relevant discussion, and embezzled the transaction proceeds to pay kickbacks to the officials Low promised to bribe.
The diverted proceeds were wired to shell companies held by Leissner and Ng, partly used for their personal benefits with the rest flew to the officials. At about the same time, in May 2012, the project was closed and generated US$ 193 million profit for Goldman Sachs. Leissner’s concealment of Low’s role from Goldman Sachs, the subsequent embezzlement, and the inaction by Goldman Sachs internal control members caused Goldman Sachs’ failure to accurately record this transaction and the involvement of Low.
Subsequently in May and November 2012, Leissner, Ng, and Low orchestrated similar bribery schemes to secure Goldman Sachs' sole underwriter role of helping 1MDB finance procurement of a local power company Genting Berhad (“Genting”) in Project Maximus and fund of a joint venture with the Wealth Fund in Project Catalyze, led to revenue of US$ 188 million and US$ 186 million, respectively. Neither projects were reflected accurately on Goldman Sachs' books and records.
In between, Leissner and Ng again ignored objection from Goldman Sachs' intelligence group and bypassed the internal control procedure in securing business with Low in Project Condor, by advising him on an investment restructure connecting to a Middle East investment firm. The transaction yielded US$10 million for Goldman Sachs.
Approximate Alleged Payments to Foreign Officials: Hiring of relatives of officials; bribes and kickbacks totaling US$ 1.6 billion.
Business Advantage Allegedly Obtained: business transactions with 1MDB and Jho Low
Agencies: Hong Kong: Securities and Futures Commission
Results: Settlement
Year Resolved: 2020
Compliance Monitor:
Ongoing: No
Details:
Among the global settlement Goldman Sachs reached with authorities in multiple countries and regions on 22 October 2020, the company resolved with the Securities and Futures Commission with a total penalty of US$ 350,000,000.
Agencies: Malaysia: Anti-Corruption Commission
Results: Prosecution of Public Officials
Year Resolved: 2020
Compliance Monitor:
Ongoing: No
Details:
On 28 September 2018, Malaysian police questioned 1MDB’s former president Arul Kanda for the second time regarding the allegedly misleading information he provided during the investigation.
On 24 July 2020, Goldman Sachs reached a US$ 3.9 billion settlement with the Malaysian government, which resolves claims relating to the 1MDB scheme and shields it from future charges.
Out of US$ 6.5 billion that Goldman Sachs had falsely alleged it had raised for the 1MDB, the Malaysian government had recovered US$ 4.5 billion and anticipates a recovery of at least US$ 1.4 billion from the settlement penalty.
On 4 September 2020, the MACC agreed to drop criminal charges against Goldman Sachs over the 1MDB scheme.
Agencies: Singapore: Attorney General’s Chambers (AGC), Singapore: Monetary Authority of Singapore, Singapore: the Commercial Affairs Department of the Singapore Police Force
Results: Settlement
Year Resolved: 2020
Compliance Monitor:
Ongoing: No
Details:
Among the global settlement Goldman Sachs reached with authorities in multiple countries and regions on 22 October 2020, the company resolved with the Attorney General’s Chambers, the Commercial Affairs Department of the Singapore Police Force, and the Monetary Authority of Singapore with a total penalty of US$ 122,000,000.
Agencies: United Kingdom: Financial Conduct Authority, United Kingdom: Prudential Regulation Authority
Results: Settlement
Year Resolved: 2020
Compliance Monitor:
Ongoing: No
Details:
Among the global settlement Goldman Sachs reached with authorities in multiple countries and regions on 22 October 2020, the company resolved with the Financial Conduct Authority and the Prudential Regulation Authority with a total penalty of US$ 126,000,000.
Agencies: United States: Civil Lawsuit
Results:
Year Resolved:
Compliance Monitor:
Ongoing: Yes
Details:
On 16 May 2022, it was reported that officers and directors of Goldman Sachs Group have reached a $79.5 million settlement with the bank's shareholders, to resolve claims that their poor oversight contributed to the bank being entangled with the looting of the 1MDB sovereign wealth fund.
A preliminary settlement was filed on Friday 13 May 2022 in Manhattan federal court and requires approval by U.S. District Judge.
On 19 September 2022, it was reported that the shareholders of Goldman Sachs Group inc. have won an initial court approval of the US$79.5 million settlement.
Agencies: United States: Department of Justice, United States: Federal Bureau of Investigation , United States: Federal Reserve Board, United States: Securities and Exchange Commission, United States: the New York State Department of Financial Services
Results: Cease-and-Desist Order, Civil Penalty, Criminal Fine, Deferred Prosecution Agreement, Disgorgement, Prosecution of Individuals, Settlement
Year Resolved: 2020
Compliance Monitor:
Ongoing: No
Details:
In its 2014 Annual Report, Goldman Sachs disclosed that the company was under investigation by regulators concerning its compliance with the U.S. Foreign Corrupt Practices Act ("FCPA") with respect to Goldman Sachs' hiring practices. According to the media reports, the SEC, DOJ and FBI are the investigating authorities.
The DOJ and FBI are investigating Goldman Sachs's role in certain transactions that took place at 1MDB.
The DOJ charged Ng and Leissner with conspiracy to violate the FCPA.
On 6 May 2019, Ng pleaded not guilty.
On 28 August 2018, a U.S. court accepted Leissner’s guilty plea.
On 16 December 2019, the SEC charged Tim Leissner with violations of the anti-bribery, internal accounting controls, and books and records provisions of the FCPA. Tim Leissner admitted the findings and reached a settlement with the SEC, which includes disgorgement of $43.7 million and a permanent bar from the securities industry.
On 22 October 2020, Goldman Sachs reached a global settlement regarding its bribery scheme relating to the 1MDB.
Goldman Sachs reached a three-year Deferred Prosecution Agreement with the DOJ to resolve charges of conspiracy to violate the anti-corruption provisions of the FCPA. The DPA includes a total criminal penalty of US$1,263,088,000 and Goldman Sachs Malaysia's guilty plea to the same charge.
The SEC settlement imposes a civil penalty of US$400 million and disgorgement of US$606.3 million to resolve substantive violations of the FCPA anti-corruption, books and records, and internal controls provisions.
Goldman Sachs also resolved with the Federal Reserve System and the New York State Department of Financial Services, agreeing to US$ 154 million and US$ 150 million respectively.