U.S. federal prosecutors brought charges of bribery and money laundering in connection with 1Malaysia Development Berhad, an investment development fund affiliated with the Malaysian government. The 1MDB story is wild — there’s a good book about it — but the short version is (allegedly!):
1. A guy named Jho Low convinced senior Malaysian government officials to set up a development fund.
2. The fund raised money by selling billions of dollars’ worth of bonds.
3. Low stole most of the money.
4. He used a lot of it to pay huge bribes to the government officials so they’d keep letting him do this.
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While Goldman now likes to present itself to the public as a tech company run by a beat-dropping DJ, or a champion of the consumer with its Marcus digital bank, the U.S. Department of Justice painted a very different picture on Thursday. It filed criminal charges against two ex-bankers for their alleged role in a money-laundering operation that lined the pockets of Malaysian government officials, their financiers and others.
The U.S. charge sheet outlined a culture of greed — and not just the “long-term greedy” once favored by senior partner Gus Levy in the 1970s. The bank, which arranged $6.5 billion of 1MDB bond offerings that netted it $600 million in fees, is described as being so focused on deals at times that compliance came second. Internal controls were allegedly “easily circumvented” by bankers helping to divert the proceeds for illicit purposes.
Prosecutors’ version of events depicts not one but several senior bankers — including Tim Leissner, who pleaded guilty — colluding to cover up bribes and kickbacks.
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The firm has said previously it raised money for 1MDB without knowing it would be diverted from the development projects. The bank is far from the only one touched by probes into 1MDB around the world. Singapore has fined eight banks and sent four people to jail over the scandal, for instance.
But the seniority of the Goldman employees being implicated by the U.S. authorities is especially troubling. It makes it harder for the bank to dismiss the allegations as the actions of a lone staffer gone rogue.
Bloomberg
And believe it, they would if they could.
Goldman has faced reputational hits before, such as the Securities and Exchange Commission’s 2010 lawsuit over the sale of mortgage-backed securities before the financial crisis. That triggered much soul-searching at the firm and the creation of a standards committee to review its operations.
Obviously not enough soul-searching.
The 1MDB scandal is more recent, it touches public funds rather than sophisticated hedge funds, and it is escalating at a time when Goldman is under new leadership and steering deeper into newer, consumer-facing businesses.
[...]
Leissner, a former Goldman partner, has pleaded guilty and agreed to forfeit $43.7 million, which sounds like a lot until you read that more than $200 million of the stolen 1MDB money was transferred to accounts controlled by Leissner and a relative of his. (Another Goldman partner, Andrea Vella, is not charged with anything but is alleged to have known about the bribery; he was put on leave at Goldman.)
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