Goldman sucks

Goldman Sachs, which has survived and thrived despite countless scandals over the years, may have finally stepped in a pile of trouble too deep to escape.

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Goldman has survived many scandals in recent years. The bank paid $550 million to settle the infamous “Abacus” affair, in which Goldman helped hedge fund investors create a born-to-lose mortgage investment product to bet against.

Then they agreed to pay another $5 billion to settle claims of improper “packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities” between 2005 and 2007.

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There’s even a Donald Trump angle to this latest great financial mess, but the outlines of that subplot – in a case that has countless – remains vague. The bank itself is in the most immediate danger.

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In the 1MDB scheme [which is currently under investigation, with criminal charges filed against Goldman], actors tied to former Malaysian Prime Minister Najib Razak allegedly siphoned mountains of cash out of a state investment fund. The misrouted money went to lavish parties with celebrity guests like Alicia Keys, a $35 million jet, works by Monet and Van Gogh, property in New York, Los Angeles and London, and (ironically) the funding of the movie The Wolf of Wall Street.

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Najib lost re-election in May, ending a 61-year reign for his party. National anger over 1MDB was a major reason for his downfall. The prime minister was allegedly central to the scam, which involved luring investors to national development projects that mostly never took place.

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Malaysian authorities filed criminal charges [...] seeking a stunning $7.5 billion in reparations for the bank’s role in the scandal. Singapore authorities also announced they were expanding their own 1MDB probe to include Goldman.

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The cash for this mother of all bacchanals originally came from bonds issued by Goldman, which earned a whopping $600 million from the Malaysians. The bank charged prices for its bond issuance that analysts believe were suspiciously high – like a massage price that suggests you’re probably getting more than a massage.

[...]

Najib was one of the first world leaders to congratulate Donald Trump on his win in 2016. At least at one time, the two men were pals. [...] Trump hosted Najib at the White House last year, thanking the soon-to-be-ousted leader for “all the investment you’ve made in the United States.”

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On November 30th of this year, the Justice Department filed a civil forfeiture suit targeting more than $73 million funneled into the country by 1MDB players. There is email evidence the money may have been intended to help influence the Trump administration to drop the case.

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[Najib's electoral loss] completely reversed the situation,” says John Pang, a former policy adviser to the prime minister’s office in Malaysia. “Before, you essentially had the victim saying there was no crime. Now, you had the Justice Department meeting with a 1MDB task force in Kuala Lumpur.”

  Matt Taibbi

All this reinforcing for Trump, being in a similar corrupt position, the fact that he can't lose office or his goose is cooked.

In addition to the Malaysian action seeking $7.5 billion, the company is facing two more class-action lawsuits filed by investors, and a significant amount of negative press.

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At year’s end, Goldman is known to be under investigation in the U.S., Singapore and Malaysia, while 1MDB probes are ongoing in at least 10 countries.

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What was in it for the bank? About $600 million in fees [...] “two hundred times the typical fee.”

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Clare Brown of the Sarawak Report, who broke many of the early stories about 1MDB, was writing about Goldman’s pricing a long time ago. In one story in 2013, she noted that when the bank earned $196 million in one transaction, that represented “around 8.8% of the issue’s total nominal value rather than the normal rates, which might be expected to amount to around 0.25%, according to traders.”

Reached by email this week, Brown said recent events only bring what was obvious some time ago into greater focus. “Basically, anyone with any knowledge of the markets and banking could see this deal was fishy as hell,” she says, adding, “What is absolutely clear is there is no way the bosses of the bank could have failed to see what a mere onlooker like myself was calling out back in 2013. They ALL HAD TO KNOW.”

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The scandal showed that all it takes is a corrupt official and a morally flexible bank office to generate billions in public losses.

Continue reading.

 ...but hey, do what you want...you will anyway.

Elliott Broidy in the news again

Recall that GOP megadonor Elliott Broidy is the man known as one of Michael Cohen's three clients (the other two being Trump and Sean Hannity), who, for a while, was finance chairman of the RNC.  Also recall that he supposedly paid $1.6 million to a woman said to have had an abortion from a pregnancy by Broidy, which some people speculate was actually on behalf of Trump.

Broidy is also under indictment for money laundering.

[I]n a scheme to launder millions of dollars into the country to help a flamboyant Malaysian financier [...] Elliott Broidy, a Los Angeles-based businessman who was a finance vice chairman of Mr. Trump’s 2016 campaign and inauguration committees, was paid to lobby the Trump administration to try to end an investigation related to the embezzlement of billions of dollars from a Malaysian state-owned fund, according to court filings made public on Friday.

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The filings were released in connection with a guilty plea entered by George Higginbotham, a former Justice Department employee. Mr. Higginbotham admitted to conspiring to lie to banks about the source of tens of millions of dollars he funneled into the United States from the Malaysian financier Jho Low, who federal authorities say masterminded a scheme to loot the 1 Malaysia Development Berhad fund, also known as 1MDB.

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In his guilty plea, Mr. Higginbotham admitted that he and the entertainer and businessman Pras Michel, a former member of the Fugees, a defunct hip-hop group, arranged for millions of dollars of Mr. Low’s money to be transferred to a law firm owned by Mr. Broidy’s wife to pay them to try to end the 1MDB investigation.

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The filings identify Mr. Broidy as “Person 1” or “Individual 1.”

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In a brief interview on Friday, Mr. Broidy did not deny that the filings refer to him. But he referred specific questions to his lawyer, who did not respond to a request for comment.

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Mr. Broidy, who pleaded guilty in 2009 in an unrelated pension fund bribery case, is one of several Trump associates whose business with foreign governments and figures has attracted scrutiny, including from investigators for the special counsel, Robert S. Mueller III.

A veteran Republican fund-raiser who also owns a defense contracting firm, Mr. Broidy had seemed positioned to become a highly influential figure in a political hierarchy that was upended by Mr. Trump’s victory. Mr. Broidy had started raising money for Mr. Trump’s 2016 campaign at a time when most elite Republican donors were staying away. After Mr. Trump’s election, Mr. Broidy marketed his connection to the new administration to politicians, businessmen and governments around the world, including some with unsavory records, and won big contracts for his defense firm.

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[Federal prosecutors] extract[ed] a guilty plea from a former Goldman Sachs banker who was involved in bribes and kickbacks related to 1MDB bond work. Mr. Broidy’s involvement, which predates Mr. Low’s indictment, underscores both Mr. Low’s efforts to navigate the United States judicial system, and the far-flung nature of Mr. Broidy’s business pursuits in the early days of the Trump administration.

In March 2017, Mr. Low’s associates were looking to retain “someone with political influence,” according to a Friday filing. Their goal was to help him deflect efforts by American authorities to seize assets bought with money he was accused of siphoning from 1MDB, and to end the Justice Department investigation into his activities, according to the filings. They indicate that, after Mr. Low expressed interest in hiring Mr. Broidy and Ms. Rosenzweig’s law firm, Mr. Michel met with Mr. Broidy and an associate “and explained Jho Low’s situation in the 1MDB matters.”

Mr. Broidy “indicated to Michel that although he was willing to assist Jho Low, he would not take any compensation directly from Jho Low in exchange for his services,” according to the filings. They indicate that Mr. Broidy “wanted $15 million in compensation, but Michel negotiated the price down to approximately $8 million.”

At least $6 million was transferred to Ms. Rosenzweig’s law firm through various accounts set up to “disguise the true source, origin and purpose of the funds, and, specifically, to conceal from U.S. financial institutions Jho Low’s ownership, control and affiliation with these funds and transactions,” according to the filings.

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Mr. Michel indicated that Mr. Broidy “agreed to try to influence a potential nominee for a federal position that would have authority over the 1MDB forfeiture matters,” according to the filings, which note that the potential office holder was not nominated.

  NYT

...but hey, do what you want...you will anyway.

Surprise! Goldman Sachs-related charges filed

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.

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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.)