The U.S.-DOJ investigation results show that over US$4.5 billion was misappropriated from the 1MDB fund, with some of the money used to buy the private jet, a super yacht, Picasso paintings, jewellery and real estate. In Dec 2017, former U.S. Attorney General Jeff Sessions described the multi-billion dollar corruption scandal as the worst form of kleptocracy.
Still, millions of Malaysians who successfully toppled the man behind the 1MDB scandal – former Prime Minister Najib Razak – cannot rely on the United States’ system to send the crook to prison. Given the opportunity, chances are high that the U.S. Justice Department and Najib would come to a settlement, rather than seeing criminal charges on the former Malaysian leader.
After all, Riza Aziz, the co-founder of Red Granite and the stepson of Najib Razak, paid just US$60 million settlement to end a civil lawsuit brought by the US Justice Department’s kleptocracy action linked to 1MDB. Red Granite, the production company behind the 2013 film, “The Wolf of Wall Street“, was involved in laundering US$238 million of 1MDB funds into the U.S. financial system.
Now the U.S. Justice Department has recommended that a settlement with Goldman Sachs over its role in the massive corruption scandal involving Malaysian investment fund 1MDB should also include a guilty plea at the parent company level,, according to London-based the Financial Times. Such plea would be the toughest penalty the Department of Justice could bring against Goldman.
Goldman Sachs, the 149-year-old American investment bank, raised nearly US$6.5 billion in three bond sales between 2012 and 2013 for 1MDB (1Malaysia Development Berhad). However, more than US$2.5 billion raised from these bonds was misappropriated by high-level 1MDB officials, their relatives and associates, according to U.S. DOJ civil lawsuits filed in a U.S. court in 2016.
Those high-level 1MDB officials, their relatives and associates were believed to be MO1 (Malaysian Official 1) or ex-PM Najib Razak, Riza Aziz and mastermind Jho Low. Goldman earned almost US$600 million for the three deals – a jaw-dropping amount of close to 10%, far in excess of the normal 1-2 percent fees a bank could expect for helping sell bonds.
The fees alone – 5 to 10 times more than usual rate – should have had raised the red flag that something fishy was going on. Essentially, the US$600 million in fees earned would make 1MDB the most profitable client in the world for Goldman during those years. The scandal has punched a bigger hole on Goldman’s reputation and credibility, after the bank’s disgraced involvement in the 2008 sub-prime financial crisis.
A criminal guilty plea could potentially expose Goldman to litigation from private parties and result in restrictions on its business, depending on the final terms of any settlement. The Justice Department has yet to charge the American corporation in relation to the 1MDB scandal. It has only brought criminal charges against two former Goldman bankers – Tim Leissner and Roger Ng.
But Goldman was quick to throw their ex-employees under the bus, claiming that the criminal activities of Leissner and Ng were hidden from the bank’s management. Tim Leissner had pleaded guilty to conspiring to launder money and to violating anti-bribery laws. He agreed to pay US$43.7 million, a good deal considering he had pocketed more than US$200 million in proceeds from the 1MDB bonds.
Roger Ng (Ng Choon Hwa) was detained by police last November after a request from the United States for a provisional warrant of arrest against him. Initially, he fought his extradition to the U.S., only to make a U-turn and wanted to defend the case in the Court for the Eastern District of New York. Malaysia then changed its mind and was advised by the Attorney General to charge Mr. Ng in Malaysian courts first.
The dramatic flip-flopping by Roger Ng and the Malaysian government shows that the U.S. cannot be trusted to put white-collar criminals in jail, especially when it also involved big American corporations like Goldman Sachs. It’s precisely this reason why Attorney General Tommy Thomas had advised the Malaysian government to seize the US$250 million Equanimity yacht first.
Had the Mahathir government sat on its hands in dealing with the super luxury yacht bought by crook Jho Low using money stolen from 1MDB funds, it’s absolutely possible that Mr. Low could settle with the U.S. government, the same way Riza Aziz walked away scot-free after paying US$60 million. Equanimity was finally sold to casino operator Genting Malaysia Berhad for US$126 million early this month.
Goldman Sachs spokesperson Jake Siewert said on Wednesday – “We do not believe that such a charge would be warranted by the facts of the case or the law, particularly because senior management was unaware of the criminal activity by Mr Leissner and his associate who took extraordinary efforts to hide their part in the illegal scheme from management, compliance, and legal functions at the firm.”
Goldman Sachs CEO David Solomon on Jan 16 this year apologised to the Malaysian people – “It’s very clear that the people of Malaysia were defrauded by many individuals, including the highest members of the prior government. Tim Leissner, who was a partner at our firm, by his own admission was one of those people. For Leissner’s role in that fraud, we apologize to the Malaysian people.”
However, the fact remains that more than 30 Goldman Sachs executives – including big boss David Solomon and his predecessor Lloyd Blankfein – had actually reviewed the Malaysian debt deals that led to criminal charges against two of its former bankers. Heck, even Gary Cohn, the former Goldman president and chief operating officer who joined Trump administration, knew about the dubious deals.
Even if Goldman Sachs decides to plead guilty at the parent company level as requested by the U.S. DOJ, so what? In 2015, five major banks – Citigroup, JPMorgan Chase, Barclays, Royal Bank of Scotland and UBS – pleaded guilty at a parent-level to criminal charges relating to market manipulation. It’s business as usual and these banks have remained unaffected.
The only reason why the Justice Department wants a settlement with Goldman Sachs to include a guilty plea as well is to pressure the bank for a higher fine. It has always been about money and never about sending criminal bankers to prison. If the U.S.-DOJ had no interest in sending Riza Aziz to prison for money laundering, what chances are there that they are interested in Najib Razak?
Source : Finance Twitter