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Catch of the Week: Goldman Sachs Agrees to Pay Over $2.9 Billion in Foreign Bribery Case

Posted  October 23, 2020

The Goldman Sachs Group Inc. and its Malaysian subsidiary have admitted to conspiring to violate the Foreign Corrupt Practices Act (FCPA) by engaging in a scheme to pay more than $1.6 billion in bribes to foreign officials in exchange for lucrative contracts.  According to Goldman’s admissions and court documents, Goldman paid these bribes 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 benefit of Malaysia and its people.

Specifically, Goldman admitted to using its own employees to engage in the bribery scheme in exchange for business and other advantages and opportunities.  Tim Leissner, the former Southeast Asia Chairman and participating managing director of Goldman Sachs, Ng Chong Hwa, also known as “Roger Ng,” former managing director of Goldman and head of investment banking for GS Malaysia, and others conspired with Low Taek Jho, aka Jho Low, who had close relationships with high-ranking government officials in Malaysia and Abu Dhabi.  The co-conspirators allegedly paid bribes using more than $2.7 billion 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 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.

Special Agent in Charge Ryan L. Korner of IRS Criminal Investigations said, “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.”

Assistant Director in Charge William F. Sweeney Jr. of the FBI added, “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 behavior lends credibility to the narrative that businesses don’t succeed based on the quality of their products, but rather their willingness to play dirty.”

Under the terms of the agreements, Goldman will pay a criminal penalty and disgorgement of over $2.9 billion.  Goldman also has reached separate parallel resolutions with foreign authorities in the United Kingdom, Singapore, Malaysia, and elsewhere, along with domestic authorities in the United States.

Leissner pleaded guilty to conspiring to launder money and to violate the FCPA.  Ng has been charged with conspiring to launder money and to violate the FCPA and has been extradited from Malaysia to face these charges at trial in March 2021.  Low has also been indicted for conspiracy to commit money laundering and violate the FCPA.  Low remains a fugitive.

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Tagged in: Catch of the Week, FCPA, Financial and Investment Fraud, Foreign Exchange, Money Laundering,