While Goldman has mostly recovered from the 1MBD corruption scandal which sent its stock price crashing late last year, its former bankers have yet to face the music, and earlier today former Goldman bankers in charge of the bank's Malaysia relationship, Tim Leissner and Roger Ng, were banned from the banking industry by the Federal Reserve for their role in helping divert billions of dollars from Malaysia’s den of thieves, also known as the country's sovereign wealth fund, 1 MDB.
Leissner and Ng arranged bond offerings that allowed funds to be diverted from 1MDB, the Fed said in a Tuesday statement, with some of the money used to bribe government officials in Malaysia and Abu Dhabi, while criminals also used proceeds to pay for lavish lifestyles, the regulator claimed.
Leissner, who agreed to the Fed’s permanent ban, was fined $1.42 million, according to the statement. Playing the scapegoat role to a T, Leissner had already pleaded guilty to charges brought by the U.S. Justice Department, including conspiring to launder money. In October, Leissner’s deputy at Goldman Sachs, Roger Ng was indicted on similar charges. As we reported last month, Malaysia said it will extradite Ng to the U.S. after he has completed legal proceedings in local courts.
As Bloomberg previously reported, the Fed had ramped up its investigation into how Goldman Sachs bankers dodged the firm’s internal controls to raise billions for 1MDB that later went missing, while apparently avoiding a scandal that shook the banking industry several years ago when the NY Fed was secretly leaking regulatory information to, who else, Goldman Sachs.
The Fed accused Leissner of participating in a scheme with Malaysian businessman Low Taek Jho and others to divert money from “several” 1MDB transactions, including three bond offerings underwritten by Goldman Sachs in 2012 and 2013, according to an order dated March 11. Low, a controversial financier, has been accused of embezzling hundreds of millions of dollars from the Malaysian fund and using some of it to buy gifts for famous models and film actors.
Leissner in August pleaded guilty to U.S. charges that he conspired to launder money and violated the Foreign Corrupt Practices Act. As part of the charges, he agreed to forfeit $43.7 million and admitted to bribing officials in Malaysia and the United Arab Emirates to get bond deals for Goldman Sachs.
Leissner said he and others arranged the 1MDB fundraising as debt offerings because it would generate higher fees for the bank. He has said his behavior was in line with the “culture of Goldman Sachs to conceal facts from certain compliance and legal employees."
So far former Goldman CEO Lloyd Blankfein, who quit as Goldman CEO just as the scandal was ramping up, has not been indicted.
Full filing below (pdf link):