Goldman Sachs (NYSE:GS)
Historical Stock Chart
1 Month : From Oct 2018 to Nov 2018
By Tom Wright and Liz Hoffman
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 10, 2018).
Former Goldman Sachs Chief Executive Lloyd Blankfein attended two meetings with a Malaysian financier at the center of one of the world's largest financial scandals, including one after the Wall Street bank's compliance department had raised multiple concerns about the financier's background and said the bank shouldn't do business with him.
The financier, Jho Low, was indicted this month by the U.S. Justice Department and charged with helping steal billions of dollars from 1Malaysia Development Bhd., an investment fund that he helped run from behind the scenes. The Justice Department further alleges that two Goldman Sachs bankers participated in the schemes while hiding their collaboration with Mr. Low from Goldman's management in New York.
The meetings, held in 2009 and 2013 for Mr. Blankfein to meet Najib Razak, Malaysia's then prime minister, included discussions of 1MDB, according to people familiar with the meetings.
A Goldman spokesman said Mr. Blankfein met many people in his 12-year tenure atop the bank, and couldn't have known Malaysia's leader would bring Mr. Low to either meeting. Mr. Blankfein has no recollection of meeting Mr. Low, he said. There is no indication Mr. Blankfein was aware of the bank's compliance concerns about Mr. Low at the time.
Asked last week at a public forum about the developing scandal, Mr. Blankfein laid the blame on rogue employees. "These are guys who evaded our safeguards and lie," he said.
The Justice Department is continuing to investigate Goldman's role in the 1MDB scandal, including which bankers were aware of Goldman's interactions with Mr. Low and how the bank handled the matter once it learned of the alleged fraud. The bank is also investigating, searching hundreds of thousands of pages of emails, calendars and travel records of employees involved in the deals.
Goldman helped 1MDB raise more than $6.5 billion through three bond issuances in 2012 and 2013, and in the process made around $600 million in profits. Over half of the sum raised was allegedly stolen by Mr. Low and others in a scheme Mr. Low masterminded, according to the Justice Department indictment. The bank has said it couldn't have known what would happen to the money it helped raise.
Mr. Low, who Malaysia's government believes is in China, has denied wrongdoing.
Tim Leissner, Goldman's former chairman of Southeast Asia, pleaded guilty in August to conspiring to launder money and violate foreign antibribery laws for helping siphon billions of dollars from the bond deals, according to filings made public last week. Former Goldman managing director Roger Ng was indicted on three counts of conspiring to violate foreign antibribery laws and launder money, the filings show.
When he pleaded guilty in U.S. District Court in Brooklyn, Mr. Leissner said he "conspired with other employees and agents of Goldman Sachs very much in line of its culture of Goldman Sachs to conceal facts from certain compliance and legal employees of Goldman Sachs," according to a heavily redacted transcript of the hearing, released Friday.
"I and several other employees of Goldman Sachs at the time also concealed that we knew that Jho Low was promising and paying bribes and kickbacks to foreign officials to obtain and retain 1MDB business for Goldman Sachs," Mr. Leissner said, adding that he and his co-workers knew some of the cash for the bribes came from the bonds Goldman sold for 1MDB.
An attorney for Mr. Leissner declined to comment on the indictment. Mr. Ng, who is under arrest in Malaysia, couldn't be reached.
The indictment also named an "Italian national" at Goldman as a co-conspirator who allegedly helped keep Mr. Low's involvement in 1MDB hidden from the bank's management in New York. People familiar with the matter say the person is Andrea Vella, a Hong Kong-based partner who helped structure the 1MDB bonds and rose to be co-head of investment banking in Asia.
Goldman put Mr. Vella on leave after the indictment was unsealed last week. He had been stripped of his management responsibilities two weeks earlier in a management shakeup. Mr. Vella, who hasn't been charged with any wrongdoing, didn't respond to a request for comment.
In 2015, after news about 1MDB broke in international media, Goldman moved to reduce the size of its Singapore office, through which much of the 1MDB bond transaction business had been run.
One of the executives on a list of people to be laid off at the time, a Swiss national named Cyrus Shey who had worked closely with Mr. Vella on the 1MDB bonds, was unhappy about being fired, according to a person familiar with the matter.
Mr. Vella told colleagues at Goldman he was concerned Mr. Shey could go public with details about 1MDB at a time of scrutiny of the business, and he interceded to ensure Mr. Shey wasn't immediately let go, according to the person. Mr. Shey later got a $1.5 million private loan from Mr. Leissner, who was then Goldman's chairman of Southeast Asia, the person said. Mr. Leissner left the bank in early 2016.
Mr. Shey didn't respond to questions. His lawyer said Mr. Shey never planned to discuss 1MDB publicly; the lawyer didn't respond to questions about the private loan from Mr. Leissner.
Mr. Leissner and his lawyer didn't respond to requests for comments for this article.
The Justice Department indictment alleges that Messrs. Leissner and Ng sought to cover up their activities by repeatedly assuring Goldman executives Mr. Low wasn't involved in their work with 1MDB, even as Mr. Low kept turning up at meetings.
The first meeting attended by Mr. Blankfein in November 2009, in New York's Four Season's hotel, was set up by Messrs. Leissner and Ng for Goldman to pursue deals with 1MDB, according to an affidavit, made public last week, from an FBI agent involved in the investigations.
Two months earlier, Mr. Leissner had attempted to get Mr. Low an account with Goldman's private bank in Switzerland, but was turned down because of compliance concerns about the source of Mr. Low's wealth, the affidavit says. Mr. Blankfein's attendance alongside Mr. Low and then-Prime Minister Najib at the 2009 meeting was first reported by Bloomberg.
In the following years, as Goldman helped 1MDB raise money, the role of Mr. Low at the fund was a constant source of concern for the bank's New York-based compliance executives and lawyers, the affidavit says. Two former Goldman executives based in Asia said Mr. Low's role in the fund was widely talked about in the office.
Lawyers and members of Goldman committees that vet deals constantly asked Mr. Leissner by email and in meetings whether Mr. Low was involved. On multiple occasions, Mr. Leissner denied that Mr. Low played any role, according to the affidavit.
In March 2013, Goldman sold the last of three bonds for 1MDB. On March 10, just over a week ahead of the $3 billion bond issuance, a meeting of a New York-based committee that decides what deals and clients Goldman should back quizzed Mr. Leissner about Mr. Low's role as an intermediary at 1MDB, the affidavit says.
After the deal, in late April, a member of the committee emailed Mr. Leissner with further concerns about Mr. Low's role, the affidavit adds. Mr. Leissner denied Mr. Low had any involvement, according to the affidavit.
Just a few months later, in September 2013, Mr. Blankfein met Mr. Low for a second time. Mr. Leissner arranged for Mr. Najib, Malaysia's then prime minister, to sit down with around 20 high-level Goldman clients at New York's Mandarin Oriental hotel. Mr. Low attended with Mr. Najib, people familiar with the matter say.
In late 2014, Mr. Blankfein praised Messrs. Leissner and Vella for their efforts in arranging business with Malaysia.
"Look at what Tim and Andrea did in Malaysia," he told a meeting in New York on how to build business in growth markets. "We have to do more of that."
Write to Tom Wright at email@example.com and Liz Hoffman at firstname.lastname@example.org
(END) Dow Jones Newswires
November 10, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.