The day after the DOJ announced FCPA and money-laundering conspiracy charges against Jho Low and two former Goldman Sachs bankers, Goldman itself published an update about the 1MDB case and ongoing investigations.
Goldman’s update appeared Friday in an SEC filing under the disclosure heading “1Malaysia Development Berhad (1MDB)-Related Matters.”
The disclosure — a model of clear and concise writing — is balanced. Perhaps previewing the basis for an eventual FCPA settlement with the feds, Goldman describes among other things its own weak internal controls and sick business culture.
Goldman doesn’t mention that it earned about $600 million in fees from the bribery-tainted 1MDB bond work. (Would the firm disgorge that amount to reach an FCPA resolution with the SEC or DOJ or both?) And Goldman doesn’t say who earned bonuses from the 1MDB windfall.
Still, the disclosure is dense with facts and tells the story well, albeit from Goldman’s perspective.
Here’s Goldman Sachs Group, Inc.’s full 1MDB disclosure from its November 2, 2018 Form 10-Q, courtesy of FCPA Tracker:
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1Malaysia Development Berhad (1MDB)-Related Matters
The firm has received subpoenas and requests for documents and information from various governmental and regulatory bodies and self-regulatory organizations as part of investigations and reviews relating to financing transactions and other matters involving 1MDB, a sovereign wealth fund in Malaysia. Subsidiaries of the firm acted as arrangers or purchasers of approximately $6.5 billion of debt securities of 1MDB.
On November 1, 2018, the U.S. Department of Justice (DOJ) unsealed a criminal information and guilty plea by Tim Leissner, a former participating managing director of the firm, and an indictment against Ng Chong Hwa, a former managing director of the firm, and Low Taek Jho. Leissner pleaded guilty to a two-count criminal information charging him with conspiring to launder money and conspiring to violate the U.S. Foreign Corrupt Practices Act’s (FCPA) anti-bribery and internal accounting controls provisions. Low and Ng were charged in a three-count indictment with conspiring to launder money and conspiring to violate the FCPA’s anti-bribery provisions. Ng was also charged in this indictment with conspiring to violate the FCPA’s internal accounting controls provisions. The charging documents state, among other things, that Leissner and Ng participated in a conspiracy to misappropriate proceeds of the 1MDB offerings for themselves and to pay bribes to various government officials to obtain and retain 1MDB business for the firm. The plea and charging documents indicate that Leissner and Ng knowingly and willfully circumvented the firm’s system of internal accounting controls, in part by repeatedly lying to control personnel and internal committees that reviewed these offerings. The indictment of Ng and Low alleges that the firm’s system of internal accounting controls could be easily circumvented and that the firm’s business culture, particularly in Southeast Asia, at times prioritized consummation of deals ahead of the proper operation of its compliance functions. In addition, an unnamed participating managing director of the firm is alleged to have been aware of the bribery scheme and to have agreed not to disclose this information to the firm’s compliance and control personnel. That employee, who was identified as a co-conspirator, has been put on leave.
The firm is cooperating with the DOJ and all other governmental and regulatory investigations relating to 1MDB. The firm is unable to predict the outcome of the DOJ’s investigation. However, any proceedings by the DOJ or other governmental or regulatory authorities could result in the imposition of significant fines, penalties and other sanctions against the firm.
Richard L. Cassin is the publisher and editor of the FCPA Blog.