The US Justice Department is calling for Goldman Sachs to plead guilty for its role in the massive corruption scandal involving Malaysian investment fund 1MDB, The Financial Times reported.
That recommendation applies to any settlement between Goldman Sachs and US or state authorities, newspaper reported, citing unnamed sources.
It would be the toughest penalty the Justice Department could impose, as it potentially could affect the financial giant’s licence and ability to conduct business.
According to a source close to the investigation, the hard line recommendations by investigators is not surprising, but the final settlement is likely to be less onerous.
US authorities have accused a Malaysian financial intermediary, Low Taek Jho, former Goldman partner Tim Leissner and former Goldman banker, Ng Chong Hwa, of conspiring to launder billions of dollars from 1 Malaysia Development Berhad…
Leissner pleaded guilty, while Jho Low and Ng Chong Hwa deny the allegations.
Goldman Sachs has tried to distance itself from its two former employees.
Asked about the guilty plea recommendation, a bank spokesman told AFP, “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 unware of the criminal activity by 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.”
For months Goldman Sachs has stuck to the tried and tested tactic of piling the blame on a fall-guy underling, in this case Tim Leissner, the former Southeast Asia boss who has already pleaded guilty to multiple crimes relating to 1MDB.
Malaysia was having none of it and AG Tommy Thomas has already issued criminal charges against the international arm of the bank in London and its Singapore subsidiaries.
Now, it is clear that the DOJ investigators are in agreement and in no mind to let this controversial bank off the hook, despite its lengendary ‘teflon qualities’ when it comes to making scandals stick.
After all, before initiating the dodgy $6.5 billion worth of loans at the heart of the 1MDB scandal, the former CEO of Goldman Sachs sat down with both Najib and Jho Low (who was already blacklisted as a top laundering threat by the compliance section of the bank) in a New York hotel to discuss initiating closer relations between the two parties.
Goldman proceeded to become the Malaysian government’s top lender and 1MDB brought in the biggest bonuses ever seen for the bank’s top players.
Under such circumstances there can be no excuse for these experienced operators to have simply failed to notice the dodgy stuff, when all the details were available for its enquiries.
Yet it was left to the tiny outsider Sarawak Report to blow the whistle way back in July 2013, calling for regulators to investigate, after we obtained a copy of the offer note for just one of these dodgy bonds and spied the outrageous and unusual terms.
If only partially informed observers like this small blog were able to spot the problem and to have dared to call it out, there is no excuse whatsoever for Goldman’s top brass to have ignored the red signals, plus our complaints, plus the growing evidence of malfeasance at 1MDB (whilst holding on to their pocketed millions in bonuses), which they did not for just weeks or months, but for YEARS, right up until Najib was booted out of office.
Goldman were not fooled, but they did make a rare miscalculation. The bank thought, like all the ‘experts’, that Najib would win GE14. In which case the scandal and the part they played could well have been buried by strong arm tactics in Malaysia.
What they misjudged was the level of righteous fury against corruption in Malaysia, so they got caught. And they ought not get away with it any more than others presently in the dock.
The DOJ ought to fine the bank billions and put its licence on the block.