Goldman Sachs Group has acknowledged that it may receive “significant penalties” resulting from its deals with 1Malaysia Development Bhd (1MDB).
It also recognised that it had weaknesses in its compliance controls, The Wall Street Journal (WSJ) reported.
In its third-quarter earnings filing to regulators, the investment management firm made citations about the indictment against its former employees for bribery and money laundering involving 1MDB, WSJ said.
Although it had acknowledged that it could face “significant penalties resulting from 1MDB”, Goldman Sachs said it was also cooperating with investigators, the report on Monday said.
According to WSJ, Goldman Sachs wrote in the filing that the indictment alleged the firm’s “system of internal accounting controls could be easily circumvented and that the firm’s business culture, particularly in South-East Asia, at times prioritised consummation of deals ahead of the proper operation of its compliance functions”.
The filing also mentioned that former Goldman Sachs bankers Tim Leissner and Roger Ng had “circumvented the firm’s internal accounting controls in part by intentionally deceiving control personnel and internal committees”.
Goldman Sachs is said to have received nearly RM2.5bil (US$600mil) in fees from the 1MDB deal.
Previously, the Financial Times reported that Goldman Sachs had helped 1MDB sell about RM27bil (US$6.5bil) of bonds between 2012 and 2013, two years before the authorities raided 1MDB’s offices to investigate allegations of massive fraud.
In a filing to the Securities and Exchange Commission on Friday, Goldman Sachs estimated that possible losses related to litigation proceedings could run as high as US$1.8bil (RM7.49bil) above its total reserves for such matters.
Previously, Goldman Sachs estimated litigation losses to be in excess of US$1.5bil (RM6.24 bil).
The Financial Times also reported that almost 30 people from Goldman Sachs had reviewed 1MDB deal’s approval process.
Meanwhile, in a 2016 indictment, the US Department of Justice (DoJ) alleged that most of the money raised with Goldman Sachs’ help was siphoned off by Low Taek Jho, also known as Jho Low.
The fugitive businessman together with bankers Ng and Leissner were indicted by the DoJ on Thursday for conspiring to launder money and violating the Foreign Corrupt Practices Act in relation to 1MDB.
Leissner pleaded guilty to conspiring to launder money and to violating anti-bribery laws. He has been ordered to forfeit US$43.7mil (RM182.27mil) as a result of his crimes.
The criminal charges relating to 1MDB are the first by DoJ.
In 2016, the DOJ reportedly recovered over US$1bil (RM4.17bil being the current conversion rate) that was allegedly stolen, and sought the forfeiture of property, including a Bombardier private jet, Manhattan penthouse, Beverly Hills mansion and paintings by Vincent Van Gogh and Claude Monet.
Low is currently wanted in Malaysia and Singapore and other countries over investigations into 1MDB.
In a separate report by the Associated Press, PKR incoming president Datuk Seri Anwar Ibrahim said that Low would be given a fair trial.
Anwar said he was “quite pleased” with developments in the case so far and that investigations in the United States, Malaysia and Singapore and other places were “progressing very well”.
The report also said Anwar had hinted that more former officials could be tried on corruption charges.
Malaysia has applied for a Red Notice to seek assistance from countries such as the United Arab Emirates, Indonesia, India, Myanmar, China and Hong Kong via Interpol, and Taiwan via diplomatic channels to arrest Low.- The Star
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Goldman Sachs CEO: I feel horrible ex-bankers broke law in 1MDB case
https://youtu.be/L0XbbbqTHYw
SINGAPORE (Reuters): Goldman Sachs chief executive officer David Solomon said on Wednesday he felt "horrible" that two former employees "blatantly broke the law" in their dealings with 1Malaysia Development Berhad.
US prosecutors filed criminal charges against the two former Goldman bankers and a Malaysian financier linked to the alleged theft of billions of dollars from the fund.
An investigation into where 1MDB's money went became the largest carried out by the Department of Justice under its anti-kleptocracy programme, and the scandal was a major reason why Malaysian voters rejected Datuk Seri Najib Tun Razak, their prime minister for nearly a decade, in the May 9 general election.
"It is obviously very distressing to see two former Goldman Sachs employees went so blatantly around our policies and so blatantly broke the law," Solomon said in an interview with Bloomberg TV in Singapore.
"I feel horrible about the fact that people who worked at Goldman Sachs, and it doesn't matter whether it's a partner or it's an entry level employee, would go around our policies and break the law," Solomon said.
US prosecutors announced last week that Tim Leissner, former partner for Goldman Sachs in Asia, had pleaded guilty to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act, and agreed to forfeit US$43.7mil (RM181.8mil).
Roger Ng, the other charged former Goldman banker, was arrested in Malaysia and is expected to be extradited.
Reuters was not immediately able to contact Ng's lawyer on Wednesday. His lawyer did not immediately respond to a request for comment after US prosecutors unveiled the charges last Thursday.
Goldman has also placed its former co-head of Asia investment banking, Andrea Vella, on leave over his role in the firm's involvement with the case, pending a review of allegations, according to a person familiar with the decision.
The Wall Street bank said in a securities filing on Friday that it may also face penalties from dealings with 1MDB.
Asked if he could provide assurances that neither he, former CEO Lloyd Blankfein or any of the senior management team suspected illegality or compliance breaches in dealings with 1MDB, Solomon said:
"We take compliance and control in our firm extremely seriously, we always have...We are going to continue to cooperate with the authorities and there's a process in place and that process will proceed." According to prosecutors, the investment bank generated about US$600mil (RM2.49bil) in fees for its work with 1MDB, which included three bond offerings in 2012 and 2013 that raised US$6.5bil (RM23.29bil). Leissner, Ng and others received large bonuses in connection with that revenue.
Finance Minister Lim Guan Eng told Reuters in June that the government will be looking at the possibility of seeking claims from Goldman Sachs.
Prime Minister Tun Dr Mahathir Mohamad said Malaysia will look into why Goldman was paid around US$600mil in fees, an amount that critics say exceeds normal levels.
Goldman has maintained that the outsized fees related to the additional risks it took on after it bought the un-rated bonds while it sought investors and, in the case of the 2013 deal which raised US$2.7bil (RM11.24bil), 1MDB wanted the funds in a hurry for a planned investment.
The new Malaysian government has barred Najib and his wife from leaving the country, and the former premier faces multiple charges of corruption, money laundering and abuse of power, though he has consistently denied any wrongdoing related to 1MDB.
In another interview with Bloomberg on Tuesday, Malaysia's prime minister-in-waiting Anwar Ibrahim said it would be "inexcusable" if Goldman Sachs was complicit in the scandal. – Reuters
Guan Eng: Goldman Sachs should return RM2.4bil fees - Nation
American investment bank Goldman Sachs should return the US$588mil (RM2.4bil) in it was paid for 1MDB-related matters, says Lim Guan Eng.
The Finance Minister said the fees were for raising bonds totalling US$6.5 billion (RM23.29 billion) for the Malaysian state investment firm back in 2012 and 2013.
"They must pay us back this money, not only the US$588mil but much more than that," he said during a briefing on Budget 2019 at Hotel Equatorial Penang on Wednesday (Nov 7).
He said there were consequential losses due to the fees paid as it had cost Malaysia big losses.
This was in respond to Goldman Sachs chief executive officer David Solomon, who admitted that their employees had broken the law over 1MDB matters.
Read more at https://www.thestar.com.my/news/nation/2018/11/08/guan-eng-goldman-sachs-should-return-rm2_4bil-fees/#wqMtc2F6O1jC35UJ.99
The Finance Minister said the fees were for raising bonds totalling US$6.5 billion (RM23.29 billion) for the Malaysian state investment firm back in 2012 and 2013.
"They must pay us back this money, not only the US$588mil but much more than that," he said during a briefing on Budget 2019 at Hotel Equatorial Penang on Wednesday (Nov 7).
He said there were consequential losses due to the fees paid as it had cost Malaysia big losses.
Read more at https://www.thestar.com.my/news/nation/2018/11/08/guan-eng-goldman-sachs-should-return-rm2_4bil-fees/#wqMtc2F6O1jC35UJ.99
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