Justice Department Charges Ex-Goldman Bankers in Malaysia 1MDB Scandal Charges name former Goldman bankers Tim Leissner and Roger Ng, as well as Malaysian financier Jho Low Goldman Sachs Entangled in Global 1MDB Scandal With the indictment of two former senior Goldman Sachs bankers, accused by U.S. prosecutors of paying bribes, stealing and laundering money from a Malaysian sovereign-wealth fund, the Wall Street giant finds itself at the center of one of the world's largest-ever financial scandals. Photo: Reuters 68 Comments By Nicole Hong, Liz Hoffman and Bradley Hope Updated Nov. 1, 2018 6:57 p.m. ET Two senior Goldman Sachs GS -1.44% bankers paid bribes and stole and laundered money from a Malaysian sovereign-wealth fund, U.S. prosecutors allege, putting the bank at the center of one of the biggest financial frauds in history. Former Goldman partner Timothy Leissner, then its head of Southeast Asia, pleaded guilty to conspiring to launder money and violate foreign antibribery laws for helping siphon off billions of dollars from the fund, known as 1Malaysia Development Bhd, or 1MDB, according to filings unsealed Thursday. Jho Low, who allegedly masterminded the fraud involving the sovereign-wealth fund, had a penchant for partying with celebrities. Photo: Stuart Ramson/Associated Press Former Goldman managing director Roger Ng, and the alleged mastermind of the fraud, Malaysian financier Jho Low, were indicted on three counts of conspiring to violate foreign antibribery laws and launder money. For Goldman, the charges—as well as a continuing investigation into the bank’s own conduct— come at an inflection point. Executives have spent years shining up a reputation sullied by the 2008 crisis and refashioning the elite firm as a Main Street bank. Goldman underwrote about $6.5 billion in bonds for 1MDB. The indictment alleges the bankers bribed government officials to get the bond deals, controlled offshore accounts where the stolen money was funneled and helped launder the proceeds. Goldman was paid $600 million in fees from 1MDB for the deals, making the investment fund one of Goldman’s most profitable clients in the world in those years. Senior officials including former Chief Executive Lloyd Blankfein and President Gary Cohn had previously praised the bankers for their work. A second Goldman partner is cited as an unnamed co-conspirator by prosecutors, who allege he knew bribes were being paid and helped Mr. Leissner get around Goldman’s internal compliance officials. The charging documents refer to an “Italian national.” People familiar with the matter confirmed his identity as Andrea Vella. Mr. Vella was placed on leave Thursday, according to a person familiar with the matter, two weeks after he was stripped of his management responsibilities as co-head of Goldman’s investment banking division in Asia. An attorney for Mr. Leissner declined to comment. Mr. Ng couldn’t be reached. Goldman declined to make Mr. Vella available. A spokesman for Mr. Low said he maintains his innocence. The Justice Department cases describe a cowboy atmosphere in Goldman’s Asian operations, where bankers were “highly focused on consummating deals, at times prioritizing this goal ahead of the proper operation of its compliance functions.” The indictments, the first criminal charges in the U.S. in the 1MDB scandal, come as prosecutors negotiate with Goldman over the bank’s own culpability, according to people familiar with the matter. “The firm continues to cooperate with all authorities investigating this matter,” a Goldman spokesman said. In recent discussions, Goldman has blamed rogue employees and pushed to avoid criminal liability, the people said. The bankers repeatedly hid their dealings with Mr. Low from Goldman’s compliance officers, who had raised concerns about the source of the baby-faced Malaysian’s mysterious wealth. The Leissner guilty plea is the biggest black eye for a Goldman partner since 1989, when executive Robert Freeman was led off the trading floor in handcuffs, later convicted of a crime related to insider trading. Bankers linked to the scandal were among Goldman’s most senior executives in Asia, and the 1MDB bond deals were blessed by senior managers in New York. Messrs. Leissner and Vella are among Goldman’s 435 partners, a rank bestowed on about 1% of employees. Mr. Leissner is cooperating with investigators, according to a person familiar with the matter, and details included in Thursday’s indictments suggest he has provided evidence against others. Mr. Leissner, 48 years old, will forfeit $43.7 million and is scheduled to be sentenced in January. Mr. Ng, 51, was arrested in Malaysia, while Mr. Low, 36, is at large and was last seen in China, according to Malaysian authorities. Goldman underwrote three bond sales for 1MDB, code-named Projects Magnolia, Maximus and Catalyze, according to the indictment. More than $2.7 billion of the approximately $6.5 billion raised was diverted into accounts controlled by Messrs. Low, Leissner and others, according to prosecutors. Money from those accounts was used to pay bribes to government officials, pad a slush fund controlled by Malaysia’s prime minister Najib Razak, and purchase jewelry for his wife Rosmah Mansor, court documents show. More than $200 million alone went to Mr. Leissner and another alleged co-conspirator. A relative of Mr. Ng received $24 million from a shell company funded with stolen 1MDB money, prosecutors say. Using a chat messenger in 2014, Messrs. Low and Leissner discussed the need to “suck up to” a government official and send “cakes” to a person prosecutors believe is Ms. Rosmah to get another 1MDB deal. Mr. Ng referred to Ms. Rosmah as “Madam Boss,” according to prosecutors. Excerpts From the Leissner Indictment    “Low and Leissner discussed the need to ‘suck up to’ a 1MDB official and to send ‘cakes’ to a person believed to be the wife of Malaysian Official #1.” “...A bank account owned and controlled by Leissner and his relative was used to transfer approximately $4.1 million to a high-end New York jeweler, in part, to pay for gold jewelry for the wife of Malaysian Official #1.” “...More than $2.7 billion was instead misappropriated by the defendant Tim Leissner and his co-conspirators and distributed as bribes and kickbacks to government officials in Malaysia and Abu Dhabi.” A few months later, prosecutors said, a bank account controlled by Mr. Leissner transferred approximately $4.1 million to a high-end New York jeweler, in part to pay for gold jewelry for Ms. Rosmah. Mr. Najib was voted out of office earlier this year. When Malaysian authorities raided his homes, they found $266 million worth of handbags, luxury watches, jewelry and other goods. Mr. Najib and Ms. Rosmah, who have both been arrested, claimed the goods were gifts from wealthy foreign leaders. They both have denied wrongdoing. Money from 1MDB was used by Mr. Low and others to fund lavish lifestyles, buy luxury homes, yachts and artwork and to finance the film “The Wolf of Wall Street.” The scandal marks a test for Chief Executive David Solomon, who took the job just a month ago. He was running the investment-banking division during the firm’s dealings with 1MDB. His predecessor, Mr. Blankfein, pushed Goldman deeper into emerging markets after the financial crisis, as the U.S. economy slowed and regulation increased. In a 2010 presentation to investors, he said the bank’s biggest opportunity was to be “Goldman Sachs in more places.” “Look at what Tim and Andrea did in Malaysia,” Mr. Blankfein said at a 2014 meeting focused on emerging markets, where Goldman was looking to grow. “We have to do more of that.” Mr. Leissner earned more than $10 million a year at the height of his dealings with 1MDB, according to people familiar with the matter. A bank account controlled by Tim Leissner transferred about $4.1 million to a high-end New York jeweler, prosecutors said. Photo: Rodin Eckenroth/Getty Images Federal prosecutors in Brooklyn filed a sealed complaint against Mr. Leissner in June, seeking a warrant for his arrest. According to court documents, Mr. Leissner was arraigned in Brooklyn federal court—under the alias “John Doe”—on June 14. Mr. Leissner and his lawyers spent the summer negotiating a plea agreement with U.S. prosecutors, and entered his plea on Aug. 28, according to the filings. After Goldman paid a $550 million fine in 2010 for its mortgage-trading activities, the bank set new standards for how it interacts with clients and what sorts of deals it pursues, and created a new committee to enforce them. Mr. Blankfein went on an 18-month tour, dubbed the Chairman’s Forum, visiting Goldman offices around the world and urging employees to guard the firm’s reputation. The 1MDB scandal shows the challenges of controlling far-flung bankers whose compensation hinges on landing big deals. Goldman’s partnership culture further muddies reporting lines; the firm’s partners have historically had significant freedom to pursue business. —Aruna Viswanatha, Justin Baer and Tom Wright contributed to this article. Discussion： Along with poorly managing various risks, financial institutions often get into trouble simple due to bad behavior of certain individuals. The latest 'scandal' appears to involve Goldman Sachs and a Malaysian development fund. These types of events always amaze me, because the individuals involved are all very affluent, yet they engage in illegal activities to make them even more superwealthy. Why do these people do this? Is it simply greed? In any case, what can or should be done to minimize the occurrence of such events? Is the probability of detection too low, the punishments too soft, or something else? Ironically, the sidebar in the article from The Economist suggests that an occasional scandal may actually be good for business, as clients may prefer doing business with institutions that cross legal/ethical lines. See attachment ：Goldman_1MDB.pdf Economist_Goldman_1MDB.pdf
Purchase answer to see full attachment