The Goldman Sachs Group Inc. (Goldman Sachs or the Company), a global financial institution headquartered in New York, New York, and Goldman Sachs (Malaysia) Sdn. Bhd. (GS Malaysia), its Malaysian subsidiary, have admitted to conspiring to violate the Foreign Corrupt Practices Act (FCPA) in connection with a scheme to pay over $1 billion in bribes to Malaysian and Abu Dhabi officials to obtain lucrative business for Goldman Sachs, including its role in underwriting approximately $6.5 billion in three bond deals for 1Malaysia Development Bhd. (1MDB), for which the bank earned hundreds of millions in fees. Goldman Sachs will pay more than $2.9 billion as part of a coordinated resolution with criminal and civil authorities in the United States, the United Kingdom, Singapore, and elsewhere.
Goldman Sachs entered into a deferred prosecution agreement with the department in connection with a criminal information filed today in the Eastern District of New York charging the Company with conspiracy to violate the anti-bribery provisions of the FCPA. GS Malaysia pleaded guilty in the U.S. District Court for the Eastern District of New York to a one-count criminal information charging it with conspiracy to violate the anti-bribery provisions of the FCPA.
Previously, Tim Leissner, the former Southeast Asia Chairman and participating managing director of Goldman Sachs, pleaded guilty to conspiring to launder money and to violate the FCPA. Ng Chong Hwa, also known as “Roger Ng,” former managing director of Goldman and head of investment banking for GS Malaysia, has been charged with conspiring to launder money and to violate the FCPA. Ng was extradited from Malaysia to face these charges and is scheduled to stand trial in March 2021. The cases are assigned to U.S. District Judge Margo K. Brodie of the Eastern District of New York.
In addition to these criminal charges, the department has recovered, or assisted in the recovery of, in excess of $1 billion in assets for Malaysia associated with and traceable to the 1MDB money laundering and bribery scheme.
“Goldman Sachs today accepted responsibility for its role in a conspiracy to bribe high-ranking foreign officials to obtain lucrative underwriting and other business relating to 1MDB,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division. “Today’s resolution, which requires Goldman Sachs to admit wrongdoing and pay nearly three billion dollars in penalties, fines, and disgorgement, holds the bank accountable for this criminal scheme and demonstrates the department’s continuing commitment to combating corruption and protecting the U.S. financial system.”
“When government officials and business executives secretly work together behind the scenes for their own illegal benefit, and not that of their citizens and shareholders, their behavior lends credibility to the narrative that businesses don’t succeed based on the quality of their products, but rather their willingness to play dirty,” said Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office. “Greed eventually exacts an immense cost on society, and unchecked corrupt behavior erodes trust in public institutions and government entities alike. This case represents the largest ever penalty paid to U.S. authorities in an FCPA case. Our investigation into the looting of funds from 1MDB remains ongoing. If anyone has information that could assist the case, call us at 1-800-CALLFBI.”
According to Goldman’s admissions and court documents, between approximately 2009 and 2014, Goldman conspired with others to violate the FCPA by engaging in a scheme to pay more than $1.6 billion in bribes, directly and indirectly, to foreign officials in Malaysia and Abu Dhabi in order to obtain and retain business for Goldman from 1MDB, a Malaysian state-owned and state-controlled fund created to pursue investment and development projects for the economic benefit of Malaysia and its people. Specifically, the Company admitted to engaging in the bribery scheme through certain of its employees and agents, including Leissner, Ng, and a former executive who was a participating managing director and held leadership positions in Asia (Employee 1), in exchange for lucrative business and other advantages and opportunities. These included, among other things, securing Goldman’s role as an advisor on energy acquisitions, as underwriter on three lucrative bond deals with a total value of $6.5 billion, and a potential role in a highly anticipated and even more lucrative initial public offering for 1MDB’s energy assets. As Goldman admitted — and as alleged in the indictment pending in the Eastern District of New York against Ng and Low — in furtherance of the scheme, Leissner, Ng, Employee 1, and others conspired to pay bribes to numerous foreign officials, including high-ranking officials in the Malaysian government, 1MDB, Abu Dhabi’s state-owned and state-controlled sovereign wealth fund, International Petroleum Investment Company (IPIC), and Abu Dhabi’s state-owned and state-controlled joint stock company, Aabar Investments PJS (Aabar).
Goldman admitted that, in order to effectuate the scheme, Leissner, Ng, Employee 1, and others conspired with Low Taek Jho, aka Jho Low, to promise and pay over $1.6 billion in bribes to Malaysian, 1MDB, IPIC, and Aabar officials. The co-conspirators allegedly paid these bribes using more than $2.7 billion in funds that Low, Leissner, and other members of the conspiracy diverted and misappropriated from the bond offerings underwritten by Goldman. Leissner, Ng and Low also retained a portion of the misappropriated funds for themselves and other co-conspirators. Goldman admitted that, through Leissner, Ng, Employee 1 and others, the bank used Low’s connections to advance and further the bribery scheme, ultimately ensuring that 1MDB awarded Goldman a role on three bond transactions between 2012 and 2013, known internally at Goldman as “Project Magnolia,” “Project Maximus,” and “Project Catalyze.”
Goldman also admitted that, although employees serving as part of Goldman’s control functions knew that any transaction involving Low posed a significant risk, and although they were on notice that Low was involved in the transactions, they did not take reasonable steps to ensure that Low was not involved. Goldman further admitted that there were significant red flags raised during the due diligence process and afterward — including but not limited to Low’s involvement — that either were ignored or only nominally addressed so that the transactions would be approved and Goldman could continue to do business with 1MDB. As a result of the scheme, Goldman received approximately $606 million in fees and revenue, and increased its stature and presence in Southeast Asia.
Under the terms of the agreements, Goldman will pay a criminal penalty and disgorgement of over $2.9 billion. Goldman also has reached separate parallel resolutions with foreign authorities in the United Kingdom, Singapore, Malaysia, and elsewhere, along with domestic authorities in the United States. The department will credit over $1.6 billion in payments with respect to those resolutions.
The department reached this resolution with Goldman based on a number of factors, including the Company’s failure to voluntarily disclose the conduct to the department; the nature and seriousness of the offense, which included the involvement of high-level employees within the Company’s investment bank and others who ignored significant red flags; the involvement of various Goldman subsidiaries across the world; the amount of the bribes, which totaled over $1.6 billion; the number and high-level nature of the bribe recipients, which included at least 11 foreign officials, including high-ranking officials of the Malaysian government; and the significant amount of actual loss incurred by 1MDB as a result of the co-conspirators’ conduct. Goldman received partial credit for its cooperation with the department’s investigation, but did not receive full credit for cooperation because it significantly delayed producing relevant evidence, including recorded phone calls in which the Company’s bankers, executives, and control function personnel discussed allegations of bribery and misconduct relating to the conduct in the statement of facts. Accordingly, the total criminal penalty reflects a 10 percent reduction off the bottom of the applicable U.S. sentencing guidelines fine range.
Low has also been indicted for conspiracy to commit money laundering and violate the FCPA, along with Ng, E.D.N.Y. Docket No. 18-CR-538 (MKB). Low remains a fugitive. The charges in the indictment as to Low and Ng are merely allegations, and those defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.