CFA Society Singapore
(Jan 17): Goldman Sachs Group Chief Executive Officer David Solomon apologised to the Malaysian people for the role that a senior banker at the firm, Tim Leissner, played in the 1MDB scandal.
Malaysia was “defrauded by many individuals,” Solomon said on a conference call with analysts after the investment bank reported fourth-quarter earnings Wednesday. Leissner “was one of those people.”
Malaysia has filed criminal charges against the Wall Street firm over a relationship that spawned one of the biggest scandals in the country’s history. Singapore expanded a criminal probe into fund flows linked to 1MDB to include Goldman Sachs, and is coordinating closely with the US Justice Department, people with knowledge of the matter said last month.
Authorities in Singapore are trying to determine whether some of the roughly US$600 million ($812.8 million) in fees from the three bond deals Goldman arranged for 1MDB from 2012 to 2013 flowed to the Singapore subsidiary, the people said.
Solomon reiterated that the firm conducted considerable due diligence on the deals and was lied to by Leissner, who pleaded guilty last year to charges including conspiring to launder money. Appearing on his first earnings call since becoming CEO in October, Solomon said the firm is cooperating with the Justice Department and the investigation is still open.
Malaysia alleges that Goldman misled investors in the three bond sales it arranged for 1MDB while knowing the money raised would be misappropriated. Goldman has said it will vigorously defend against the charges.
The bond sales were arranged by Goldman Sachs International, a London-based unit. That division, along with the Singapore entity, were among three units named in Malaysia’s criminal charges against the company, which seek fines in excess of the US$2.7 billion of funds allegedly misappropriated and US$600 million of fees Goldman reaped.
US prosecutors say more than US$4.5 billion flowed from 1MDB, through a complex web of opaque transactions and fraudulent shell companies, to finance spending sprees by corrupt officials and their associates.
Leissner, the former Goldman partner who oversaw the relationship with 1MDB, is in the US, where he has pleaded guilty to conspiring to launder money and bribery. His former deputy, Roger Ng, was arrested in November in Malaysia and is fighting extradition to the US He’s also pleaded not guilty to the charges Malaysian authorities levelled against him.