On December 16, 2019 the Securities and Exchange Commission (SEC) issued a Cease and Desist Order against Respondent Tim Leissner the former senior executive of Goldman Sachs Group, Inc. (Goldman).

The Cease and Desist Order cites three specific bond offerings underwritten by Goldman for the 1 Malaysia Development Berhad (1MBD) fund. 1MDB was created to pursue investment and development projects for the economic benefit of Malaysia and its people, primarily relying on debt to fund these investments. Between 2012 and 2013 Goldman underwrote approximately $6.5 billion in bond offerings. According to the SEC “billions of dollars were diverted from 1MBD” in order to pay bribes and kickbacks to government officials in Malaysia and the Emirate of Abu Dhabi.

“Leissner and others instead planned and executed a scheme to misappropriate more than $2.7 billion and distribute the money as bribes and kickbacks to government officials in Malaysia and Abu Dhabi, including but not limited to Najib Razak, as well as to other participants in the scheme and their families, including Leissner.” The Order indicates that up to 41.5% of the funds raised were diverted to illegal activities.

It seems that Mr. Leissner, along with other senior executives at Goldman failed to fully disclose that proceeds of the bond offerings for the purchase of energy and power companies were not solely for the purchase of those companies and “other general corporate” purposes. Instead a large portion of the billions raised was going to pay bribes and kickbacks to government officials as well as enriching himself. The SEC Cease and Desist Order specifically states, “Leissner knowingly caused these records to be false.”

In all three bond offerings the SEC cites the Goldman Sachs documentation of the offerings specifying the purported purpose of the offerings i.e. purchase of a Malaysian energy company, a power plant purchase etc. including for “general corporate purposes”. The misstatement of the intended purposes of the bond offerings caused the failure to record a portion of these funds for the purposes of kickbacks, bribes and self-enrichment on Leissner’s part is the books and records violations.

The SEC Cease and Desist Order also reflects that, “He also caused Goldman Sachs’s books and records to not, in reasonable detail, accurately or fairly reflect the transactions and dispositions of the company’s assets in violation of Section 13(b)(2)(A) of the Exchange Act, and he willfully aided and abetted violations of that Section.” Also, “knowingly circumventing what internal accounting controls Goldman Sachs had in place in order to both advance and conceal the corrupt scheme.”

“Goldman Sachs’s various internal FCPA and accounting controls were overseen and enforced by its compliance function (the “Compliance Group”) and its legal department (the “Intelligence Group”).” Leissner selectively concealed from other employees of Goldman Sachs, including the GS Committees and their members, that he was working with Low as an intermediary to secure the deals.”

In addition to being barred from the industry Mr. Leissner was to disgorge $43,700,000 which was reduced and deemed satisfied by the amount of Respondent’s criminal forfeiture in United States v. Leissner, Cr. No. 18-CR-439 of the same amount. In a related civil matter with the Board of Governors of the Federal Reserve System Mr. Leissner agreed to pay a civil money penalty of $1,425,000.

In August of 2018 trial in the criminal matter Mr. Leissner pled guilty to two counts, conspiracy to violate the Foreign Corrupt Practices Act and conspiracy to commit money laundering. The criminal Information reflects that Mr. Leissner engaged in the criminal activity from 2009 through 2014. Mr. Leissner is looking at up to life imprisonment based on sentencing guidelines.

It appears, like with the Walmart case, the Goldman subsidiary Goldman Sachs – Asia LLC will be charged with a criminal offense, while the parent company will be subject to a Non-Prosecution Agreement (NPA) and the imposition of a corporate monitor.

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