The biggest scandal of Goldman Sachs? A multi-billion dollar international fraud that also financed "The Wolf of Wall Street"

Goldman Sachs offices in Manhattan. (Source: The New York Times)

Goldman Sachs is facing one of the biggest scandals in its history, a multibillion-dollar international fraud that, according to investigators, was organized with the # 1 39; help of a flamboyant financier with a taste of Hollywood

Federal prosecutors unveiled Thursday the guilty plea of ​​a former banker of Goldman Sachs and announced accusations of corruption and money laundering money against a second banker, as part of an investigation into the alleged embezzlement of billions of dollars state – managed investment fund in Malaysia. Prosecutors also laid charges against the Malaysian businessman who, according to them, had stolen some of the money: Jho Low, who had spent millions of dollars on gifts to celebrities such as actor Leonardo DiCaprio and the Miranda Kerr model.

This money was used to buy a painting by Picbado. diamond necklaces and Birkin bags, as well as to pay for the Hollywood blockbuster "The Wolf of Wall Street". Najib Razak, the Malaysian prime minister who created and oversaw the so-called sovereign wealth fund, lost his re-election bid following the scandal, in which US prosecutors said that $ 731 million of the missing money had been deposited in his own bank accounts. Sachs and his new general manager, David M. Solomon. US prosecutors continue to investigate other bankers and on Goldman himself, according to three people familiar with the case.

The bank has spent years trying to rehabilitate a reputation badly damaged by allegations of misconduct and to make its customers benefit from financial crisis profits. Goldman executives today emphasize the value of their bank in companies around the world – efforts that could be eroded by the bank's role in Malaysia's sprawling scandal.

Brooklyn's lengthy prosecutions set a disastrous picture for Goldman, who helped raise funds for the fund, 1Malaysia Development Berhad, or 1MDB. According to court documents, former bankers allegedly paid bribes and bribes to foreign executives to guarantee Goldman's $ 6 billion bond underwriting contracts generating a fee of $ 600,000. millions of dollars.

Authorities reported that at least one high-ranking officer in the bank's Asian function operations were aware of the scheme, which dodged Goldman's systems to detect the payment of bribes. This person, not identified in the court documents, was not charged. According to three people close to the case, the executive was Andrea Vella, co-head of Goldman's investment banking business in Asia.

Federal prosecutors said that federal prosecutor Tim Leissner, former investment banker of Goldman, had pleaded guilty. in August to participate in the system of corruption and money laundering. He left the firm in 2016 after the first appearance of the scandal.

The court documents were sealed until Thursday, when the other two men, Low and Roger Ng, the former MP for Leissner, were charged. Ng, who left Goldman in 2014, was arrested in Malaysia; Low remains on the run.

Although the bank knew that Leissner was at the center of the investigation, the extent of the charges seemed to have taken Goldman off guard. The bank did not expect that an officer from its Asian investment bank would also be involved. Goldman suspended Vella Thursday, according to a person with direct knowledge but unauthorized to speak in public.

Goldman has repeatedly downplayed his role in the 1MDB scandal, claiming he did not know how the fund's money was being used.

Goldman President Lloyd Blankfein attempted to portray the case as a criminal act committed by dishonest employees.

"These are guys who have escaped our safeguarding measures and have lied, like what's going to happen," Blankfein said on the sidelines of the New York Times DealBook conference Thursday. use our phones away from home, and personal for personal reasons. "

Federal prosecutors have described Low as the mastermind of the ploy to loot the Malaysian sovereign wealth fund. During an exchange with Leissner, Low said that it was necessary to "bet on" 1MDB officials, including sending "cakes" – that is, bribes, according to documents filed by the

Court filings on Thursday showed that federal prosecutors had built their case since their first complaint against Leissner in June, at which time the charges contained no reference to the co-conspirator identified by people close to Vella, but the court documents relating to Leissner's argument of August 28 are valid.

Vella could not be reached for comment. He retained the services of a lawyer, according to three people familiar with the case, but these people did not want to identify the lawyer.

Court documents filed by federal prosecutors describe a long-standing ploy initiated in 2009 by Goldman's bankers to disguise Low's involvement. in the fund companies and the money paid on his advice. These bribes and bribes helped secure the bank's business, while a group of people close to the former Malaysian prime minister stole part of the proceeds from bonds to fuel their sumptuous lifestyle. participation in the fund because Goldman's legal team was concerned about the origin of its wealth. Leissner and other Goldman bankers helped 1MDB raise money through three bond issues while making hundreds of millions of dollars in commissions. During each transaction, Leissner followed Low's instructions regarding the choice of bribes to obtain contracts for internally nicknamed "Project Magnolia", "Project Maximus" and "Project" bonds. catalyze ".

The money collected was to be spent on projects helping the Malaysian people like those described in the transaction finance documents. Instead, court filings describe an elaborate plan to channel millions of dollars in bond products to so-called front companies controlled by Low and others. Some of this money was paid into bank accounts in Hong Kong.

Internal emails, included in the court documents, show that Leissner and his team cited one of the oldest agreements proposed by the bank with Malaysians under the name "Tiara Project". luxury goods The Malaysian authorities finally seized because they had been purchased with money from 1MDB: 14 diadem diamonds dotted.

Until recently, public attention on the scandal was mainly focused on the fate of this money. Federal prosecutors in Los Angeles have engaged in several civil suits to recover badets purchased with some of the money.

According to these lawsuits, Najib's wife, Rosmah Mansor, reportedly received $ 30 million worth of jewelery purchased with silver from 1MDB, including 22 A 4-carat pink diamond necklace. worth $ 27.3 million only.

Leissner also retained some of the funds for himself, according to the authorities. By pleading guilty, he was condemned to give up nearly 44 million dollars that he had won thanks to the ploy.

Counsel for Leissner did not return the request for comment.

A spokesman for Low said Low was innocent.

"As stated in the indictment today, Low had no official office at 1MDB and had never been employed by Goldman Sachs". spokesman Jim Haggerty said. He added: "In addition, the detailed bond offerings in the indictment have been undertaken openly and legally between experienced and well-regulated financial institutions and government entities."

The fraud led Malaysian voters to expel Najib in May; Prosecutors brought corruption charges against him in July. The new Prime Minister, Mahathir Mohamad, promptly opened an investigation. The Malaysian government is asking Goldman Sachs for a refund.

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