[Marxism] Goldman Sachs’s Tactic in Malaysian Fraud Case: Smear an Ex-Partner
lnp3 at panix.com
Thu Jan 17 08:36:59 MST 2019
(A tsunami of sleaze.)
NY Times, Jan. 17, 2019
Goldman Sachs’s Tactic in Malaysian Fraud Case: Smear an Ex-Partner
By Matthew Goldstein, Emily Flitter and Kate Kelly
They sound like the ingredients of a pulpy thriller: Bigamy. Secret
religious conversions. A doctorate from a mail-order diploma mill.
Affairs with powerful women.
The sordid list — a mixture of facts, accusations and insinuations,
packaged in a glossy slide show — represents the crux of a
well-orchestrated campaign by Goldman Sachs to discredit one of its
former partners and to minimize the Wall Street bank’s role in the
looting of a big Malaysian investment fund.
In recent presentations to American regulators and law enforcement
authorities, according to people familiar with their contents, Goldman
executives and their lawyers have depicted Tim Leissner, a former top
investment banker, as a master con man, someone so sneaky that even the
retired military intelligence officers who work for the bank couldn’t
sniff him out.
The scorched-earth tactics, especially against someone who had been a
star banker, reflect just how worried Goldman is about the criminal
investigations into its role in the theft of at least $2.7 billion from
the 1Malaysia Development Berhad, or 1MDB, sovereign wealth fund.
One big reason for concern is that senior Goldman officials, including
the bank’s chief executive at the time, helped win Malaysian business.
And the relationship became a crucial engine of profits for the bank,
generating about $600 million in fees.
The bank’s hope is that by casting Mr. Leissner as a rogue employee,
Goldman will reduce its legal and reputational liability.
On Wednesday, in a sign of how the stakes are rising, Goldman disclosed
that in the fourth quarter of 2018 it set aside an additional $516
million to cover potential legal and regulatory penalties, including
those related to 1MDB. And executives said Goldman could owe $2 billion
on top of what it has already put in its reserves.
“For Leissner’s role in that fraud, we apologize to the Malaysian
people,” David M. Solomon, the bank’s chief executive, told analysts
Wednesday. “As you would expect, we have looked back and continue to
look back to see if there is anything that we as a firm could have done
A Goldman spokesman, Michael DuVally, said that since Mr. Leissner left
the bank in 2016, Goldman found new violations of its internal policies
“that we have shared with the Department of Justice and other relevant
While it’s not uncommon for companies to defend themselves by blaming
lone employees, Goldman’s ad hominem attacks on Mr. Leissner stand out
for their aggressive, charged nature. The bank has not presented
authorities with proof to substantiate all of its allegations, and some
of them — including a focus on Mr. Leissner’s supposedly converting to
Islam on two occasions — are, at best, inflammatory.
Mr. Leissner, 48, has been criminally charged by American and Malaysian
prosecutors with bribery and money laundering in connection with the
theft from 1MDB. He pleaded guilty last year to the United States
charges. He is scheduled to be sentenced in June. His lawyer did not
respond to requests for comment for this article.
For years, Mr. Leissner was one of Goldman’s most powerful dealmakers in
Asia. Among other things, he helped Goldman win lucrative assignments
selling bonds for 1MDB. Mr. Leissner facilitated at least one meeting
between Goldman’s chief executive at the time, Lloyd C. Blankfein, and a
Malaysian financier named Jho Low, who subsequently was charged as the
mastermind of the 1MDB theft.
Goldman suspended Mr. Leissner in 2016, and the bank’s executives have
publicly faulted him for lying to Goldman and snaring the bank in the fraud.
But in private meetings with federal and state officials and employees
in recent months, Goldman has intensified its efforts to blame Mr.
Leissner, according to five people familiar with the bank’s campaign who
were not authorized to discuss it publicly.
In November, for example, the bank met with federal prosecutors in
Washington and delivered a lengthy PowerPoint presentation that sought
to paint Mr. Leissner as a man practiced in the art of deception,
according to two people familiar with the presentation.
One slide in the presentation said that Mr. Leissner may have been
briefly married to two women at the same time.
Another slide included a photo of Mr. Leissner praying with other men,
as well as images of a government-issued ID card that showed Mr.
Leissner describing himself as Muslim. The people familiar with the
presentation said Goldman officials used the slide to claim that Mr.
Leissner twice converted to Islam in order to impress wealthy Muslim
women he was dating.
The inch-thick presentation also accused Mr. Leissner of having had a
sexual relationship with at least one Goldman client and of having
received a mail-order Ph.D. from a now-defunct university, the people said.
It isn’t clear what evidence Goldman has of the alleged affair, which
bank officials believe took place before Mr. Leissner married the
fashion designer and model Kimora Lee Simmons in 2013.
In addition to the Justice Department, Goldman delivered similar
multi-hour presentations to bank regulators, the people said. As well as
the section seeking to discredit Mr. Leissner, the presentation outlined
the vetting Goldman performed before agreeing to sell bonds for 1MDB. It
also had a section on Mr. Low, including clips from news articles
describing him as a promising entrepreneur and investor.
In part, Goldman is using the presentation to argue that, given Mr.
Leissner’s supposed slipperiness, the bank’s compliance system should
not be faulted for failing to detect his scheme. The bank also is hoping
to dissuade authorities from relying on any testimony or cooperation
that Mr. Leissner might provide and that could put Goldman in a bad light.
As part of his guilty plea last year, Mr. Leissner admitted to
misappropriating at least $50 million from 1MDB’s bond offerings and to
deceiving Goldman about Mr. Low’s role in those deals. But Mr. Leissner
also told a federal judge that hiding his actions from Goldman’s
compliance department was “very much in line” with a wider culture at
the firm, especially in Asia.
Senior executives at Goldman have been spreading the
blame-the-rogue-employee message to its partners, according to six
people familiar with Goldman’s efforts.
In December, Goldman held an annual dinner for retired partners at the
Conrad Hotel in Lower Manhattan. Mr. Solomon talked about the 1MDB
investigation, explaining that Goldman has muscular compliance programs
but would not always be able to protect against ill-intentioned
employees, according to five people who were there. They said they were
struck by Mr. Solomon’s bitter tone.
Goldman’s efforts to defend itself by attacking Mr. Leissner’s behavior
could raise more questions for the bank. Some Goldman executives knew
about his alleged romantic relationships with clients, but the bank did
not object to them until after Mr. Leissner became a target of
Five current and former Goldman bankers said in interviews that they
were aware of Mr. Leissner’s hard-partying reputation and romantic
overtures to wealthy women, including several who were executives at
companies that were bank clients.
Joe Ravitch, a former Goldman partner who helped hire Mr. Leissner from
Lehman Brothers in Hong Kong in 1999, said it was common knowledge that
Mr. Leissner was misbehaving. “A lot of the people that worked for me
would tell me the stories about Tim being a wild man,” he said.
In one case, Goldman investigated Mr. Leissner’s relationship with a top
female executive of a Malaysian media company, but the bank ultimately
didn’t take any action against Mr. Leissner, according to a Goldman
In Malaysia, where Goldman itself has been criminally charged,
prosecutors and senior government officials are unlikely to be receptive
to the bank’s claim that Mr. Leissner was a lone wolf.
“The whole world knows that their senior executives were involved with
wrongdoing and don’t feel that guilty, so I think there needs to be some
accountability,” said Malaysia’s finance minister, Lim Guan Eng, in an
interview on Monday. “You have to show genuine remorse for what has
happened. You must pay the penalty.”
Alexandra Stevenson contributed reporting.
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