[Marxism] Goldman Sachs’s Tactic in Malaysian Fraud Case: Smear an Ex-Partner

Louis Proyect 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 
better.”

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 
authorities.”

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 
investigations.

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 
official.

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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