NEW YORK (BLOOMBERG)- When Malaysian Prime Minister Najib Razak visited New York in September 2013, a senior Goldman Sachs Group Inc. official went out to greet him.
At the time, that would have seemed fitting: Malaysia had been good to Goldman Sachs. Three bond offerings from the country’s 1MDB wealth fund, controlled by Najib, had already generated about US$600 million (S$824 million) in fees for the bank.
But now, previously unreported details of that gathering at the Time Warner Center overlooking Manhattan’s Central Park could prove damaging for Goldman Sachs.
A federal filing unsealed on Thursday places Najib and a “high-ranking executive” from the bank in a meeting with several people the US now accuses of a massive global fraud – including a Malaysian financier who had been repeatedly flagged by the bank’s compliance teams.
Attendees included the Goldman Sachs banker who’d arranged the bond offerings, Tim Leissner, who’s now admitted to US authorities that he conspired to bribe officials to get the deals done and accepted some US$200 million of the proceeds into accounts he controlled.
Also present was Low Taek Jho, the Malaysian financier known as Jho Low who the US accuses of masterminding the scheme to divert billions of dollars from 1MDB to private accounts, fine art, luxury toys and high-end real estate.
By the time the top Goldman executive met with Najib and Low on that sunny Wednesday in September, Leissner had been asked – and had denied – multiple times that Low was involved in the 1MDB offerings, according to US filings. Several compliance officers at Goldman had also shot down Leissner’s efforts to bring Low aboard as a client. Yet there was Low, an effervescent networker whose free-spending exploits were already tabloid fodder.
That wasn’t the end of Low’s work in New York. Three days later he returned to the Time Warner Center, where Najib was staying at the Mandarin Oriental hotel, according to the court filing, an FBI special agent’s affidavit filed under seal in June.
There, Low and a jeweller presented Najib’s wife, Rosmah Mansor, with a custom-made 22-carat pink diamond pendant and necklace, according to court documents. The jewels cost US$27.3 million. The money came from funds that were raised by Goldman for 1MDB and then diverted into accounts controlled by Low, according to the filings.
The US filings don’t identify many of the meetings’ participants by name. Leissner, Low, Najib and others are identifiable from previously disclosed details. The documents include several other references to senior Goldman Sachs officials who aren’t identifiable, including the one at the Time Warner Center meeting.
It’s unclear whether those references are to the same high-ranking banker or to several, and the filings don’t say whether the executives were aware of the bank’s long-running warnings about Low. There’s no evidence that the executive at the Time Warner Center meeting had knowledge of the necklace delivered days later.
Federal prosecutors in Brooklyn, who are running the probe, likely have a broader view. Leissner’s admission of bribery and laundering conspiracy came in a document called a criminal information, which often suggests a cooperation deal with authorities.
If that’s the case, Leissner could be a crucial guide for global investigations into how a majority of the US$6.5 billion raised by Goldman Sachs, ostensibly to promote development in Malaysia, was allegedly diverted in one of the largest plunderings of public funds in history.
The latest documents may mean Goldman Sachs’s reckoning over the 1MDB affair is far from over. On Thursday, the bank placed Andrea Vella, its former co-head of investment banking, on leave.
Court documents unsealed earlier in the day said an unidentified Goldman official in Asia conspired with Leissner, Low and another then-Goldman banker, Roger Ng, and had knowledge that bribes were being paid.
Prosecutors’ description of the official lines up with that of Vella, who couldn’t be reached for comment.
Goldman Sachs has previously said it believed the money it was raising for 1MDB would be used for development projects.
Through a spokesman, Goldman Sachs, which has said it’s cooperating with authorities, declined to comment.
Najib didn’t immediately comment through a spokesman.
Ng, who was arrested in Malaysia and faces extradition to the US, couldn’t be reached for comment.
Low, whose whereabouts aren’t known, said through a spokesman that he’s innocent.
A representative for Leissner didn’t immediately respond to a request for comment.
Lloyd Blankfein, who stepped down as Goldman Sachs’s chief executive officer last month, told an audience in New York on Thursday that he didn’t know of senior managers missing red flags in the 1MDB dealings.
“I am not aware of them, but I am not in a position to refute facts that I don’t have a complete picture of,” Blankfein said. “We’ve asked for this information also, and we don’t have it,” he said, adding that the matter was an issue of a few employees dodging bank controls and lying about it.
The Time Warner Center meeting came at the tail end of nearly a half-decade of dueling impulses within Goldman, according to government filings.
On one hand, compliance officials across the globe were issuing warnings about Low. On the other, Leissner, Ng and some others in Asia were playing fast and loose, hiding their involvement with Low even as they aggressively pursued Malaysian business with him.
The business culture at the bank, “particularly in South-east Asia, was highly focused on consummating deals, at times prioritising this goal ahead of the proper operation of its compliance functions,” the government wrote.
CULTIVATING JHO LOW
Leissner and Ng’s relationship with Low went back to 2009, when Goldman Sachs and other big banks were digging out of the global financial crisis. Leissner and other Goldman bankers sought to cultivate ties with him to win business with the Malaysian wealth fund, then known as TIA.
Even then, Low was gaining dubious attention.
“Big-Spending Malaysian Is the Mystery Man of City Club Scene,” the New York Post wrote in early November 2009.
Chronicling US$160,000 in bar tabs rung up by the then 20-something Malaysian, it said Low had “burned through hundreds of thousands of dollars at the city’s hottest nightspots in the last three months – and shows no signs of stopping.”
That same month, with a new Malaysian wealth fund up and running – 1Malaysia Development Bhd., known as 1MDB – Leissner was eager to capture its business for Goldman. He emailed Ng and suggested helping to build up Low’s credentials as a successful businessman, by having 1MDB find a company to buy.
Leissner also sought to curry favor with Najib, who as prime minister appointed 1MDB’s board. One early effort, as outlined in the filings, could have run afoul of US rules against hiring officials’ relatives to advance business interests: In a November 2009 email, Ng told Leissner that he met some of Najib’s children at Low’s apartment and was working to get them to join Goldman Sachs.
“Get them in,” Leissner replied to his deputy.
NEW YORK MEETING
One thing Low provided: access to Najib. In late 2009, in a meeting arranged with Low’s help, an unidentified “high-ranking executive” at Goldman met with Najib and Leissner in New York, according to the FBI agent’s June affidavit. Evidence suggests that Low attended, the agent wrote.
Goldman’s first work with 1MDB came in late 2009, according to filings. At the time, based on emails reviewed by the FBI, Leissner and Ng were both aware of Low’s relationship with Najib. Months later, Low asked Ng to blind-copy his name on emails, so his involvement in 1MDB affairs wouldn’t be apparent.
Yet Leissner and Ng also spent years, from 2009 to 2011, attempting unsuccessfully to bring Low aboard as a Goldman client.
When they tried to get him an account in Goldman’s private wealth-management arm in Switzerland in 2009, the bank’s compliance group said that the source of Low’s wealth wasn’t clear and that the press surrounding his lavish spending was a negative.
In 2011, Leissner put Low forward for a similar private wealth account in Singapore – and was batted down by a different group of compliance officials.
“We have pretty much zero appetite for a relationship with this individual,” one compliance employee wrote.
Goldman’s Europe, Middle East and Africa team, as well as its Intelligence Group, had vetted Low and found “significant adverse information” about his wealth sources, according to the US.
In another effort to legitimise Low, in early 2011 Leissner approached Goldman about representing a private equity client who wanted to buy a gold mine in Kazakhstan.
After learning that the firm was controlled by Low, the bank’s compliance group balked.
Then, according to the filing, a Goldman deal team returned with another proposal to buy the mine, by a different private equity group. Yet that firm, too, was controlled by Low, the bank’s Intelligence Group found, calling the deal “even more problematic.”
‘NO ROLE’ FOR LOW
Leissner continued to deny Low’s involvement in 1MDB deals, as Goldman closed in on its first bond sale for the fund in May 2012, according to the filings.
On April 4, during a firmwide meeting of the capital and suitability committee, the Intelligence Group’s global co-head asked Leissner about his meeting with Low and a senior official of IPIC, the Abu Dhabi investment firm that was going to partner with 1MDB. Leissner said that although Low hadn’t attended the meeting, he had helped set it up.
The compliance official told Leissner that Goldman Sachs wanted “no role” for Low. “We should ask that any payments from any of (sic) participants to any intermediaries are declared and transparent,” the official added, according to the filing.
Leissner acknowledged the instruction. He, Ng and other members of his team added that there were no finders or intermediaries in the bond deal, according to the court documents.
Goldman held its first bond sale for 1MDB in May 2012, raising $1.75 billion.
Of that, about $577 million was diverted to bank accounts controlled by an Abu Dhabi investment firm. From there, about US$295 million was transferred to a shell company controlled by Low. In the ensuing weeks, an account controlled by Leissner and his former wife, a Chinese national, received deposits of the 1MDB cash – US$35 million, and then another US$16.9 million.
The month after the first bond sale, a Goldman compliance official emailed members of Leissner’s team, asking if Low was involved in the transaction.
“Please keep us posted if there are any other politically exposed persons involved in this transaction in a non-official capacity,” the compliance official wrote.
Low wasn’t involved, an unidentified executive director on Leissner’s team wrote.
Over the next year or so, Goldman arranged two more fundraising rounds for 1MDB. Like the first, these were bond offerings, which generated higher fees for the bank than other forms of capital raising, Leissner said in his admission.
In all, Leissner said in his guilty plea, more than US$200 million flowed into accounts controlled by him and his ex-wife, as part of a global flow of money that also allegedly bought a luxury yacht, paid for a movie production and bought jewels for Low’s love interests.
The next September brought Leissner, Low, Najib and the high-level Goldman executive together in New York, along with another 1MDB official and a relative of Najib. The purpose of the meeting, according to the FBI agent’s affidavit: To discuss more business opportunities for Goldman in Malaysia, including with 1MDB.
Source: Read Full Article