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DOJ Announces FCPA And Related Enforcement Action Against Individuals Associated With Goldman Sachs In Connection With 1MDB Fund

In arguably one of the most high-profile individual Foreign Corrupt Practices Act enforcement actions in recent years, the DOJ announced [1] yesterday that Low Taek Jho (Jho Low [2]), Ng Chong Hwa (Roger Ng – a former managing director at Goldman Sachs), and Tim Leissner (the former Southeast Asia Chairman at Goldman Sach and Participating Manager Director) were charged with FCPA offenses for paying bribes to various Malaysian and Abu Dhabi officials in connection with 1Malaysia Development Berhad (1MDB), Malaysia’s state-owned and state-controlled investment development company. The individuals were also charged with conspiring to launder billions of dollars embezzled from 1MDB.

Low, Ng Indictment [3]

In the criminal indictment, Low is described as:

“an intermediary in relation to 1MDB and other foreign government officials on numerous financial transactions and projects involving [Goldman Sachs] and others, though he did not hold a formal position at 1MDB nor was he ever employed by the Governments of Malaysia or Abu Dhabi.”

Ng is described as:

“a Malaysian national who was employed as a Managing Director by various subsidiaries, and acted as an agent and employee of [Goldman Sachs] from approximately 2005 to May 2014.”

1MDB is described as:

“[being] created to pursue investment and development projects for the economic benefit of Malaysia and its people, primarily relying on debt to fund these investments. 1MDB ‘s development projects were focused in the areas of energy, real estate, tourism and agribusiness. 1MDB was overseen by senior Malaysian government officials, was controlled by the Government of Malaysia and performed a government function on behalf of Malaysia. […] 1MDB was thus an ‘instrumentality’ of a foreign government …”.

Foreign Agency A is described as:

“[A]n investment fund wholly owned by the Government ofAbu Dhabi. It was established by the Government ofAbu Dhabi pursuant to an Emiri Decree in or around 1984, with a mandate to advance Abu Dhabi’s natural petroleum wealth for the development of the emirate. Foreign Agency A was overseen by senior Abu Dhabi government officials, was controlled by the Government of Abu Dhabi, which appointed all the members of Foreign Agency A’s board of directors, and performed a government function on behalf of Abu Dhabi. Foreign Agency A was thus an ‘instrumentality’ of a foreign government …”.

Under the heading “Overview of Criminal Scheme,” the indictment alleges:

“1MDB was created to pursue investment and development projects for the economic benefit of Malaysia and its people. However, between approximately 2009 and 2014, billions of dollars were misappropriated and fraudulently diverted from 1MDB through various means, in part for the purpose of paying bribes to foreign officials. The defendants Low, Ng … and others conspired to launder the proceeds of that criminal conduct in and through the U.S. financial system. These laundered funds were used, in among other ways, to pay bribes to obtain and retain business for [Goldman Sachs], and for the personal benefit of the co-conspirators and their relatives and associates, including, among other things, for the purchase of luxury residential real estate in the United States and artwork from an auction house in New York, New York, and the funding of major Hollywood films.

The defendants Low and Ng, while Ng was acting within the scope of his employment as an agent of [Goldman Sachs], with the intent, at least in part, to benefit U.S. [Goldman Sachs], together with others, conspired to obtain and retain business from 1MDB for [Goldman Sachs] through the promise and payment of bribes to government officials in Malaysia and Abu Dhabi. Low, Ng … and others also conspired to launder funds embezzled from 1MDB, some of which were used to pay bribes to government officials in Malaysia and Abu Dhabi, through financial systems in the United States and elsewhere. As part of the scheme, Low, Ng … and others used Low’s close personal relationships with government officials in Abu Dhabi and Malaysia, including Low’s relationship with Malaysian Official #1, to obtain and retain 1MDB business for [Goldman Sachs] through the promise and payment of bribes to these government officials.

In the course of the scheme, Low, Ng … and others obtained and retained 1MDB business for [Goldman Sachs], including three bond offerings that raised a total of approximately $6.5 billion for 1MDB in 2012 and 2013. These three bond offerings and related transactions ultimately earned [Goldman Sachs] approximately $600 million in fees and revenue and resulted in Ng … and others receiving large bonuses from [Goldman Sachs] and enhancing their professional reputations at [Goldman Sachs].

Although the stated purpose of the approximately $6.5 billion raised by the three bond transactions was to support 1MDB projects for the benefit of the Malaysian people, more than $2.7 billion was instead misappropriated by Low, Ng … and others and distributed, in part, as bribes and kickbacks to government officials in Malaysia and Abu Dhabi, including 1MDB Official #1, 1MDB Official #2, 1MDB Official #3, Malaysian Official #1 and Abu Dhabi Official #1 and their families …”.

In order to get the deals, Ng also conspired with other employees and agents of [Goldman Sachs] … to knowingly and willfully circumvent the internal accounting controls of [Goldman Sachs] in connection with the three 1MDB bond transactions and other 1MDB business. [Goldman Sachs’s] internal accounting controls were overseen and enforced by its compliance function (the “Compliance Group”) and part of its legal department, referred  to internally as the “Business Intelligence Group” (the “Intelligence Group”). These groups worked in conjunction with, and as part of, various committees in reviewing transactions, including the three 1MDB bond deals, for approval. However, the business culture at [Goldman Sachs], particularly in Southeast Asia, was highly focused on consummating deals, at times prioritizing this goal ahead of the proper operation of its compliance functions.

Ng … and other employees and agents of [Goldman Sachs] knew that Low played a central role in the bond transactions, including by acting as an intermediary between [Goldman Sachs], 1MDB and other Malaysian and Abu Dhabi government officials. Ng … and other employees and agents of [Goldman Sachs] also knew that bribes had been promised to these officials to secure 1MDB business for [Goldman Sachs]. Ng … and other employees and agents of [Goldman Sachs] conspired to conceal that and other information from [Goldman Sach’s] Compliance Group and Intelligence Group to prevent those groups from attempting to stop [Goldman Sachs] from participating in the lucrative transactions. Based on, among other things, their experience at [Goldman Sachs] and in the region, the willingness of co-conspirators and colleagues to assist them, the high fees that the 1MDB deals would generate for [Goldman Sachs] of the deals were successful, and a system of internal accounting controls at [Goldman Sachs] that could be easily circumvented, Ng … and others believed that they would have, and they in fact did have, repeated success in concealing Low’s involvement from, and pushing these deals through, [Goldman Sachs] control functions to obtain very lucrative business for [Goldman Sachs], themselves and others.”

[4]

Based on the above, the indictment charges Low and Ng with conspiracy to violate the FCPA’s anti-bribery provisions invoking both the 78dd-1 and 78dd-3 prongs of the FCPA. Among other overt acts, the indictment allegs that various meetings in connection with the bribery scheme took place in Los Angeles and New York. The indictment also alleges:

“[A]t Low’s request, a high-end New York jeweler (“N. Y. Jeweler #1 “) met with Low, Malaysian Official #1 and the wife of Malaysian Official #1 at a hotel in New York, New York to show a pink diamond necklace that N.Y. Jeweler #1 had designed for Malaysian Official #1 ‘s wife. Approximately three weeks earlier, the pink diamond necklace was purchased using approximately $27.3 million, which funds were sent from a shell company beneficially owned and controlled by Low and other co-conspirators.

Low … and others caused approximately $4.1 million to be transferred via wire from Management Company #1 Account to the U.S. bank account of N.Y. Jeweler #1, in part, to pay for certain gold jewelry for the wife of Malaysian Official #1.”

The indictment also charges Ng with conspiracy to violate the FCPA’s internal controls provisions and both Low and Ng with conspiracy to commit money laundering.

Leissner Information [5]

In the criminal information, Leissner is charged, based on the same core conduct described above, with conspiracy to violate the FCPA’s anti-bribery provisions and internal controls provisions and conspiracy to commit money laundering.

As noted in the DOJ’s release, Leissner pleaded guilty and has been ordered to forfeit $43.7 million as a result of his crimes.

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