As highlighted in this prior post, in November 2018 the DOJ criminally charged former Goldman Sachs executives Tim Leissner and Ng Chong Hwa (Roger Ng) (along with Low Taek Jho – Jho Low) with Foreign Corrupt Practices Act 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.
Leissner pleaded guilty and in October Goldman Sachs resolved a net $1.66 billion FCPA enforcement action based on the same conduct. (See additional posts here and here).
Ng is mounting a defense and recently filed this motion to dismiss (an entire section of which is redacted). As highlighted below, Ng argues that the DOJ’s case against him suffers from several factual errors and legal deficiencies. Ng also suggests that the DOJ scripted Leissner’s guilty plea and that Goldman’s DPA was entered into for reasons of risk aversion and otherwise compromises his ability to defend himself.
In summary fashion, the motion states:
“Roger Ng waived extradition from his home country of Malaysia to voluntarily leave his wife and young daughter, who have not seen him since May of 2019 and November of 2018 respectively, to come to the United States and bravely engage our justice system and prove his innocence. He and his counsel argue in these motions that this Indictment is deeply flawed and that there are compelling reasons to dismiss these charges and allow him to return home. He and his counsel thank the Court for agreeing to permit an oversized submission in this matter. This case is both massively complex and direly important to him and we appreciate the time the Court has taken and will take in resolving these issues.
As part of the Government’s effort to make Goldman pay for its corporate-wide failure to recognize that Low and Leissner were using the company as part of a criminal scheme, it has errantly indicted Ng, who, the evidence will show, was absolutely not involved in the stunning crimes committed by others, and whose only meaningful role was that he introduced Low to Leissner at a time when neither he nor anyone else knew Low was simply a criminal. Leissner would soon join forces with Low, as had many powerful figures before him, and become part of what in reality was a massive Ponzi scheme that Low commenced in 2007 and that would crescendo in a potentially lucrative Initial Public Offering on an entity called 1MDB Energy in late 2014 or 2015.
The Indictment is remarkable because it seemingly acknowledges that the three Goldman bond deals in the Indictment are part of a far larger scheme, involving diverse participants and other crimes, all with Low at the center. The Indictment, however, steers clear of many of the other crimes and much of the conduct taking place between 2009 and 2014 by Low and others that are set forth in scores of other filings by the U.S. Department of Justice. The Government does this because if the Court or a jury viewed the totality of the conduct, the conduct would look far less like an FCPA bribery and more like a series of frauds and thefts in the nature of a massive Ponzi scheme. The problem of course with these events being a Malaysian-based fraud scheme, as opposed to an FCPA violation concerning Goldman Sachs Group, is that the U.S. would have missed out on the massive payday from October 22, 2020, when Goldman Sachs Group entered into a Deferred Prosecution Agreement (“DPA”) and agreed to pay $2.9 billion. As a result, and as is often the case when a law is stretched to accomodate facts that do not naturally fit, the Indictment in this case suffers from a host of serious problems, some of which are addressed in these motions.
First, the Indictment should be dismissed for lack of venue.
Second, by creating the non-existent entity it calls “U.S. Financial Institution #1” as a combination of Goldman Sachs Group, Inc., an issuer of U.S. securities, and other Goldman Sachs entities which are not issuers, the Government eliminates from the jury’s consideration a statutory element of FCPA bribery, specifically that Ng must be an employee or agent of an issuer. Accordingly, Count One of the Indictment should be dismissed.
Third, Count Two should be dismissed because the Indictment fails to allege that Ng conspired to circumvent a set of internal accounting controls cognizable under the FCPA.
Fourth, Count Three should be dismissed for failure to provide what the Constitution requires of an Indictment and because one of its predicates cannot be specified unlawful activity for money laundering under the “reference canon.”
Fifth, we petition the Court to modify the provision in the DPA that prevents Goldman employees from testifying in a manner inconsistent with the “facts” in the DPA, as that provision serves to prevent witnesses from telling the truth at this trial; the Court should also modify the DPA to require that Goldman makes its employees available as witnesses for the defense.
Sixth, the Court should order the Government to promptly produce Brady material, including the communications between the Government and counsel for Tim Leissner, communications between the Government and Goldman and all exculpatory material related to information in paragraphs 40 and 53 of the Indictment.
Seventh, the Court should Order that the Government change the designation of over 110,000 items of discovery from “Attorneys’ Eyes Only” to “Sensitive Discovery Material.”
As to FCPA specific issues, the motion argues:
“The Indictment does not allege that Ng was an agent of, or employed by, an actual issuer of U.S. Securities. Instead, the Indictment creates a legal fiction called U.S. Financial Institution #1. By creating U.S. Financial Institution #1 as an artificial combination of different business entities, one of which (Goldman Sachs Group, Inc.) is an issuer of U.S. securities and others of which (including Ng’s actual employers) are not, the Government relieves itself of having to prove the statutory element that Ng must be an employee or an agent of an issuer. The first object of Count One charges Ng with conspiring to violate the Foreign Corrupt Practices Act (“FCPA”), contrary to Title 15, United States Code, Sections 78dd-1, 78ff(a), and 78ff(c)(2)(a), in violation of Title 18, United States Code, Section 371. (Ind. ¶ 59(a).) Section 78dd-1, commonly known as the “issuer” prong of the FCPA’s bribery statute, makes it unlawful “for any issuer . . . or for any . . . employee, or agent of such issuer” to corruptly use means of interstate commerce in furtherance of a bribery scheme. 15 U.S.C. § 78dd-1(a). Therefore, one element of an “issuer” FCPA violation alleged against an individual is that the defendant is an “employee[] or agent” of an “issuer.” An “issuer” is defined as “any person who issues or proposes to issue any security.” 15 U.S.C. § 78c(a)(8). The FCPA, however, further restricts the definition of the term – and therefore further restricts the universe of people who can be held liable under the FCPA’s bribery provision – to only an “issuer” “which has a class of securities registered pursuant to section 78l of [Title 15] or which is required to file reports under section 78o(d) of [Title 15].” See 15 U.S.C. § 78dd-1(a).
The problem with the Indictment is that it invented “Financial Institution #1,” a made-up entity that does not exist. Paragraph 3 of the Indictment reads in full:
U.S. Financial Institution #1 was a global investment banking, securities and investment management firm incorporated in Delaware and headquartered in New York, New York. It conducted its activities primarily through various subsidiaries and affiliates (collectively “U.S. Financial Institution #1”), including those that employed the defendant Roger Ng and some of his co-conspirators, including Co-Conspirator #1. U.S. Financial Institution #1 had a class of securities registered pursuant to Section 12 of the Securities and Exchange Act of 1934 (Title 15, United States Code, Section 78) (the “Exchange Act”) and was required to file reports with the U.S. Securities and Exchange Commission under Section 15(d) of the Exchange Act (Title15, United States Code, Section 78o(d)). As such, U.S. Financial Institution #1 was an “issuer” within the meaning of the FCPA, Title 15, United States Code, Section78dd-l(a).
Although this definitional paragraph may seem innocuous on its face, it has the effect of eliminating the Government’s obligation to plead (and later, to prove) an essential element of an FCPA “dd-1” bribery charge, specifically that Ng was an employee or agent of an “issuer.” This is because “Financial Institution #1,” as defined by the Indictment, is not a single, actual “issuer” of securities, as the FCPA requires. Accordingly, no jury can determine Ng guilty of conspiracy to violate the FCPA as the agent of an “issuer,” because no actual “issuer” of securities is set forth in the Indictment.”
Regarding internal controls, the motion argues:
“Count Two charges that Ng conspired with others to circumvent the internal accounting controls of an “issuer.” Read properly, the statutory text focuses on whether an individual circumvented the financial accounting of the transactions and assets of a company deemed an “issuer” under the FCPA. Those who conspire to pay bribes generally use their company’s funds, and conceal the nature of the payments by describing them in the company’s books and records as legitimate business expenses. In such circumstances, internal accounting controls are circumvented because those examining the company’s assets and liabilities would not be able to discover the illegal bribe. For example, if a Goldman employee used Goldman funds to pay a bribe and then accounted for the bribe as a legitimate (as opposed to illegal) expenditure, that would violate the law.
Even the Government must to admit that nothing of the sort happened in this case. Rather, the bribes alleged in this case were paid from stolen 1MDB funds, not Goldman funds. These bribes did not involve any of Goldman’s funds and therefore had nothing to do with Goldman’s internal accounting controls.
By charging Ng in Count Two with conspiring to circumvent Goldman’s internal accounting controls, the Government seeks to radically expand the term “internal accounting controls” to encompass factors wholly unrelated to the financial accounting of Goldman’s assets and transactions. Even viewing the facts in the light most favorable to the Government, its theory of Count Two is plainly inconsistent with the text, the context, and the intent of the internal accounting controls provision of the FCPA and should be dismissed.”
Regarding the Goldman DPA, the motion argues:
“On October 22, 2020, the Department of Justice announced that it had reached a DPA with Goldman. As argued below, two of the DPA’s provisions, whether intended or not, will violate Ng’s constitutional rights at trial and should therefore be modified.
A. The Silence Provision
In addition to collecting $2.9 billion from Goldman, the Government also received something nearly as valuable from the DPA: Goldman’s silence. Under ¶ 23 of the DPA:
The Company expressly agrees that it shall not, through present or future attorneys, officers, directors, employees, agents or any other person authorized to speak for the Company, make any public statement, in litigation or otherwise, contradicting the acceptance of responsibility by the Company set forth above or the facts described in the Statement of Facts.
Making this provision even more stifling, the Government has “sole discretion” in determining “whether any public statement by any such person contradicting a fact contained in the Statement of Facts will be imputed to the Company for the purpose of determining whether it has breached this Agreement.” Id. Should the Government find that Goldman violate this provision, Goldman would be subject to prosecution “for any federal criminal violation of which the [the Government has] knowledge, including, but not limited to, the charges in the Information.” Id.; see also id. at ¶¶ 17-20.
This “silence” provision, enforced at the sole discretion of the Government, ensures that no Goldman employee will contradict the Government’s narrative relating to Goldman’s misconduct – including Ng’s alleged misconduct for which he is charged. This creates a constitutional issue in this case because it is “elementary that criminal defendants have a right to establish a defense by presenting witnesses.” United States v. Williams, 205 F.3d 23, 29 (2d Cir. 2000). The Supreme Court described this fundamental right, “the right to offer the testimony of witnesses, and to compel their attendance, if necessary, is in plain terms the right to prepare a defense, the right to present the defendant’s version of the facts as well as the prosecution’ to the jury so it may decide where the truth lies.” Taylor v. Illinois, 484 U.S. 400, 409 (1988) (quoting Washington v. Texas, 388 U.S. 14, 19 (1967)). “The right to establish a defense by presenting witnesses serves the truth-seeking function of the trial process by protecting against the dangers of judgments ‘founded on a partial or speculative presentation of the facts.’” Williams, 205 F.3d at 29 (quoting Taylor, 484 U.S. at 411).
As the Second Circuit has noted: “Under certain circumstances, intimidation or threats that dissuade a potential defense witness from testifying may infringe a defendant’s due process rights.” United States v. Pinto, 850 F.2d 927, 932 (2d Cir. 1988). In such situations, reversal is warranted where “the government’s conduct interfered substantially with a witness’s ‘free and unhampered choice’ to testify.” Id.
That is precisely what the Government has done in this case. Because of this provision, Goldman employees who are potential exculpatory witnesses for Ng will now be afraid to testify on his behalf out of fear that the Government will find, in its sole discretion, that their testimony contradicts the DPA’s Statement of Facts.”
[…]
B. The Witness Provision
The crux of this case involves conduct alleged to have occurred in Southeast Asia, more than 9000 miles from the Eastern District of New York. Not surprisingly, many of the key trial witnesses are foreign nationals who live and work in Southeast Asia and are therefore beyond this Court’s subpoena power. While this may seem to create an equal issue for both the Government and the defense, the actual disparity is glaring. Under paragraph 5(c) of the DPA, Goldman is obligated to
use its best efforts to make available for interviews or testimony, as requested by the Offices, present or former officers, directors, employees, agents and consultants of the Company. This obligation includes, but is not limited to, sworn testimony before a federal grand jury, in federal trials or at any other proceeding, all meetings requested by the Offices, and interviews with domestic or foreign law enforcement and regulatory authorities.
Because of this provision, the Government can require that Goldman makes its present or former Goldman employees available to testify for the Government at trial. Even before the DPA was filed, Goldman had already provided the Government with access to its employees and had voluntarily made some of its foreign-based employees available to the Government for interviews in the United States.27 (See DPA ¶ 4(b) (noting that Goldman “received partial credit for its cooperation with the Offices’ investigation of the underlying conduct, including: collecting and producing voluminous evidence located in other countries; making regular factual presentations and investigative updates to the Offices; and voluntarily making foreign-based employees available for interviews in the United States.”))
As a result of this provision in the DPA, the Government controls which, if any, Goldman employees will be trial witnesses. This will undoubtedly lead to a one-sided portrayal of the facts. This issue is compounded by the “silence” provision in paragraph 23 of the DPA, which, as noted above, threatens Goldman with violating the DPA if a Goldman employee makes a statement “in litigation or otherwise” that contradicts the facts described in the Statement of Facts. Coupling these provisions, the Government will not only be able to choose which Goldman witnesses will testify at trial (¶ 5(c)) but also control what these witnesses will say at trial (¶ 23).
While the Government has unfettered access to these foreign witnesses, Ng does not. Moreover, as noted in Court on several occasions, counsel is not able to travel to Malaysia to interview potential witnesses because of the country’s Covid-19 restrictions. Unlike the Government, Ng does not have the might of a DPA behind him to require Goldman’s foreign witnesses to travel to the United States and testify in the Eastern District of New York in his defense. This reality has Constitutional consequences, as described above. See Williams, 205 F.3d at 29 (quoting Taylor v. Illinois, 484 U.S. 400, 411 (1988)).”
C. Request for Relief
To redress the Constitutional concerns listed above, counsel firsts requests that the Government agree to modify the Goldman DPA in two ways. First, the “silence” provision should be modified so that it specifically does not apply in the case against Ng. Second, the “witness” provision should be modified to require Goldman to make its employees available as defense witnesses to the same degree it makes its employees available to the Government. By modifying the DPA in this manner, the Government will remove fundamental unfairness that will otherwise permeate the trial.”
If the Government does not agree, we request that this Court use its “supervisory power” that “permits federal courts to supervise ‘the administration of criminal justice’ among the parties before the bar.”
Regarding Goldman’s acknowledgments in the DPA and discussions with the government, the motion argues:
“As a result of its actions regarding 1MDB, Goldman Sachs Group, Inc. faced indictment and the potential loss of its U.S. banking privileges as well as the ability to conduct transactions in dollars, a consequence that could signal the end of the company. Unsurprisingly, Goldman said what it had to say, and its final statements have been memorialized in publicly filed documents. Now, Ng should be entitled to Goldman’s “regular factual presentations and investigative updates” to the DOJ. (See DPA at 4, ¶ 4(b).) He is entitled to know what Goldman has said in presentations to the Government over the past four years and how Goldman’s story changed over time. The Government has explicitly admitted the existence of material that Goldman provided to the Government (see id.), but has not provided it to Ng. Ng has specifically requested this documentation and he has not received it. It is contrary to the Government’s Rule 16 and Brady obligations and it is contrary to the settled law of this Circuit. Ng therefore moves for all material covered by the DPA entered into recently between Goldman and the Government.”
Elsewhere, the motion asserts:
“In this case, it was Goldman in the role of the bandleader who had signed Johnny Fontaine, to bring Judge McMahon’s movie reference to a final resting place. To save its collective skin, on October 22, 2020, Goldman Sachs pled to an Information and signed a plea agreement before Your Honor. In exchange, Goldman Sachs got what it was looking for: It escaped the death penalty. For, as part of the deal struck by Goldman and the Government, the Government gave Goldman Sachs Group a DPA. The DPA is, of course, literally a lifeline for Goldman Sachs: Without it, if the Government had indicted the company, it would almost certainly have gone out of business.”
Regarding whether the DOJ scripted Leissner’s guilty plea, the motion argues:
“On August 28, 2018, Tim Leissner appeared before Your Honor and provided a factual allocution comprised of a variety of admissions regarding his role in one of the largest frauds ever perpetrated, and implicating his one-time friend, and subordinate, Ng. Leissner’s script matched – often word for word – central parts of the Indictment that is now pending against Ng.
[…]
Who wrote these identical words? Leissner or the Government? What communications did the parties have in crafting Leissner’s script? Did Leissner omit some critical piece of information that the Government wanted out? Did Leissner include information that the Government wanted in? Did the Government decide that Leissner should discuss the “culture” of his office, or did Leissner make that call? And, if there was coordination between Leissner and the Government, why did that happen?”
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