Goldman Sachs Group’s dirty laundry has been airing in a New York courtroom, from a fast-escalating racket to loot Malaysia’s wealth fund to the handsome compensation given a high-flying grifter.
Tim Leissner, a former top banker at Goldman and the star witness in the federal bribery trial of his colleague Roger Ng, has spent the last week recounting troubling behaviour that went on for years at Goldman and would make a compliance officer’s skin crawl.
And he’s not done. Leissner, who pleaded guilty for his role in a scheme that pilfered billions from the fund known as 1MDB through a series of bond deals arranged by Goldman, is due back in court Tuesday for more testimony. He’s cooperating with prosecutors.
Among his many admissions so far: frequently lying to compliance officers, working on unapproved side deals, trying to get Goldman jobs for the Malaysian prime minister’s kids, arranging hundreds of millions of dollars in bribes, pocketing more than US$60 million in kickbacks for facilitating 1MDB’s bond deals, and getting paid US$12 million by Goldman the first year he did so.
In fact, Leissner told the jury, the bank showered praise on him and his team for their lucrative work on the first bond transaction -- so they figured they’d do it again. The firm congratulated him on “an amazing transaction for Goldman Sachs” and he called the 1MDB relationship “a marriage made in heaven.”
“We were all very enthusiastic and euphoric about our success” with the US$1.75 billion Project Magnolia, as the first bond deal was called, said Leissner, 52. “Accordingly, we were quite keen on engaging with 1MDB again.”
See also: Najib offers unreserved apology, regrets that 1MDB scandal happened under his watch
And they did.
‘A Replica’
Ng, 49, was Goldman’s head of investment banking in Malaysia and Leissner, then head of Asia investment banking, was his boss. Ng is accused of conspiring with Leissner and Malaysian financier Jho Low, now a fugitive, to divert hundreds of millions of dollars from three deals totalling US$6.5 billion for the fund, 1Malaysia Development Bhd, through kickbacks and bribes to Malaysian and Abu Dhabi officials. Low, a fugitive, engineered the scheme, according to the U.S. The deals generated US$600 million for Goldman.
The second transaction, which also raised US$1.75 billion, was called Project Maximus and was intended to be “a replica” of the first deal, with the same institutions and the same people getting bribes and kickbacks, Leissner told the jurors. Almost immediately after closing Maximus, he and Low began working on a third 1MDB bond issuance, Project Catalyze, for US$3 billion, according to the US.
But Leissner said he and Ng weren’t paid a kickback on that deal. He said Low told him the cash had to go toward funding the prime minister’s re-election campaign, providing handouts to voters -- many of whom “are actually fairly poor,” he said.
Leissner and Ng had code words for their kickbacks that they would use on BlackBerry Messenger when they worried they might not get the money, Leissner told the court.
“I think it was that the cakes or the cookies weren’t coming fast enough,” he said.
Goldman spokeswoman Maeve DuVally declined to comment on Leissner’s testimony. The scandal cost the bank more than US$5 billion in fines and forced its Asia division to plead guilty to a US criminal charge.
Missed Payment
Ng, the only Goldman banker to go to trial in the 1MDB scandal, has argued he was the first to inform Goldman compliance about Low, sending “red flag warnings” not to do business with him. His legal team contends that Leissner, who pleaded guilty to money laundering and bribery of foreign officials, is testifying only to get a reduced sentence.
Leissner testified to several instances when everything almost fell apart, including a moment in which 1MDB neared a default when it missed its first interest payment on the Magnolia bonds. The lapse tripped alarm bells within Goldman, Leissner said, and risked triggering an investigation that would expose the whole scam.
For Goldman Sachs, a default by 1MDB would be “a reputational problem and money problem, because we had, of course, taken US$200 million out” of the US$1.75 billion. Personally, he said, he feared an investigation “would uncover, in fact, one of the reasons why there was no money left, which was the scheme.”
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
Leissner said the interest payment was finally made after the bankers reached out to Low, who said “not to worry, because he was making arrangements for the money to be there,” Leissner told the court.
While the late payment didn’t immediately affect Goldman’s banking business with 1MDB, it raised “red flags within our control function,” which requested “further due diligence to be conducted on 1MDB and its operations.”
Hiding Jho Low
Leissner testified that he and Ng concealed the extent of Low’s role in the deals from compliance, which was concerned with his source of wealth. A New York Post report circulating among Goldman bankers at the time described him as a “20-something Wharton grad from Malaysia who has burned through hundreds of thousands of dollars at the city’s hottest nightspots.”
Leissner testified that he and Ng came up with code names for Low including Friend and PMO, for the Malaysian prime minister’s office, to which he had access.
But Leissner said other Goldman officials knew about Low’s involvement. He cited his own boss at the time, Michael Evans, then Asia chairman, as well as several other former executives of the bank.
Leissner told the jurors Evans went with him to visit 1MDB executives after the Magnolia transaction and that Evans thanked the chief executive officer at the time for using Goldman.
“Don’t thank me,” Leissner said the CEO responded. “Thank Jho Low.”
“So Mike knew from that moment,” Leissner told the jury, though he added that previously he had lied to Evans about Low’s involvement.
Tabloid Testimony
On Tuesday the trial turned tabloid for a while as Leissner told the jury that a woman with whom he had an affair blackmailed him into buying her a US$10 million home by threatening to expose his crimes. That was the same day Leissner testified that in 2009 Malaysia’s prime minister, Najib Razak, suggested that in return for the 1MDB business he wanted his children to get jobs at the bank.
“Just met PM’s three children with Jho at his apartment,” Leissner read to the jury from an email Ng sent him. “We’ll work on getting them to join GS.”
Leissner replied to Ng: “Sounds good my friend. Get them in.”
It didn’t work out -- a senior Goldman official rejected the idea -- so Leissner helped get one of the kids in the door at private equity firm TPG.
Side Deals
Leissner also said his and Ng’s dissatisfaction with their Goldman pay motivated their wheeling and dealing. He described efforts they made to supplement their income -- apart from what he said was their role in the 1MDB scam -- with deals that weren’t approved by the bank.
He told the jury that he and Ng tried to help the owner of a copper project in the Philippines sell the business for US$50 million. The deal would have generated a 7.5% commission for the two of them, netting them a US$3.75 million fee. Ng told Leissner that his take would’ve been greater than his annual bonus at Goldman, Leissner testified.
“Roger was not happy with his compensation,” Leissner said. “He felt he should have been paid more.”
15,500 Documents
On Wednesday, the government disclosed that it had failed to turn over more than 15,500 documents related to Leissner. This prompted the judge to pause the trial after Leissner completes his direct testimony, to give the defense time to go through the documents.
Ng’s attorney Marc Agnifilo told the court he might request a mistrial and even a dismissal of the indictment. The trial resumes Tuesday.
The case is U.S. v. Low Taek Jho, 18-cr-538, U.S. District Court, Eastern District of New York (Brooklyn).
Photo of Roger Ng: Bloomberg
