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Goldman Sachs is said to try to avoid pleading guilty in 1MDB scandal
[NEW YORK] Goldman Sachs is trying to get federal prosecutors to ease up on the bank for its role in a brazen scheme to loot billions of dollars from a Malaysian sovereign wealth fund.
Lawyers for the bank have asked Deputy Attorney General Jeffrey Rosen to review demands by some federal prosecutors that Goldman pay more than US$2 billion (S$2.79 billion) in fines and plead guilty to a felony charge, according to three people briefed on the matter.
The bank has sought to pay a lower fine and avoid a guilty plea, according to the people, who spoke on condition of anonymity because the talks were continuing.
The request, which was made several weeks ago, is not unusual for a high-profile corporate investigation and often comes in the final stage of settlement talks. But it has been a point of pride for Goldman that it has never had to admit guilt in a federal investigation, and the scandal has already been a black eye for the bank.
Authorities in the United States and Malaysia say more than US$2.7 billion was diverted from the fund, known as 1MDB, in a scheme that involved flamboyant financier Jho Low, the country's former prime minister, and other powerful people. The fund was meant to finance projects for the benefit of the people of Malaysia, but some of the cash went to buy luxury apartments, yachts and paintings and even to finance the movie The Wolf Of Wall Street.
Negotiations have been delayed at times because of the Covid-19 health crisis, but the people said they expected a resolution of the criminal investigation by early September. The probe has been led by prosecutors in Brooklyn and with the money laundering and kleptocracy group in Washington.
Representatives for prosecutors in Brooklyn and the Justice Department declined to comment. Jake Siewert, a Goldman spokesman, said the bank was "continuing to engage with all relevant authorities".
A settlement would resolve Goldman's place in the nearly five-year federal investigation into allegations of foreign bribery, corruption and money laundering involving 1MDB, more formally known as the 1Malaysia Development Berhad fund. Goldman raised US$6.5 billion for the fund, earning US$600 million in fees.
Two former Goldman executives were charged in the US.
One, Tim Leissner, has already pleaded guilty and is cooperating. He said that he and others at Goldman conspired to circumvent the bank's internal controls to work with Low to pay bribes to officials in Malaysia in order to secure the lucrative bond work for the bank.
Leissner, who is married to fashion designer and model Kimora Lee Simmons, personally profited from the scheme and agreed to forfeit up to US$43.7 million.
Low, who is believed to be living in China, has also been charged. The former prime minister, Najib Razak, was charged in Malaysia. A verdict in his trial on corruption charges could come next month.
Riza Aziz, the stepson of Najib and one of the producers of The Wolf Of Wall Street, reached a monetary settlement last month with Malaysian authorities, who dropped money laundering charges against him and agreed to enter a judgment of acquittal.
Prosecutors in the US began investigating in 2015, but the case became one of the top Wall Street enforcement matters during the Trump administration.
A watchdog group, Citizens for Responsibility and Ethics in Washington, recently said it wanted to know more about the interest of Trump appointees in the case.
Attorney General William Barr and Assistant Attorney General Brian Benczkowski - both of whom previously worked at Kirkland & Ellis, one of the firms representing Goldman Sachs - obtained ethics waivers that allowed them to participate in the 1MDB investigation. (Rosen had been a lawyer at Kirkland, but he did not need an ethics waiver because he had left the law firm more than two years ago.)
"This is a hugely significant case, and we are trying to figure out if we need to be concerned whether there are conflicts of interest on the part of leading Department of Justice officials," said Noah Bookbinder, the organisation's executive director.
In February, the group sent a Freedom of Information Act request to the Justice Department seeking copies of emails or any other records documenting either man's involvement in the 1MDB investigation. The department, which has not produced any documents, declined to comment on the request.
On Wednesday, Mr Benczkowski told Justice Department staff that he was leaving as of July 3. In an e-mail, the department cited the work by prosecutors on 1MDB as one of his accomplishments.
The department's pursuit of the 1MDB case is notable because the Trump administration and Mr Barr have not made white-collar prosecutions a top priority.
The prosecution of white-collar crime has never been so low since tracking began in 1986, according to Trac, a federal criminal justice database affiliated with Syracuse University.
"If he does not want to be as aggressive on corporate crime, that is his prerogative," Rebecca Roiphe, a former prosecutor and professor at New York Law School who specialises in legal ethics, said of Mr Barr. "But these kind of appeals can give cause for concern when there are things that the public can't see what is being done."
Prosecutors in Malaysia have filed their own criminal charges against the bank and 17 executives, and are said to also be seeking a multibillion-dollar penalty.
In its appeal to Mr Rosen, Goldman contends that any fine from the Justice Department should be mitigated by what it will have to pay to Malaysia, as well as regulators like the New York Department of Financial Services and the Securities and Exchange Commission, according to the people briefed on the matter.
The bank also wants Mr Rosen to reduce a potential guilty plea by one of its foreign subsidiaries to something less scarring, like a deferred prosecution agreement, the people said. Under such an agreement, which is common in foreign corrupt practices cases, all charges are dismissed after a designated time.
David Solomon, the bank's chief executive officer, has apologised several times for Goldman's role in the 1MDB scandal. He has attributed the wrongdoing to a couple of rogue employees.
Besides Leissner, prosecutors in the US have charged former Goldman banker Roger Ng, who is awaiting trial on foreign bribery and money laundering charges. A third former Goldman executive, Andrea Vella, was not charged but prosecutors referred to him as a co-conspirator in court filings. He has been barred from the financial industry by the Federal Reserve.
Even with a settlement, federal prosecutors will not be done with the 1MDB matter.
Leissner, who pleaded guilty in August 2018, had been scheduled for sentencing this month but that was recently moved to January. Prosecutors, who have not publicly disclosed the terms of Leissner's bail, made the request in a sealed letter to a federal judge.
Ng, who pleaded not guilty, is set to go on trial in Brooklyn federal court early next year.
Low has never appeared in federal court.