University of Massachusetts Boston Laws and Regulations Research Paper A detailed description of the current event A detailed discussion of the relevant la
University of Massachusetts Boston Laws and Regulations Research Paper A detailed description of the current event
A detailed discussion of the relevant law explain the law from the very beginning, as if your reader knows nothing about the topic; this is how you demonstrate your understanding of the law
Why is it important to the industry? What companies will care about this news story? What will its impact be? Who will win? Why? You can choose to answer any or all of these questions (or any other question).
7-8 pages, double spaced
The paper should be prepared using the APA writing style and guideline for formatting references. You must provide a bibliography, and all direct quotations and data sources must be properly cited.
Please use site below and the attached case I included
https://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act
https://www.forbes.com/sites/korihale/2020/01/21/goldman-sachs-takes-a-1-billion-hit-due-to-ex-hip-hop-banker/#61aec32b73d5
https://theindustryspread.com/sec-charges-former-goldman-sachs-executive-fcpa-violations/
https://www.sec.gov/news/press-release/2019-260 UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 87750 / December 16, 2019
INVESTMENT ADVISERS ACT OF 1940
Release No. 5418 / December 16, 2019
INVESTMENT COMPANY ACT OF 1940
Release No. 33715 / December 16, 2019
ACCOUNTING AND AUDITING ENFORCEMENT
Release No. 4108 / December 16, 2019
ADMINISTRATIVE PROCEEDING
File No. 3-19619
In the Matter of
TIM LEISSNER,
Respondent.
ORDER INSTITUTING
ADMINISTRATIVE AND CEASE-ANDDESIST PROCEEDINGS PURSUANT TO
SECTIONS 15(b) AND 21C OF THE
SECURITIES EXCHANGE ACT OF 1934,
SECTION 203(f) OF THE INVESTMENT
ADVISERS ACT OF 1940, AND SECTION
9(b) OF THE INVESTMENT COMPANY
ACT OF 1940, MAKING FINDINGS, AND
IMPOSING REMEDIAL SANCTIONS AND
A CEASE-AND-DESIST ORDER
I.
The Securities and Exchange Commission (Commission) deems it appropriate and in the
public interest that public administrative and cease-and-desist proceedings be, and hereby are,
instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 (Exchange
Act), Section 203(f) of the Investment Advisers Act of 1940 (Advisers Act), and Section 9(b) of
the Investment Company Act of 1940 (Investment Company Act) against Tim Leissner
(Respondent or Leissner).
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the Offer) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, Respondent admits the Commissions
jurisdiction over him and the subject matter of these proceedings, and consents to the entry of this
Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to Sections 15(b) and
21C of the Securities Exchange Act of 1934, Section 203(f) of the Investment Advisers Act of
1940, and Section 9(b) of the Investment Company Act of 1940, Making Findings, and Imposing
Remedial Sanctions and a Cease-and-Desist Order (Order), as set forth below.
III.
On the basis of this Order and Respondents Offer, the Commission finds 1 that:
SUMMARY
1.
This matter relates to a massive corruption scheme perpetrated by Leissner while
acting as a senior executive of The Goldman Sachs Group, Inc. (Goldman Sachs or the
Company). Leissner, in coordination with other Goldman Sachs senior executives, authorized
and paid bribes and kickbacks to government officials in Malaysia and the Emirate of Abu Dhabi
(Abu Dhabi) in order to secure lucrative business for Goldman Sachs. Leissners actions
resulted in violations of the antibribery, books and records and circumvention of internal
accounting controls provisions of the Foreign Corrupt Practices Act (FCPA).
2.
1Malaysia Development Berhad (1MDB) is a Malaysian state-owned and
controlled investment fund created to pursue projects for the economic benefit of Malaysia and its
people. Between approximately 2009 and 2014, as 1MDB raised capital to fund its projects,
billions of dollars were diverted from 1MDB. The diverted funds included a substantial portion of
the approximately $6.5 billion in capital that 1MDB raised in 2012 and 2013 through three bond
offerings that it executed with Goldman Sachs (the bond deals). As part of the scheme, Leissner
and others bribed government officials in Malaysia and in Abu Dhabi to obtain and retain lucrative
business for Goldman Sachs, including the 2012 and 2013 bond deals, from which Goldman Sachs
earned approximately $600 million.
3.
Leissner willfully violated Section 30A of the Exchange Act by directly
participating in the bribery scheme. He also caused Goldman Sachss books and records to not, in
reasonable detail, accurately or fairly reflect the transactions and dispositions of the companys
assets in violation of Section 13(b)(2)(A) of the Exchange Act, and he willfully aided and abetted
violations of that Section. Additionally, Leissner willfully violated Section 13(b)(5) of the
The findings herein are made pursuant to Respondents Offer of Settlement and are not binding on any other
person or entity in this or any other proceeding.
1
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Exchange Act and Rule 13b2-1 thereunder by knowingly circumventing what internal accounting
controls Goldman Sachs had in place in order to both advance and conceal the corrupt scheme.
Respondent
4.
Tim Leissner, age 50, was employed by Goldman Sachs between April 1998 and
March 2016. Prior to his separation from Goldman Sachs, Leissner was a Participating Managing
Director, Vice Chairman of the Investment Banking Division for Asia Ex-Japan, and Chairman of
South East Asia. Leissner was a coverage banker for various clients in the Asia Ex-Japan region,
including 1MDB. Leissner was at all relevant times an associated person of the Companys U.S.
registered broker-dealer and investment adviser, Goldman Sachs & Co. LLC.
Related Entities
5.
The Goldman Sachs Group, Inc. (Goldman Sachs or the Company) is a U.S.
based global investment banking, securities, and investment management firm headquartered in
New York, New York. The common stock of the Company is registered pursuant to Section 12(b)
of the Exchange Act and is listed for trading on the New York Stock Exchange. The Company is
an issuer within the meaning of the FCPA.
6.
Goldman Sachs & Co. LLC (GS&Co.), a subsidiary of Goldman Sachs, is
registered as a broker-dealer and as an investment adviser with the Commission. GS&Co.s
principal business operations are located in New York, New York. Leissner was associated with
GS&Co. from April 1998 until March 2016.
7.
1MDB was a strategic investment and development company wholly-owned by the
Malaysian government through the Malaysian Ministry of Finance. It was formed in 2009 when
the Malaysian government took control of a municipal entity called Terengganu Investment
Authority (TIA). 1MDB was 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 Malaysian government, and performed a government function on behalf of Malaysia.
8.
The Middle Eastern Sovereign Wealth Fund was an investment fund whollyowned by the government of Abu Dhabi. It was established by the government of Abu Dhabi
pursuant to an Emiri Decree in or around 1984 with a mandate to advance Abu Dhabis natural
petroleum wealth for the development of the emirate. The Middle Eastern Sovereign Wealth Fund
was overseen by senior Abu Dhabi government officials, was controlled by the Abu Dhabi
government, which appointed all the members of the Middle Eastern Sovereign Wealth Funds
board of directors, and performed a government function on behalf of Abu Dhabi.
9.
The Middle Eastern Investment Firm, a subsidiary of the Middle Eastern
Sovereign Wealth Fund, was a public joint stock company incorporated under the laws of Abu
Dhabi.
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10.
Jho Low, age 38, is a Malaysian national who advised on the creation of TIA,
1MDBs predecessor entity. Jho Low has never held a formal position at 1MDB. Jho Low
nevertheless exercised significant control over 1MDB during the time period relevant to this Order.
Jho Low worked as a finder and intermediary in relation to 1MDB officials and other government
officials on numerous financial transactions and projects involving Goldman Sachs.
11.
Roger Ng, age 47, is a Malaysian national who was employed as a Managing
Director and acted as an agent of Goldman Sachs. He worked with Leissner at Goldman Sachs
from approximately 2009 to May 2014.
12.
Najib Razak, age 66, was the Prime Minister of Malaysia from 2009 to 2018 who
held a position of authority with 1MDB.
FACTS
Background
13.
1MDB was formed in or around 2009, when the Malaysian government asserted
federal control over TIA, which previously had been a development fund controlled by the
Malaysian state of Terengganu.
14.
1MDB was created for the stated purpose of pursuing investment projects for the
economic benefit of Malaysia and its people, relying mainly on debt to support these projects.
1MDB was supervised by senior Malaysian government officials, controlled by the Malaysian
government, and performed a government function on behalf of Malaysia. Upon 1MDBs
formation, Najib Razak assumed a position of authority with 1MDB. Najib Razak had the
authority to approve all appointments to, and removals from, 1MDBs Board of Directors and
1MDBs Senior Management Team. In addition, any financial commitments by 1MDB, including
investments, that were likely to affect a guarantee given by the government of Malaysia for the
benefit of 1MDB or any policy of the Malaysian government, required the approval of Najib
Razak.
Malaysian Intermediary Jho Low
15.
Low had advised on the creation of TIA, 1MDBs predecessor entity. Although he
did not hold a formal title with 1MDB or the Malaysian government, Low worked as a finder and
intermediary in relation to 1MDB officials and other government officials on multiple financial
transactions and projects, including transactions involving Goldman Sachs.
16.
Goldman Sachs, through its participating managing director Leissner, was retained
to provide financial advice to the government of Malaysia in connection with the 2009 federal
takeover of TIA (Project Tiara). Notwithstanding Lows public denials about any involvement
with 1MDB during this time, while working on this project, Leissner and other senior executives at
Goldman Sachs knew that Low worked as a finder and intermediary in relation to 1MDB, and
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began to actively work to conceal Lows involvement in Goldman Sachs-related transactions from
others at the firm. Leissner and others, including Goldman Sachs Managing Director Roger Ng, at
the time knew that Low remained close to 1MDB officials and other government officials in
Malaysia, including Najib Razak, and Abu Dhabi. During this time, Low also specifically
requested that Leissner, Ng and others conceal his involvement in Goldman Sachss business.
17.
Goldman Sachss various internal FCPA and accounting controls were overseen
and enforced by its compliance function (the Compliance Group) and its legal department (the
Intelligence Group). These groups worked in conjunction with, and as part of, various Goldman
Sachs committees (GS Committees) in reviewing transactions for approval.
18.
Goldman Sachss written policies required bankers who submitted transactions to
GS Committees for approval, such as Leissner, to broadly disclose information relevant to the
matters at issue, including a full assessment of the transaction risks. Nevertheless, while
working on Project Tiara and thereafter, Leissner selectively concealed from other employees of
Goldman Sachs, including the GS Committees and their members, that he was working with Low
as an intermediary to secure the deals. Leissner did this in an effort to avoid potential heightened
scrutiny of the bond deals by the GS Committees, the Compliance Group or the Intelligence
Group.
19.
Between in or around September 2009 and in or around March 2011, Leissner and
others, including Ng, supported at least three attempts to make Low a formal client of Goldman
Sachs. Leissner and Ng supported these efforts because, in part, they believed that Low would
work to deliver lucrative business deals, including from 1MDB, for the ultimate benefit of
Goldman Sachs, Leissner, Ng and others. These attempts were unsuccessful because certain
personnel within Goldman Sachss Compliance Group and Intelligence Group had previously
refused to approve any business relationship with Low. Their refusal was based, in part, on
concerns that these groups had concerning the source of Lows wealth. Personnel within the
Compliance Group and the Intelligence Group communicated the rejection of Lows application to
Leissner and others within Goldman Sachs. Notwithstanding their knowledge of the concerns that
had been raised about Low not being a suitable client for Goldman Sachs, Leissner and other
employees and agents of Goldman Sachs continued to work with Low based upon their belief that
Low would help ensure that government officials in Malaysia and Abu Dhabi would deliver
lucrative business deals to Goldman Sachs.
The Bond Deals
20.
Later, when Goldman Sachs was retained by 1MDB to assist it with three large debt
financings in 2012 and 2013 the bond deals Leissner and other senior executives of Goldman
Sachs knew that Low was playing a central role in these transactions, including by acting as an
intermediary between Goldman Sachs, 1MDB and other Malaysian and Abu Dhabi government
officials. Leissner and other senior executives of Goldman Sachs also knew that Low promised to
pay bribes and kickbacks to these officials to secure 1MDB business for Goldman Sachs.
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21.
Throughout 2012 and 2013, Leissner and other senior executives of Goldman Sachs
actively worked to obtain and retain business from 1MDB for the benefit of Goldman Sachs
through the promise and payment of bribes and kickbacks to government officials in Malaysia and
Abu Dhabi using, in part, misappropriated and embezzled proceeds from the bond deals. During
this time, through the course of the scheme, Leissner and others paid millions of dollars in bribes
and kickbacks to government officials, and obtained 1MDB business for Goldman Sachs, in
particular, the three bond deals. These three bond financing transactions were referred to internally
at Goldman Sachs as Project Magnolia, Project Maximus and Project Catalyze.
22.
Goldman Sachss role as underwriter for the bond deals meant that the firm would
be using its own capital to fund the initial purchase of the 1MDB bonds. Accordingly, the
transactions were formally reviewed and approved by multiple GS Committees including the
Firmwide Capital Committee (Capital Committee). The Capital Committees charter states as
follows:
The Committee provides approval and oversight globally of debt-related
transactions, including principal commitments of the Firms capital. The
Committee aims to ensure that business, reputational and suitability standards for
underwritings and capital commitments are maintained on a global basis.
23.
Although the purported 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,
Leissner and others instead planned and executed a scheme to misappropriate more than $2.7
billion and distribute the money as bribes and kickbacks to government officials in Malaysia and
Abu Dhabi, including but not limited to Najib Razak, as well as to other participants in the scheme
and their families, including Leissner.
Goldman Sachs Obtains Project Magnolia from Malaysian Sovereign Wealth Fund
24.
In or around early 2012, Leissner and other senior executives of Goldman Sachs
met in Malaysia with others, including Low and other 1MDB officials. A purpose of the meeting
was to discuss 1MDBs proposed purchase of a Malaysian energy company (Malaysian Energy
Company A) and Goldman Sachss preparedness to help obtain financing for the purchase.
25.
During that meeting, Leissner and other senior executives of Goldman Sachs
discussed with Low the type of financial guarantee that 1MDB needed to obtain for the bond
issuance to meet Goldman Sachss underwriting requirements. They ultimately agreed on a
guarantee from the Middle Eastern Sovereign Wealth Fund. Leissner, Ng and another senior
executive of Goldman Sachs understood that Low was acting as an intermediary between 1MDB,
Najib Razak and other government officials from Abu Dhabi.
26.
In late February 2012, Leissner and other senior executives of Goldman Sachs met
with Low and other 1MDB officials in London to discuss the proposed financing. During this
meeting, Low explained that in order to secure the guarantee from the Middle Eastern Sovereign
Wealth Fund discussed at the prior meeting with Leissner and others, they would have to pay
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bribes and kickbacks to government officials, including to certain officials in Malaysia and Abu
Dhabi. After the February 2012 meeting, Leissner discussed this information with other senior
executives of Goldman Sachs.
27.
In or around March 2012, 1MDB formally engaged Goldman Sachs to be the sole
underwriter for the $1.75 billion debt financing transaction designed, in part, to pay for the
acquisition of Malaysian Energy Company A, which was guaranteed by the Middle Eastern
Sovereign Wealth Fund.
28.
In or around March 2012, Leissner and certain other senior executives of Goldman
Sachs traveled to Abu Dhabi along with Low and certain other 1MDB officials
to meet with officials of the Middle Eastern Sovereign Wealth Fund and its subsidiary the Middle
Eastern Investment Firm to discuss the contemplated guarantee for Project Magnolia. Throughout
that time, Leissner knew Low had arranged the meetings with the officials of the Middle Eastern
Sovereign Wealth Fund and the Middle Eastern Investment Firm, and that some of these officials,
among others, would be paid bribes by Low to secure the guarantee.
29.
Leissner and other senior executives of Goldman Sachs also knew that Low would
pay bribes and kickbacks to influence Malaysian officials to obtain the necessary approvals to
execute Project Magnolia for Goldman Sachs. During the months leading up to the issuance of
Project Magnolia, Leissner knew that Low enlisted 1MDB officials to assist him in ensuring that
all necessary approvals were obtained from 1MDB officials and others to complete the transaction,
in exchange for bribes and kickbacks to those 1MDB officials.
30.
In or around the end of May 2012, near the closing of Project Magnolia, Leissner
actively worked with another senior executive of Goldman Sachs and Low to divert some of the
bond proceeds that Goldman Sachs raised from Project Magnolia into the bank accounts of shell
companies that Leissner, the other Goldman Sachs senior executive and Low beneficially owned
and controlled. These individuals understood and expected to keep some of the diverted funds for
their personal use, and that other funds would be used to pay bribes and kickbacks to government
officials in Malaysia and Abu Dhabi and elsewhere in exchange for their assistance in obtaining
and retaining business for Goldman Sachs in connection with Project Magnolia.
31.
On or about May 21, 2012, Project Magnolia closed, earning approximately $193
million in fees for Goldman Sachs.
32.
Goldman Sachs transferred the proceeds of the Magnolia bond offering via wire to
the 1MDB entity designated to receive the payment. At the time, Leissner, Low and others knew
that a large portion of the proceeds of the bond offering would be diverted to themselves and
others, including government officials, through shell companies beneficially owned and controlled
by Low, Leissner and others.
33.
Goldman Sachss documentation of the wire transfer including a signed payment
authorization and instruction, an executed agreement between Goldman Sachs and its client, and
the Project Magnolia offering circular (collectively, the Magnolia Bond Documents) falsely
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stated that the proceeds would be used only to pay for the acquisition of Malaysian Energy
Company A or for general corporate purposes. Leissner knowingly caused these records to be
false.
34.
Within three months of the closing of Project Magnolia, millions of dollars of bond
proceeds were transferred through shell companies beneficially owned and controlled by Low and
other participants in the…
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