A former Goldman Sachs Group Inc. banker is in talks with U.S. prosecutors to potentially plead guilty to criminal charges stemming from an alleged scheme to steal billions of dollars from a Malaysian state investment fund, people familiar with the matter said.
The talks bring the fast-moving investigation closer to Goldman, which raised billions for the Malaysian fund, 1Malaysia Development Bhd, and come after the arrest of Malaysia’s former prime minister, who founded the fund and lost his re-election bid earlier this year.
The onetime Goldman partner and Southeast Asia chairman, Tim Leissner, who hasn’t been charged, is seeking an agreement with prosecutors that would involve his cooperation with the government’s criminal-fraud probe into 1MDB and Goldman, the people said.
One potential charge Mr. Leissner could ultimately plead guilty to would be a violation of the U.S. Foreign Corrupt Practices Act, which bans the use of bribes to foreign officials to get or keep business, according to some of the people familiar with the matter.
Prosecutors would have to corroborate any information he might provide and determine its usefulness to the overall investigation before agreeing to a plea, legal experts say.
Investigators have said 1MDB was used by former Prime Minister Najib Razak as a political slush fund and by associates of his to buy real estate, art and other luxuries from London to Beverly Hills, Calif. The U.S. Justice Department alleges in civil lawsuits that $4.5 billion was taken from the fund.
Mr. Leissner, a German national married to an American fashion designer, was Goldman’s top banker on the fund. In that role, he forged a close relationship with Jho Low, a Malaysian businessman who prosecutors allege is the mastermind of the purported fraud, which would be one of the biggest in history.
Prosecutors from the U.S. Attorney’s Office in Brooklyn also are investigating whether Goldman, which earned nearly $600 million from its role in arranging a series of bond sales for 1MDB, violated any laws, some of the people said. Billions of dollars raised through the bond offerings were almost immediately routed to bank accounts connected to figures in the probe, including Messrs. Low and Najib, investigators have said.
Mr. Najib was charged in court with three counts of criminal breach of trust. He pleaded not guilty to all the charges and has denied any wrongdoing at 1MDB. The former prime minister had previously been cleared by the country’s previous attorney general.
In addition to Mr. Najib’s arrest last week, Malaysia also has issued a warrant for the arrest of Mr. Low, who is believed to be in China.
Mr. Low hasn’t been charged and has denied any wrongdoing. Mr. Low and his lawyers declined to comment. The U.S. and Malaysia are both investigating Mr. Low, The Wall Street Journal has reported, but it is unclear if he will be charged or which country’s authorities might do so.
“Since we suspended Mr. Leissner, we have discovered that certain activities he undertook were deliberately hidden from the firm, which we have brought to the attention of the relevant authorities,” a Goldman spokesman said.
A lawyer for Mr. Leissner declined to comment on the bank’s statement. A spokesman for the U.S. Attorney’s Office in Brooklyn and a spokeswoman for the Justice Department declined to comment.
U.S. investigators have sought to determine whether Goldman had reason to suspect that money it helped 1MDB raise was misused and, if so, whether the bank was obligated to report any concerns to authorities, the Journal has reported. The Federal Reserve, Securities and Exchange Commission and New York state’s Department of Financial Services also are examining some of the bank’s actions, as are Singapore authorities, the Journal has reported.
Goldman’s big profits on the bond offerings, and their timing—one closed mere weeks before Malaysia’s 2013 presidential election—raised eyebrows throughout Wall Street. Some of the money raised in the offerings, investigators have said, was used to help fund Mr. Najib’s campaign, the Journal has reported.
Goldman has said it did nothing wrong and had no way of knowing there might be fraud surrounding 1MDB. The bank has said its main role was raising money it thought would be used for the stated purposes. Goldman had repeatedly denied Mr. Low’s request to open personal accounts at the firm.
Still, no one flagged the 1MDB transactions to regulators, the Journal has reported. “We have found no evidence showing any involvement by Jho Low in the 1MDB bond transactions,” the firm has said previously.
Mr. Leissner met Mr. Low in 2009. That year, Goldman became an adviser to the oil wealth fund. The fund evolved into 1MDB when the prime minister gave it the broader goal of spurring economic development.
Goldman advised 1MDB on two 2012 bond sales, raising $3.5 billion. A third offering, also underwritten by Goldman, raised an additional $3 billion in 2013.
Mr. Leissner was suspended from Goldman in early 2016 and later quit the firm after it discovered he had written an unauthorized letter to a Luxembourg bank vouching for Mr. Low. The letter said Goldman had done due diligence on Mr. Low and found no issues.
Singapore’s Monetary Authority cited the letter in barring Mr. Leissner from doing business in the city-state for a decade. His attorney, Marc S. Harris, said in late 2016: “Throughout his professional life, Mr. Leissner has conducted himself with integrity, dedication and with high ethical standards and we believe the various ongoing investigations will support these facts.”
The Financial Industry Regulatory Authority, a U.S. industry body, banned Mr. Leissner from the securities industry last fall after the former banker didn’t respond to requests for documents and other information stemming from his departure from Goldman. Mr. Leissner’s attorney had declined to comment on the ban.
– WSJ
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