Funds diverted to suspicious offshore shell company, US court told

 

Former Goldman Sachs executive Tim Leissner fired several questions at BSI bankers during a meeting in Singapore, catching them off guard, a witness told Roger Ng’s 1MDB trial in New York. (Bloomberg pic)

NEW YORK: Tim Leissner rebuffed questions about a suspicious shell company associated with 1MDB bond deals by saying due diligence was “not Goldman’s responsibility”, a former banker testified.

Former BSI SA banker Kevin Swampillai said on the stand that Leissner dismissed BSI’s questions about why fees paid to the Abu Dhabi-owned Aabar Investments PJS fund, which guaranteed two of the 1MDB bond deals, were being sent to an offshore shell company instead of the fund itself.

“You have a Middle East sovereign wealth fund that is about to enter into a transaction, but in this case, it involved a shell company in the British Virgin Islands – that was highly unusual,” Swampillai told the jury in the Brooklyn, New York, federal court trial of Leissner’s alleged co-conspirator and former Goldman Sachs Group Inc colleague, Roger Ng.

Low Taek Jho, or Jho Low, the alleged mastermind of 1MDB, brought business to BSI, including accounts belonging to 1MDB subsidiaries and state-owned Aabar, Swampillai said. BSI was then asked to do a joint venture between Aabar and the new shell company tied to the first 1MDB bond transaction, he said.

Abu Dhabi’s state-owned International Petroleum Investment Co and its subsidiary Aabar provided the guarantee for the two deals underwritten by Goldman for 1MDB. But before the first transaction closed in May 2012, Swampillai told the jurors, he and his BSI colleagues wanted to know why funds Aabar was getting as a fee for the guarantee were going into the offshore company.

He told the jury that BSI had invited Leissner and Ng to a meeting in April 2012 at a private dining room at Singapore’s Taste Paradise restaurant to address the Swiss bank’s concerns. While the BSI bankers expected a presentation from Goldman, Leissner instead announced that he could stay only 20 minutes because he had to catch a flight, Swampillai testified.

Leissner then turned the tables on the BSI bankers, peppering them with questions of his own, he said.

“It took everyone at BSI off guard,” he told the jurors.

“Tim Leissner basically dismissed those questions we raised. He basically said, ‘Due diligence is not Goldman’s responsibility – it’s BSI’s responsibility to conduct its own due diligence’.”

Leissner then left, Swampillai testified. Ng stayed behind but did not speak to Swampillai, who then also left. Prosecutors may argue that Ng’s silence was an endorsement of Leissner’s attempts to deceive BSI.

Ng is charged with conspiring with Leissner and Low to steal billions of dollars from the two bond transactions and a third that followed.

As part of the fraud, prosecutors say, Low – now a fugitive – and others created a fake Aabar entity to divert the funds. The US says Low then paid tens of millions of dollars to officials in Malaysia and Abu Dhabi as part of the scheme while Ng received at least US$35.1 million.

Leissner pleaded guilty and is cooperating with the US against Ng.

Swampillai told the jurors he himself had engaged in an unrelated fraud involving 1MDB. He said Singapore regulators had permanently banned him from his industry but that he was not criminally prosecuted. - FMT