NEW YORK/KUALA LUMPUR (Reuters) - U.S. prosecutors unveiled criminal charges on Thursday against two former Goldman Sachs Group Inc bankers and Malaysian financier Low Taek Jho tied to the alleged theft of billions of dollars from Malaysian sovereign wealth fund 1MDB.
Prosecutors in the U.S. Attorney’s Office in Brooklyn announced that Tim Leissner, former partner for Goldman Sachs in Asia, had pleaded guilty to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act, and agreed to forfeit $43.7 million.
Roger Ng, the other charged former Goldman banker, was arrested in Malaysia at the request of U.S. authorities and is expected to be extradited, according to John Marzulli, a spokesman for the prosecution.
The third person, the financier popularly known as Jho Low, remains at large. Malaysian authorities have revoked his passport and issued an arrest warrant for him, and have also applied for an Interpol red notice seeking assistance from the United Arab Emirates, Indonesia, India, Myanmar, China and Hong Kong.
James Haggerty, a spokesman for Low, said in an e-mailed statement that Low “maintains his innocence.”
“Mr. Low simply asks that the public keep an open mind regarding this case until all of the evidence comes to light, which he believes will vindicate him,” Haggerty said.
A lawyer for Leissner could not be reached for comment. A lawyer for Ng did not immediately respond to a request for comment.
Goldman has placed its former co-head of Asia investment banking, Andrea Vella, on leave over his role in the firm’s involvement with the case, pending a review of allegations, according to a person familiar with the decision.
The Wall Street bank said in a securities filing on Friday that it may also face penalties from dealings with 1MDB and is cooperating with various government probes.
The government of former Malaysian Prime Minister Najib Razak set up 1Malaysia Development Berhad, or 1MDB, in 2009. An estimated $4.5 billion was misappropriated from 1MDB by high-level officials of the fund and their associates between 2009 and 2014, the U.S. Justice Department has alleged.
Najib has consistently denied wrongdoing in connection with alleged graft involving 1MDB.
According to the indictment against him, Low never held a formal position with the fund but he worked as an intermediary in numerous 1MDB transactions involving Goldman and others.
Prosecutors say Low, Ng, and Leissner conspired to launder the proceeds of fraud involving 1MDB through the U.S. financial system. Some of the laundered funds were then allegedly used to pay bribes to obtain business for Goldman. Other funds were used for the personal benefit of defendants, including purchases of luxury U.S. real estate and art.
Goldman said in an emailed statement that it “continues to cooperate with all authorities investigating this matter.” It has previously denied any wrongdoing.
According to prosecutors, the investment bank generated about $600 million in fees for its work with 1MDB, which included three bond offerings in 2012 and 2013 that raised $6.5 billion. Leissner, Ng and others received large bonuses in connection with that revenue.
Prosecutors described the bank’s system of internal accounting controls as “easily circumvented,” and said its culture in Southeast Asia was “highly focused on consummating deals, at times prioritizing this goal ahead of the proper operation of its compliance functions.”
On at least three occasions, Leissner and Ng tried to get the bank to accept Low as a client, according to court documents, but compliance staff blocked the efforts over concerns about the source of Low’s money.
Nevertheless, Ng and Leissner concealed Low’s involvement and pushed deals through the bank’s control functions to obtain “very lucrative business for Goldman Sachs, themselves and others,” according to the documents.
While U.S. prosecutors have previously filed civil asset forfeiture suits for assets allegedly bought with some of the stolen funds, these are the first criminal charges the Justice Department has brought against individuals in the case under the Foreign Corrupt Practices Act, a federal law targeting official bribery abroad.
At least six countries, including Malaysia, the United States and Switzerland, have been investigating alleged thefts from 1MDB.
The 1MDB investigations in the United States and Malaysia have gathered pace since Najib unexpectedly lost a general election in May to Mahathir Mohamad, who returned to power 15 years after he retired as prime minister.
Since the election, Malaysian authorities have brought 38 charges against Najib. Many of the charges – multiple counts of corruption, money laundering and criminal breach of trust – are linked to 1MDB.
Najib has pleaded not guilty to all the charges and has consistently denied wrongdoing.
Reporting by Brendan Pierson in New York and A. Ananthalakshmi in Kuala Lumpur; Additional reporting by Aparajita Saxena in Bengaluru, Jennifer Hughes in Hong Kong and Lauren Tara LaCapra in New York; Editing by Anthony Lin and Nick Zieminski