The trial of Roger Ng, former banker at Goldman Sachs accused of looting the 1MDB sovereign wealth fund depicts textbook corrupt practices and minds. One of the actors of corrupt dealings in the financial scandal, Timothy Leissner who is the prosecution's star witness, reinforces what have been documented and construed by the Department of Justice and the Securities & Exchange Commission of the US in the 2012 and 2020 resource guides to the Foreign Corrupt Practices Act to be cardinal misconducts that can lead to violating the Act.
For the uninitiated, the FCPA prohibits offering to pay, paying, promising to pay or authorizing the payment of money or anything of value in order to:
influence any act or decision of the foreign official in their official capacity;
induce a foreign official to do or omit to do any act in violation of their lawful duty;
induce a foreign official to use their influence with a foreign government or instrumentality thereof to affect any act or decision of such government or instrumentality; or
secure an improper advantage while obtaining or retaining business for or with, or directing business to, any person.
Premise of trial: Banker having conspired with a fugitive financier to embezzle 1MDB of over US$4.5bil
At the trial, former Senior Partner testifies on how he and the Banker had navigated corporate internal controls to illicitly obtain business from 1MDB. Former Prime Minister of Malaysia had authorised monies from 1MDB on the advisory of the Financier for the bank to raise funds through bonds. As greed manifested among both bankers and the Financier, the PM too exploited their close connection so as to secure employment opportunities for his off-springs, a quid pro quo for the lucrative business they obtained from him. The Financier at one point compelled the Senior Partner to contribute to one of the PM’s wife’s charity foundations, and the partner did so with his own fund to bypass the requirements of the bank’s policy on donations to government officials. The donation was made to “...extend the relationship with her by giving her something of value, which is the contribution to her charity to make her look good.” On his own account, kickbacks and bribes, directly and through intermediaries, to government officials in Malaysia and UAE were necessary otherwise the bond transactions would not have been successful. A total of US$681mil traceable to 1MDB was received by the PM throughout the rogues' scheme that involved thievery, bribery and money laundering. Part of that was to fund the PM's cash handouts during election campaign, an age-old muscle employed by the UMNO party to bribe the less discerning voters. The Senior Partner claims to have been informed that bribe was allegedly made to the husband of former Federal Bank governor, facilitating an unprecedented overnight transfer of US$1bil from 1MDB to PetroSaudi International, which would otherwise undergo the Federal Bank’s approval process. Conflict of interests arose, as he “succumbed to greed and ambition” thereby acting with pecuniary interest in the business deals. Consequently, he and the Banker yielded US$35mil in kickbacks from the Financier but would disguise as proceeds of a business venture between their wives. He also bribed an ex-lover with a US$10mil house in London from his ill-gotten gains. Together, the bankers had circumvented many compliance controls, including partaking in minimal due diligence processes which were not in proportion to the risks undertaken (transacting in countries that rank as highly corrupt on corruption indices). The Financier whose questionable financial standing got him rejected as a client in the first place, would have raised red flags had there been appropriate due diligence to reveal his involvement in the business dealings with the bank. The Senior Partner implies that executives at the investment bank (the parent company and its regional unit) eventually knew that the Financier was chiefly the decision-maker all along acting on behalf of 1MDB and had not sounded alarm bells internally. By then, the investment bank was raking in US$606mil compensations from underwriting bonds for 1MDB, such fees touted as several times higher than industry norms, and executives were receiving very handsome commissions and bonuses.
In 2020, the investment bank had reached a settlement amount of US$3.9bil with the Malaysian Attorney-General's Chambers to drop criminal prosecution and a deferred prosecution agreement of US$2.3bil in penalties and disgorgement of US$600mil with the DoJ. The bank admitted to being culpable for the criminal wrongdoings of its firm, the bankers and 17 other bank associates complicit in violating the FCPA.
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