When Goldman Sachs partners – past and present – met for their 150th birthday this month, sentiment was muted. The 370 attendees included famous Goldman alumni such as former US Treasury Secretary Hank Paulson, former New Jersey Governor Jon Corzine, and former Trump Adviser Gary Cohn, all of whom testify to the end of Lloyd Blankfin's 12-year term of office the bank.
But there was a remarkable absence. Tim Leissner, once a star anchor who raised tens of millions of dollars at its peak, was not among the guests as they drank drinks at the Conrad Hotel near Manhattan's Goldman headquarters. After being praised by executives as an example of imitation, Mr. Leissner became a pariah within the bank after pleading guilty to bribery, conspiracy and money laundering to the Malaysian National Development Fund for a huge amount of fraud.
Now he poses a The biggest threat that Goldman has never endangered.
Roy Smith, a former partner and today he is a professor at New York University. The fraud at 1Malaysia Development Berhad (1MDB) is one of the biggest crises facing the bank. "It could conceivably have a much bigger price tag [than other scandals] because these things escalate over time," he says.
It is not the first time that the bank is in crisis. In the 1990s, it was widely criticized for its role in the collapse of Robert Maxwell's media empire. And a fine of $ 500 million was imposed in 2010 – a record for Wall Street at that time – due to misleading investors about Abacus, a mortgage-backed security sold in the run-up to the financial crash.
However, when the Malaysian scandal took hold fully, Goldman is increasingly critical of his role in taking over $ 6.5 billion of bond offerings for 1MDB in 2012 and 2013, for which He made a sizeable $ 600 million in fees and trading profits. After the money was raised, $ 2.7 billion was allegedly siphoned off by Malaysian financier Jho Low, accused of controlling the fraud, paying for a lavish lifestyle, and bribing Malaysian officials. The money allegedly ended in Van Gogh paintings, in Beverly Hills mansions and even financed the movie "Wolf of Wall Street" – itself a story of financial surplus.
Present and past partners express incomprehension that the company was plunged into such a major crisis by three transactions in a dark market. Questions are openly asked who knew about Mr. Leissner's activities and why Goldman's extensive compliance operation did not prevent it.
The bank has attempted to distance itself from the alleged fraud, but these efforts were badly hit in November when Mr Leissner announced as part of his guilty plea that hiding things from compliance employees was "very" Culture of the bank. Mr Leissner and his lawyers did not respond to a request for comment.
His former deputy Roger Ng and Mr Low were charged in the United States. Mr Ng, who is fighting an US extradition request, is also being sued in Malaysia for what he denies. Najib Razak, Malaysia's former prime minister, is accused of transferring $ 681 million to his bank account and faces nearly 40 separate charges of fraud, corruption, money laundering, and "criminal breach of trust," which he denies.
As the scandal worsens, investors have dropped Goldman shares, losing their market value by more than $ 8.5 billion a month in the past. The bank is currently under investigation by the US Department of Justice and is facing a messy lawsuit by Abu Dhabi that guaranteed two of the bonds. Malaysia's Attorney General has filed criminal complaints against Goldman, Leissner and Ng demanding fines in excess of $ 3 billion. The country's finance minister said on Friday that the bill to Goldman should be closer to $ 7.5 billion.
The US Attorney General investigating the 1MDB case identified the environment of the Goldman Asia office as a fraud factor. "[The] corporate culture. , , was very focused on closing deals, and this goal was temporarily prioritized prior to the proper operation of its compliance functions, "wrote the DoJ in criminal proceedings against Mr. Low.
Chris Kotowski, an analyst at investment bank Oppenheimer, describes the fraud as "shocking in scale and audacity". But he also asks how it could have happened "between 2012 and 2014, when the banks paid tens of billions of crises and should have been on high alert. It's obviously badly reflected on Goldman. , , Reputation is a disaster.
Goldman insisted he had no knowledge that Mr. Leissner had participated in the alleged plot to abuse 40 percent of the proceeds from the loan offerings, or that Mr. Low was considered a middle man, the lubricates the wheels of the deal. However, these allegations have been undermined in recent weeks by the revelation that Mr. Blankfein had met him twice in 2009 and 2012.
This happened despite Goldman's decision in 2010 to reject Mr. Low as a client because they could not "confirm the source of his wealth".
Mr. Low, whose whereabouts are unknown, has preserved his innocence. In a statement responding to the US indictment, a spokesman said the 1MDB loan offerings were "open and lawful between experienced, well-regulated financial institutions and government agencies."
Bonds were always controversial due to the large amount Goldman benefited from the fundraising and the fact that it was the only bookrunner on such a big deal. The long term damage to Goldman's franchise is difficult to quantify. Executives say it has been limited to Singapore and Malaysia so far. However, the boss of a rival investment bank argues that Goldman "will not be as aggressive and sweet as ever." , , it will lose its edge. "
According to analysts, the bank could receive fines of up to $ 2.5 billion on allegations of the allegations because of the scandal. Malaysia had already asked the bank to repay the $ 600 million she had earned through the deal before the Attorney General demanded a $ 3 billion fine. The amount of the sanction will depend, in part, on whether the bank's lawyers can convince prosecutors that Mr. Leissner was a rogue employee, and not the product of an organization in which the deal played a major role.
The scandal could also raise uncomfortable questions regarding the control of some Goldman executives in Asia. Dan Dees, the global co-head of the Bank for Investment Banking, was a senior executive in the region and the head of Mr. Leissner when all three 1MDB deals were completed. Stephen Scherr, Goldman's recently appointed Chief Financial Officer, was Global Head of the Bank's New York Finance Group from 2008 to 2014.
After crawling through e-mails and documents, the bank found no misconduct by employees outside Mr. Leissner and Mr. Ng, according to a person familiar with the internal investigation.
The story of how Goldman ended up at the center of such a fancy scam can be traced back to 20 years when the bank hired Mr Leissner as new vice president with a resume working for JPMorgan and Lehman Brothers. Colleagues remember a smart, energetic banker firmly rooted in his civic education in Germany, where his father had a senior job at Volkswagen.
As he worked his way up the ranks, he moved to Malaysia. In 2006, he advised MMC Corporation, a conglomerate, on one of the largest takeovers in the country, a deal that has become his calling card in the region.
But as his reputation grew, other financiers began to question his approach. A rival recalls working with Goldman as a joint bookrunner on the flotation of a major Malaysian company. After placing the order, Mr Leissner attempted to falsely claim credit for transactions that other banks had won. "I challenged him, but he still swore he brought [the order]," the rival said.
Former colleagues said they had become wary of Mr. Leissner after he established himself as a womanizer despite his wife being a Goldman employee.
Many felt that this behavior was a personal matter, but others were irritated that the relationship often seemed to have a business connection. In one case, Mr Leissner was accused of having an affair with a senior executive of a Malaysian company that advised the bank. When faced with the potential conflict of interest, he denied the connection, according to the people who are familiar with the matter.
He also had a brief affair with Anis Jamaludin, the daughter of a powerful Malaysian politician, Tan Sri Jamaluddin Jarjis, who died in a helicopter crash in 2015. Mr. Leissner arranged an internship with Goldman in 2010, although some of his colleagues were uncomfortable.
Ms. Jamaludin has since been told by friends that she believes Mr. Leissner has made the relationship approach the Malaysian political elite. "She feels lazy that the only reason he showed any interest in her was to be close to her father," says a friend. In 2013, he married American model and designer Kimora Lee Simmons, both of whom appeared in the popular press.
Mr. Leissner joined the Asian unit of Goldman Sachs in 1998 After a harsh off-site meeting at Dusit Thani, a luxury hotel in Phuket, Thailand, the company's legend was found. After a day of PowerPoint presentations, a group of bankers retreated to the pool bar. When the night stopped, cheerfulness became inappropriate after several male partners clenched with female colleagues.
A handful of scandalized participants complained at the New York headquarters. After Mr. Paulson, then a senior manager of Goldman, heard about the incident, he was furious, according to the people who recalled the episode. The responsible banker was disciplined, but kept his job.
It is not clear if the guest list contained Mr. Leissner. However, several former employees say the episode is an example of the liberal environment of the Asian bank.
Some reported other cases of misconduct. A former banker says that in the late 1990s, a supervisor handed him "cash" and asked him to hand it over to reporters in Indonesia to ensure positive press coverage for a client. Some others say that Mr. Leissner and some of his colleagues are entertaining customers in indecent bars, where they are served by half-naked waitresses.
After the incident in Phuket a contingent of senior American bankers – internally referred to as "cultural enterprises". – have been sent to improve business in the region. "After that there were no more parties in exotic locations," recalls a former employee. "All we got was endless talk about money laundering and compliance."
Mr. Leissner quickly rose to Goldman. In 2002, he was appointed Managing Director of the region and in 2006, he joined the elite group of approximately 500 partners. The increase earned him one of the bank's highest pay packages, ranging from $ 5-7 million a year at its best. "If you get promoted so fast, the pressure as a participating partner is very high. , , They need to keep working at this level, "says one contemporary.
Another former colleague remembers how Mr. Leissner's star has risen since the crash of 2008. "After the financial crisis, most of the guys were rainmakers … there really was not any more," he says. They did not have the deep set of customer relationships to really make things the way Tim did. "
This person argues that Mr. Leissner's status as someone who has" brought in a lot of business "gives him" one "Latitude" in dealing with customers and could have given him less control over 1MDB.Two of Mr Leissner's former managers dispute the allegation and claim that he has the same n hurdles to get through his business like any other banker.
A former partner believes that Mr. Leissner [try to] can take as many older people as him "because he is embittered as a" rogue banker "when Goldman's extensive litigation and compliance committees closed the deal.
19659002] But an essential part of Goldman's defense against the claims of institutional failure will be that there were none. " red flags "to mark the banker as risky before the 1MDB case was revealed.
Goldman will insist to the DoJ that its compliance practices were strong, a claim that was then backed by several rival bankers in Asia. "Sometimes they were overly conservative," says one, though this raises the question of why the alleged fraud went unnoticed.
Mr. Blankfein did not mention the assembled partner of the Conrad Hotel Party with the 1MDB scandal. David Solomon, his successor as Chief Executive Officer, did it. He told former partners who saw that nearly 34 percent had lost the value of their shares this year, that a person "who makes an effort" could do a great deal of damage. "We will learn from this experience," he added.
In an earlier version of this story, we said that Stephen Scherr had settled in Asia at the time of the 1MDB fraud; He worked in New York as the global head of the Goldman Finance Group.