A high-profile corruption probe that has spanned continents landed its first direct blow at Goldman Sachs.
At least three senior Goldman bankers were implicated by the U.S. Department of Justice in a multiyear criminal enterprise that included bribing officials in Malaysia and elsewhere and laundering of hundreds of millions of dollars. Now that federal prosecutors have filed criminal charges against two of the bankers, one question is burning inside the Wall Street bank: Will others be next?
One of the company's most senior bankers in Asia, Andrea Vella, was immediately placed on leave pending review of the allegations. He wasn't charged with wrongdoing but matches the description of an unidentified co-conspirator in the Justice Department's filings for charges unsealed Thursday.
The confession of one of the bank's onetime Asia chiefs, Tim Leissner, might undercut Goldman's take on what happened. In behind-the-scenes talks with authorities, the firm has presented information that isolates much of the blame on Mr. Leissner, according to two people with knowledge of the exchanges. In pleading guilty to conspiring to launder money and violate the Foreign Corrupt Practices Act by paying bribes, Mr. Leissner agreed to a version of the events that's potentially damaging to some of his former colleagues and even his old shop.
"The firm continues to cooperate with all authorities investigating this matter," a Goldman Sachs Group Inc. spokesman said in an emailed statement.
Mr. Vella led Goldman's Asia investment-banking operations until about two weeks ago when new CEO David Solomon stripped him of his management duties. Goldman declined to comment on Mr. Vella's behalf, and a call to Mr. Vella wasn't immediately returned.
Prosecutors assert that beyond Mr. Leissner a number of employees at the firm knew about a bribery scheme but worked to hide it from Goldman's compliance and legal departments as the bank won a lucrative assignment at the center of the case. The firm would ultimately help raise more than $6 billion on behalf of 1MDB, a wealth fund that was then allegedly plundered in spectacular fashion.
More specifically, prosecutors said "employees and agents" of the bank were aware that the deal involved controversial financier Low Taek Jho, who was indicted for allegedly masterminding the plan to siphon off billions of dollars, according to documents unsealed Thursday. Employees also allegedly knew bribes and kickbacks had been promised to Malaysian and Abu Dhabi government officials to ensure Goldman got 1MBD's business. But on both points, employees worked to hoodwink Goldman's internal compliance system, prosecutors wrote in court filings.
The DOJ hasn't publicly identified the other employees it described.
Goldman Sachs has for years said it raised money for 1MDB without knowing that it would be diverted from the development projects. Authorities have said cash instead went into yachts, luxury real estate, paintings and jewelry, as well as into private bank accounts.
Mr. Leissner's former deputy, Roger Ng, was arrested in Malaysia and is set to appear in a Malaysian court on Friday, according to a person with knowledge of the matter. Mr. Low was charged in absentia. He is accused of conspiring with Ng to launder billions of dollars embezzled from 1MDB. Mr. Low maintains his innocence.
The bank had been telling U.S. prosecutors it was deceived by Mr. Leissner during the deals with 1MDB, the two people familiar with the matter said. That effort portrayed Mr. Leissner as someone who repeatedly lied to the company and hid business investments, but also included even more salacious details, such as assertions that he failed to disclose romantic relationships with women who could help him win business.
Mr. Leissner admitted in his plea that he bribed officials in two countries — Malaysia and the United Arab Emirates countries to get bond deals for Goldman Sachs. He admitted that he and others arranged the 1MDB fundraising as bond offerings because it would generate higher fees for the bank.
Mr. Leissner also admitted to enriching himself beyond what was publicly known, saying that more than $200 million in proceeds from 1MDB bonds flowed into accounts controlled by him and a relative. As part of his settlement, he will forfeit almost $44 million.
The Justice Department's filings leave Goldman Sachs with defenses even as they raise uncomfortable questions. On the one hand, the company had compliance measures aimed at vetting the people it deals with and preventing illegal acts. But at the same time, a number of its employees allegedly knew about or took part in efforts that thwarted those controls, according to prosecutors.
