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US Fed issues lifetime bans on Goldman's Leissner and Ng

BIScom Subsection: 
Editorial Staff

It's not enough but it's a start. And it's too little, too late. The USA's Federal Reserve Board no doubt hopes that by taking a strong line against two individuals that it can diminish the damage done to Goldman Sachs over its participation in the Malaysian financial case relating to 1MDB. And the fact that it's taken so long for the Fed to act doesn't cast the regulator in an especially good light, either.

The Fed's press release, dated 12 March (edited for style, content unaffected)

The Federal Reserve Board on Tuesday announced that it is prohibiting Tim Leissner and Ng Chong Hwa, also known as Roger Ng, from the banking industry for their participation in a scheme to illegally divert thousand of millions of dollars from a Malaysian sovereign wealth fund. Leissner was also fined USD1.42 million and consented to the permanent ban.

Leissner and Ng, former senior investment bankers employed by foreign subsidiaries of The Goldman Sachs Group, Inc., coordinated bond offerings arranged by Goldman for 1Malaysia Development Berhad (1MDB) in 2012 and 2013. The funds diverted from 1MDB were then used for the conspirators' personal benefit and to bribe certain government officials in Malaysia and Abu Dhabi.

In August 2018, Leissner pleaded guilty to criminal charges brought by the Department of Justice in the Eastern District of New York for conspiring to breach the Foreign Corrupt Practices Act and to commit money laundering. Ng was indicted in October 2018 on similar charges.

But the fact is that the Fed has been tardy. The Monetary Authority of Singapore took similar action in December last year, but only against Leissner after he pleaded guilty to charges, including money laundering, laid by the USA's Department of Justice. Ng is in under arrest in Malaysia.

Will the Fed succeed in drawing attention away from Goldmans? Probably not: legal action by the Government of Malaysia is pending. Goldmans has apologised but fallen short of admitting fault or, even, offering to pay back the fees it earned on deals that are at the heart of the charges against Leissner and Ng. Of course, Malaysia wants far more than a refund of fees: it wants the money that Goldmans had a hand in removing from its people, regardless of who else might have been involved.

In fact, the 1MDB case could turn into a hugely important case to ascertain whether conspirators can be considered jointly and severally liable for losses suffered by their victims.