By Jake Maxwell Watts and P.R. Venkat
SINGAPORE--Singapore's probe into a multibillion-dollar
financial scandal touched Goldman Sachs Group Inc. for the first
time on Friday as its central bank said it was planning to ban the
Wall Street firm's former top executive in Southeast Asia from
operating in the city-state's financial system for 10 years.
The executive, Tim Leissner, was Goldman's point man on deals
involving Malaysian state investment fund 1Malaysia Development
Bhd., or 1MDB. The Monetary Authority of Singapore, the central
bank, announced the proposed ban on Mr. Leissner after it found he
had written a recommendation letter for a Malaysian financier, Jho
Low, in June 2015. In it, Mr. Leissner claimed that Goldman had
performed due diligence on Mr. Low.
"These statements were untrue and were made by Mr. Leissner
without Goldman Sachs' knowledge or consent," the MAS statement
said.
Goldman Sachs said in a statement Friday that it had discovered
the matter in January 2016 and reported it to Singapore
authorities. Mr. Leissner left Goldman in February after Goldman
put him on leave.
Attempts to reach Mr. Leissner, who is living in Los Angeles,
weren't immediately successful. He has previously denied
wrongdoing. A lawyer for Mr. Leissner on Friday said his client had
not been aware of any planned regulatory action by Singapore
against him. Mr. Leissner has now been invited by Singapore
authorities to respond and looks forward to doing so, the lawyer
added.
U.S. investigators claim Mr. Low was a mastermind of a massive
alleged fraud at 1MDB that spread world-wide. Some investigators
have described it as one of the world's largest-ever financial
swindles.
Attempts to reach Mr. Low, who has denied wrongdoing, were
unsuccessful. He's also being sought by authorities in Singapore,
said a person with knowledge of the matter.
Goldman made around $600 million in fees in 2012 and 2013
selling a total of $6.5 billion in bonds for 1MDB, its largest
payday anywhere in the world in those years. Much of the proceeds
of the bonds were siphoned off immediately into offshore accounts
and used to buy luxury real estate in the U.S., finance Hollywood
movies and acquire other assets, the U.S. Department of Justice
alleged in a lawsuit this summer.
The 1MDB fund and Goldman have denied wrongdoing. Malaysian
authorities have also cleared 1MDB of wrongdoing.
The letter cited by the Singaporean announcement was written by
Mr. Leissner to a Luxembourg bank to help Mr. Low open an account
there, although he never did so, according to people familiar with
the matter. The young Malaysian and his associates opened hundreds
of accounts around the world, especially in Switzerland and
Singapore, and used them to funnel money taken from 1MDB, according
to investigations that are ongoing in the U.S., Singapore,
Switzerland and elsewhere.
The use of Singapore's banking system to funnel hundreds of
millions of dollars in allegedly stolen funds has embarrassed
authorities here, who in the past few months have taken action to
penalize banks involved in allegedly moving 1MDB money, including
shuttering branches of two Swiss private banks.
Mr. Leissner, a German national who had been doing deals for
Goldman in Malaysia since 2002, got to know Mr. Low a few years
later, say people familiar with the matter. Mr. Low had been
bringing Middle Eastern investment to Malaysia, and, in 2009, he
persuaded the sultan of a Malaysian state to set up an oil-wealth
fund, which Goldman was appointed to advise, according to those
people. The state oil-wealth fund was soon taken over by Malaysia's
federal government and named 1MDB. Mr. Low took no formal role at
1MDB but ran the fund behind the scenes, say people who worked
there.
The fund was supposed to boost growth in Malaysia and its first
deal was to invest $1 billion in an offshore oil venture. But $700
million was immediately stolen and sent into an account controlled
by Mr. Low at Swiss bank Coutts & Co. in Zurich, the U.S.
Justice Department suit alleges. From there the money flowed to
numerous other accounts in Singapore and elsewhere, the first drips
of at least $3.5 billion that the Justice Department claims was
siphoned from 1MDB between 2009 and 2013.
Some of the 1MDB money ended up in accounts owned by Malaysian
Prime Minister Najib Razak and was used for political spending,
according to the U.S. Justice Department and Malaysian
investigation documents. The prime minister has denied wrongdoing.
Malaysia's Attorney General has said the money Mr. Najib received
was a gift from Saudi Arabia and most was returned. Mr. Najib has
been cleared of any wrongdoing by Malaysian authorities.
On Friday, the Monetary Authority of Singapore also levied
financial penalties of 5.2 million Singapore dollars ($3.65
million) on Standard Chartered Ltd. and 2.4 million Singapore
dollars on Coutts for failures in their anti-money-laundering
controls. The authority didn't mention 1MDB in relation to these
fines, but both banks played a role in moving money taken from the
Malaysian fund, according to the U.S. Justice Department
lawsuit.
A request to Coutts for comment was referred to a spokesman at
the Royal Bank of Scotland PLC., which owned Coutts during the
period of alleged control failures and is winding down the
remaining Coutts Singapore operations it still controls.
The RBS spokesman said the company regrets any failings and has
sought to strengthen its policies. Standard Chartered said in a
statement Friday it regrets that 1MDB-related transactions passed
through the bank. It said it had reported the suspicious
transactions, cooperated with authorities and had taken action to
strengthen its controls.
In 2012, hundreds of millions of dollars in money originating
with 1MDB was transferred to an account with Standard Chartered in
Singapore controlled by an associate of Mr. Low, according to the
U.S. Justice Department suit.
The money that ended up in Standard Chartered in Singapore came
from billions in bonds that Goldman had sold for 1MDB in 2012 to
finance the acquisition of power plants, the U.S. Justice
Department said. The bonds were backed by an Abu Dhabi
sovereign-wealth fund on the suggestion of Mr. Low, said a person
involved with the deal.
Earlier this year, Singapore also fined UBS Group AG's local
unit and the city-state's largest local bank DBS Bank Ltd. for
money-laundering control failures related to 1MDB. UBS and DBS said
they had voluntarily reported suspicious transactions and are
committed to improving their own approaches to stopping money
laundering.
Saurabh Chaturvedi and P.R. Venkat contributed to this
article.
Write to Jake Maxwell Watts at jake.watts@wsj.com and P.R.
Venkat at venkat.pr@wsj.com
(END) Dow Jones Newswires
December 02, 2016 04:42 ET (09:42 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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