Nobody Is Buying Goldman’s Unbelievable Excuse for 1MDB Fraud

  • While Goldman has insisted that just two employees are responsible for the burgeoning 1MDB scandal, insiders said the deals were approved by committees staffed by top executives, including CFO Stephen Scherr.
  • Goldman committees approved the doomed bond deals on the condition that bankers explain to 1MDB that it had cheaper options in raising $6.5 billion.

Goldman Sachs is finding it hard to distance itself from what it says were the actions of a few bad apples.

The bank has said just two employees were primarily responsible for a deepening international scandal in which Goldman bankers helped a Malaysian financier plunder billions of dollars from an investment fund called 1MDB. The two are Tim Leissner, a Goldman partner who plead guilty to U.S. bribery charges in August, and Roger Ng, a managing director who has been arrested in Malaysia. A third executive, Andrea Vella, has been put on leave.

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But according to current and former employees, deals as large as those that helped create the $6.5 billion 1MDB require scrutiny from several top firm-wide committees. The 2012 and 2013 bond transactions at the heart of 1MDB were “bought deals” that meant Goldman had to use its capital to buy newly created securities before offloading them to investors. That’s riskier than in more typical arrangements where Goldman is merely distributing bonds to investors.

“Anyone who’s been there a long time knows you can’t do big things without senior people knowing, period,” said one former Goldman employee. “No matter how senior you are, there’s always somebody above you. So a lot of people had to decide they were comfortable committing billions of dollars to this.”

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