It's all fun and games until someone gets hurt: lessons on FCPA enforcement from the goldman sachs and 1MDB scandal

• Author: Lauren Lang
• Pages: 203-230

IT’S ALL FUN AND GAMES UNTIL SOMEONE GETS HURT:

LESSONS ON FCPA ENFORCEMENT FROM THE GOLDMAN

SACHS AND 1MDB SCANDAL

Lauren Lang*

INTRODUCTION

In October 2020, the Department of Justice (“DOJ”) and Securities and

Exchange Commission (“SEC”) announced the largest Foreign Corrupt Practices

Act (“FCPA”) enforcement action of all time against Goldman Sachs, the parent

company of Goldman Sachs Malaysia and a first-time FCPA violator, at $1.66 billion.

1

DOJ / SEC Announce Net $1.66 Billion (The Largest Of All-Time) FCPA Enforcement Action Against

Goldman Sachs In Connection With 1MDB Fund, FCPA PROFESSOR (Oct. 23, 2020), https://fcpaprofessor.com/

doj-sec-announce-net-1-66-billion-largest-time-fcpa-enforcement-action-goldman-sachs-connection-1mdb-fund/;

Jon Hill, Goldman Sidesteps Monitor in 1MDB, Raising Eyebrows, LAW360 (Oct. 23, 2020), https://www.law360.

com/articles/1321968/print?section=assetmanagement.

This enforcement action made a statement, and it signals where the Agencies may take

future FCPA enforcement actions.

For about five years, two Goldman Sachs Malaysia executives, Tim Leissner and

Ng Chong Hwa (“Roger Ng”), conspired to provide corrupt payments to foreign offi-

cials in Malaysia and the United Arab Emirates (“UAE”), and more specifically, for-

eign officials in Abu Dhabi.

2

Their desire to obtain business from 1Mayalysia

Development Berhad (“1MDB”) led to about $1.6077 billion

3

DOJ Plea Agreement Attachment A, supra note 2, at 23; see Press Release, Dep’t of Just. Off. of Pub. Affs,

Goldman Sachs Charged in Foreign Bribery Case and Agrees to Pay Over $2.9 Billion (Oct. 22, 2020), https://

www.justice.gov/opa/pr/goldman-sachs-charged-foreign-bribery-case-and-agrees-pay-over-29-billion.

being siphoned out of

a sovereign wealth fund meant to help the Malaysian people that instead went to pay

bribes to foreign officials and foreign officials’ relatives.

4

After bribing foreign offi-

cials to provide services, like underwriting three 1MDB bonds, advising 1MDB on an

acquisition, and helping the company evaluate a possible initial public offering

(“IPO”), Goldman Sachs made $606 million in fees and revenue.

5

Goldman Sachs

* Lauren Lang is a 2022 graduate of Georgetown University Law Center. She would like to thank Professor

Sean Hagan, Jason Shumacher, Annie O’Connor, Stephanie West, Nicholas Fuenzalida, and the entire ACLR

staff for all their help with this Note. She would also like to thank Ms. Serensky for laying the foundation and

providing her with the tools that eventually led her to write this Note. © 2023, Lauren Lang.

1.

2. DOJ Plea Agreement Attachment A at 23, 32, United States v. Goldman Sachs (Malaysia) SDN. BHD., Cr.

No. 20-438 (E.D.N.Y. Oct. 22, 2020) (using numbers to reference the paragraph).

3.

4. DOJ Plea Agreement Attachment A, supra note 2, at 7, 24, 51(a)–(h), 57(a)–(i), 64.

5. Id. at 24, 42, 50, 56, 63; see also Goldman Sachs Grp., Inc., Respondent, Exchange Act Release No. 90243,

2020 WL 6262335 (Oct. 22, 2020) at 1 (using numbers to reference the paragraph) [hereinafter SEC Cease-and-

Desist Order] (requiring Goldman Sachs to pay $606 million in disgorgement payments). It is important to note

that Goldman Sachs made $190 million on one of these transactions. In comparison, Goldman Sachs made less

203

wired payments that passed through the Eastern District of New York.

6

Low Taek Jho, also known as Jho Low (“Low”), worked with the two Goldman

Sachs executives to siphon off money from 1MDB.

7

Id. at 23; see Wall St. J., Goldman Sachs Entangled in Global 1MDB Scandal, YOUTUBE (Nov. 8, 2018),

https://youtu.be/f6-Q_sgP0uo.

As a result, Leissner, Ng, and

Low violated U.S. money laundering laws.

8

Low used the money to buy real

estate,

9

throw parties on yachts with celebrities,

10

and fund movies like The Wolf of

Wall Street and Dumb and Dumber To.

11

Id.; see Yantoultra Ngui & Bradley Hope, ‘Wolf of Wall Street’ Producer Is Charged With Money

Laundering in 1MDB Scandal, WALL ST. J. (July 5, 2019), https://www.wsj.com/articles/the-wolf-of-wall-street-

leads-to-1mdb-arrest-of-ousted-malaysian-leaders-stepson-11562242252; WRIGHT & HOPE, supra note 5, at 2.

He also used some of the money to throw

an extravagant thirty-first birthday party in the Chairman Suite at the Palazzo in

Las Vegas, which costs $25,000 per night.

12

Tom Wright & Bradley Hope, The Billion-Dollar Mystery Man and the Wildest Party Vegas Ever Saw,

WALL ST. J. (Sept. 15, 2018), https://www.wsj.com/articles/the-billion-dollar-mystery-man-and-the-wildest-

party-vegas-ever-saw-1536984061.

Leonardo DiCaprio, Kim Kardashian,

and several Goldman Sachs bankers—including Tim Leissner—attended Low’s

birthday bash.

13

Low even reportedly paid “a six-figure sum” to have Britney

Spears serenade Low with “Happy Birthday.”

14

The money once meant to help

promote growth, prosperity, and economic development for the Malaysian people

did not find its way there.

This Note explores what the DOJ and SEC’s enforcement in the Goldman Sachs

and 1MDB scandal reveals about FCPA enforcement. Part I describes the back-

ground of the FCPA and the current trends of FCPA enforcement. Part II describes

the Goldman Sachs and 1MDB scandal in greater detail—focusing on the key

players, what happened, and the indictments. Part III explores how the Goldman

Sachs scandal informs trends in FCPA enforcement. Finally, this Note provides

concluding thoughts on the scandal.

I. BACKGROUND TO UNDERSTAND THE CASE

Part I explains the history of the Foreign Corrupt Practices Act and the Act’s

key provisions. Part I ends with a discussion on the current trends in FCPA

enforcement.

on the Sarawak transaction the year before its work with 1MDB and normally earns a $1 million fee for similar

work. TOM WRIGHT & BRADLEY HOPE, BILLION DOLLAR WHALE 185 (2018).

6. DOJ Plea Agreement Attachment A, supra note 2, at 24.

7.

8. Press Release, Dep’t of Just. Off. of Pub. Affs., supra note 3.

9. Wall St. J., supra note 7.

10. Id.

11.

12.

13. Id.

14. Id.; WRIGHT & HOPE, supra note 5, at 5–6.

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