THE US Department of Justice revealed in November that a senior employee of Goldman Sachs bank was pleading guilty to “conspiring to launder money and conspiring to violate the Foreign Corrupt Practices Act” by “paying bribes.”

The Goldman Sachs banker, their former south-east Asia chairman Tim Leissner, said in his plea that “I conspired with other employees and agents of Goldman Sachs very much in line [with the] culture of Goldman Sachs to conceal facts from certain compliance and legal employees of Goldman Sachs.”

It’s a big deal on two levels. First, it’s a big deal financially. Leissner is pleading guilty to bribery and corruption related to Goldman Sachs winning work that made the bank around £474 million in fees. The US prosecutors say Leissner has been personally ordered to hand over £35m “as a result of his crimes.”

Second, it is a big deal for the bank. Goldman Sachs is already known as the Giant Vampire Squid of capitalism for the way it sucks money out of the system. Now one of their top bankers is admitting a crime and saying the kind of sleazy work of concealing bribes is “very much in line [with the] culture of Goldman Sachs.”

Goldman Sachs’s reputation looks even worse when you realise these £474m in fees, connected to bribery and corruption, were squeezed out of the taxpayers of Malaysia. This developing-world nation has 31 million citizens, many of them very poor.

But Goldman Sachs is implicated in a scheme to hand over Malaysian government money to rich, corrupt politicians. In 2009 the government of Malaysian prime minister Najib Razak set up “1Malaysia Development Berhad,”  known as 1MDB. The name roughly translates as “1st Malaysian Development Ltd.”  
 

1MDB was a development fund, or a “sovereign wealth fund.” It was meant to invest Malaysian public money in development projects to help the poor nation get richer. Instead, according to US prosecutors, over £1.58 billion from this huge fund was diverted into the bank accounts of friends of prime minister Razak or used to pay bribes to other government officials.

Public money that was supposed to help Malaysia develop flooded offshore to help associates of the prime minister buy mansions in New York and houses in London, and into their bank accounts.

A friend of the prime minister called Jho Low is accused of being the central figure in what US prosecutors call an “international conspiracy” of “kleptocracy.” Jho Lo, former prime minister Razak and their associates deny the charges.

Goldman Sachs’s bankers role, according to US prosecutors, included  helping  the 1MDB conspirators spirit the money away and pay the necessary bribes. The bank helped 1MDB raise funds through bonds designed to pay Goldman Sachs huge £474m commissions. In the process of this bond-raising, billions were paid in bribes and other dubious payments.
 

Leissner, in his guilty plea, says he personally helped to “pay bribes and kickbacks,” for example diverting £3.2m to a New York jeweller’s account so he could give jewels to the wife of a top Malaysian official.

Billions were paid in bribes and other dubious payments

Even though these deals looked over-generous to Goldman Sachs, and even though their top staff — right up to their chairman — had to approve the deals, somehow Goldman Sachs never noticed the corruption. Leissner says this was because concealing facts was central to the “culture” of the bank.

While the bankers could not see — or chose not to see — the corruption under their noses, one investigative website, the Sarawak Report, run pretty much single-handed by British journalist Clare Rewcastle, has been instrumental in uncovering the whole scandal from around 2013 onwards. Rewcastle also exposed Goldman Sachs’s involvement, showing that the bank was making an incredible £158m from fees for arranging a single fundraising deal. Goldman Sachs were charging  8 per cent of the deal in fees, when a typical fee rate would be more like 0.25 per cent. The deal looked fishy from the start.

Goldman are not the only big bank drawn into the 1MDB scandal. But it doesn’t seem a huge surprise that a bank known as the Giant Vampire Squid would get tangled up the largest scandal of the century. At the same time, it is no surprise that the Tories should at the same time be relying on friendships with Goldman Sachs bankers.

British regulators have not pursued financial corruption. They haven’t been ordered to really shake up the city and expose financial crimes.

At the same time many City figures have been donating to the Tory Party, including those from Goldman Sachs.

Senior Goldman Sachs banker Michael Daffey gave the Tories £232,000 between 2013 and the last election. A new donor, Adam Crook, gave the Tories £50,000 this May. Crook is vice-president, Goldman Sachs Asset Management. These donations entitled Daffey and Cook to membership of the Tory “Leaders Group” whose “members are invited to join Theresa May and other senior figures from the Conservative Party at dinners.”

To be completely clear, I am not suggesting that either Daffey or Crook had any involvement in the 1MDB affair at all — this was not their department. But they are major figures in a bank accused of having a “culture” that allows that kind of thing to happen.

Goldman Sachs’s involvement in the latest scandal is indicative of the general state of banking. The Tories, you might have thought, would be wary of taking bankers’ money after the financial crash, with all its dirty scandals. But that has not been the case. Tory donations from City figures are as high as ever.

After the financial crisis and all the misbehaviour that has been exposed, the government should have been looking hard at how to prosecute, clean up and stop financial corruption. But as they rely on funding from the rich staff of institutions involved in big financial corruption, they were unlikely to do more than wring their hands and accept the cash.

Solomon Hughes writes every Friday in the Morning Star.