Goldman Sachs is once again the villain

The Goldman you love to hate is back.
The Goldman you love to hate is back.
Image: Reuters/Brendan McDermid
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A decade ago, when the financial crisis swamped the world, Goldman Sachs was the undisputed villain of Wall Street.

While other banks were perceived as greedy or incompetent (and often both), Goldman had an unsurpassed aura of sinister venality. Whether it was engineering a massive short at the expense of its clients, or manipulating global aluminum markets, only Goldman could be called, in the now-immortal words of Rolling Stone’s Matt Taibbi, “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

For the past 10 years, Goldman has tried to sanitize that reputation and promote what can only be called the softer side of investment banking. When Lloyd Blankfein retired as CEO and handed the reins to David Solomon in July, it seems that the worst of its publicity challenges had been laid to rest.

Now, they’re all rushing back.

Two senior Goldman executives are accused by US prosecutors of conspiring to steal billions of dollars from a Malaysian sovereign wealth fund in what the Wall Street Journal (paywall) calls “one of the biggest financial frauds in history.”

Timothy Leissner, a former Goldman partner who used to head the bank’s southeast Asian business, pleaded guilty to conspiring to launder money and violating anti-bribery laws. Roger Ng, a Goldman managing director, was indicted on the same charges, along with Malaysian financier Jho Low.

Low is the alleged mastermind of the plot, in which essentially he convinced the Malaysian government to sell billions of dollars in bonds to establish the 1MDB fund, then bribed those officials with some of that money so he could steal the rest. Goldman underwrote $6.5 billion in bond sales, and pocketed $600 million in fees.

Leissner is accused of helping Low bribe officials and launder the money. More than $2.7 billion was funneled to the conspirators’ accounts, with more than $200 million going to Leissner alone, the government says. Other ill-gotten gains paid for real estate, art, jewelry, yachts,  and even producing the movie “The Wolf of Wall Street” (irony duly noted). Former Malaysian prime minister Najib Razak was arrested in July for his role in the scandal, which has taken years to unspool.

Who at Goldman knew what and when is still unclear. At least one other high-ranking Goldman executive, identified by the Wall Street Journal as Andrea Vella, is alleged to have helped Leissner evade Goldman’s internal controls. He was not indicted, but was stripped of his responsibilities as co-head of Asian
banking and placed on leave, according to the journal.

In an emailed statement, a Goldman spokesman said, “The firm continues to cooperate with all authorities investigating this matter.”

Whether the scandal is remembered as Blankfein’s last, or as Solomon’s first, it’s a reminder that while much may have changed in the world of finance since 2008, maybe some things haven’t.