A former banker has agreed to forfeit $43.7 million and has pled guilty to Foreign Corrupt Practices Act (FCPA) violations and money laundering in one of the largest individual FCPA enforcement cases to date. The two-count guilty plea and a three-count indictment unsealed on November 1, 2018, allege that three individuals conspired to misappropriate and launder billions of dollars from Malaysia’s state-owned and state-controlled investment development fund 1Malaysia Development Berhad (1MDB). The individuals used these funds to bribe Malaysian and Abu Dhabi officials and secure business for a financial institution ultimately retained to underwrite three lucrative bond offerings for 1MDB.1
Tim Leissner and Ng Chong Hwa (also known as Roger Ng) were managing directors of a major financial institution engaged in global investment banking, securities and investment management. They, along with Malaysian financier Low Taek Jho (also known as Jho Low), allegedly misappropriated more than $2.7 billion in funds from 1MDB. They used these funds to bribe and pay kickbacks to high-ranking officials in Malaysia and Abu Dhabi, who had the ability to control 1MDB’s business decisions.
Leissner and Ng allegedly laundered the looted money by buying luxury residential real estate and artwork in New York and by funding Hollywood films, including the Wolf of Wall Street. Other funds were diverted into bank accounts that they or their family members beneficially owned. Leissner and Ng allegedly conspired to circumvent their firm’s internal accounting controls to perpetuate the scheme.
As a result of these bribes, Leissner and Ng were allegedly able to bring in lucrative business deals as 1MDB’s underwriter for three major bond deals worth $6 billion. This work generated $600 million in fees and led to large bonuses for Leissner and Ng.
Leissner’s two-count guilty plea was unsealed on November 1.2 He was charged with conspiracy to violate the bribery and internal controls provisions of the FCPA and to commit money laundering. He pled guilty in August and agreed to forfeit $43.7 million. He is scheduled to be sentenced in January 2019.
A three-count indictment against Ng and Low was also unsealed on November 1, alleging that they conspired to violate the FCPA and to commit money laundering.3 That same day, Ng was arrested in Malaysia “pursuant to a provisional arrest warrant issued at the request of the United States.” Low is still at large. The US Department of Justice has also filed three forfeiture actions related to nearly $1.7 billion in assets looted from 1MDB as part of this scheme.4
DOJ’s Focus on the Individual: The unsealed guilty plea and indictment are evidence of the DOJ’s continued focus on individual wrongdoing. Leissner will forfeit $43.7 million—one of the largest monetary sanctions ever levied against an individual in an FCPA enforcement action. By contrast, total monetary sanctions levied against all individuals in 2017 enforcement actions were only approximately $8 million. This focus on individuals is consistent with the DOJ’s current enforcement policy, which emphasizes the importance of prosecuting individual wrongdoers.5 Deputy Attorney General Rod Rosenstein noted this priority during his speech at the White Collar Crime Institute in May 2018: “Corporate settlements do not necessarily directly deter individual wrongdoers…Our goal in every case should be to make the next violation less likely to occur by punishing individual wrongdoers.”6
Cross-Border Enforcement: The 1MDB fraud cases also illustrate the DOJ’s increasing coordination with foreign regulators to pursue multijurisdictional investigations and enforcement. The DOJ noted that it received significant foreign assistance from Singapore, Malaysia, Switzerland and Luxembourg authorities. As noted above, Ng was arrested in Malaysia the same day the indictment was unsealed.
Foreign regulators have also independently investigated and brought charges related to the 1MDB fraud. For example, earlier this year, Malaysian authorities raided the homes of former Prime Minister Najib Razak—former chairman of 1MDB—and his wife, and seized approximately $29 million in cash and more than 400 luxury handbags. In September 2018, Malaysian authorities charged Najib with abuse of power and money laundering of $556 million looted from 1MDB. The Monetary Authority of Singapore has also seized assets worth at least $174.5 million and banned eight financial professionals in connection with Singapore’s own investigation into the fraud.
* * *
These enforcement actions provide further evidence that the DOJ is prioritizing FCPA enforcement actions against individuals and continues to coordinate with foreign regulators in its prosecution efforts. In line with the FCPA Corporate Enforcement Policy, companies should keep in mind that they should disclose all relevant facts about the individuals involved in misconduct to obtain full cooperation credit for self-disclosure.