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Goldman Sachs 1MDB settlement: a meaningful punishment for major financial crimes?

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Late last month, the U.S. Department of Justice announced a landmark settlement with banking giant Goldman Sachs over its participation in a massive bribery scheme that syphoned hundreds of millions from Malaysian public coffers. As a part of a deal with prosecutors, the Wall Street firm agreed to pay nearly $3 billion to authorities in multiple countries, and agreed to have its Malaysian subsidiary plead guilty in a Brooklyn court to conspiring to violate U.S. bribery laws.

The fine, the largest ever under the U.S. Foreign Corrupt Practices Act followed the indictment of two Goldman executives who U.S. authorities alleged pushed the bribery ring.

The scandal focused on a multi-billion dollar fund known as 1MDB, which was ostensibly devoted to developing the Malaysian economy. Instead, billions were illicitly syphoned from the fund, often via offshore accounts, to wealthy elites, politicians and Goldman bankers. Some of the looted money is suspected to have financed the film production of “Wolf of Wall Street,” the Hollywood feature starring Leonardo DiCaprio.

In its action against Goldman, U.S. authorities used a controversial tool called a deferred prosecution agreement, or DPA, in which an offending firm pays a fine and agrees to a period of probation in order to avoid the potentially ruinous prospect of being criminally prosecuted.

Critics say that the U.S. legal system’s increasing reliance on DPAs to address financial crime reflects its softness on corporate executives, who can often safely assume that they will not face jail time for white-collar misconduct.

In September, ICIJ published the FinCEN Files, a global investigation detailing trillions of tainted dollars moving through major U.S. banks. In many cases, huge amounts of suspicious money flowed through institutions that had already been subjected to DPAs for money laundering. To some critics, the findings epitomized the toothlessness of DPAs and their inability to deter corporate crime. “They’ve become in effect the cost of doing business rather than a real punishment,” Jed Rakoff, a senior federal judge in Manhattan, told ICIJ.

The DOJ got a bad name because, in a lot of cases, no one in the company was being held to account, but this shows an effort to do that.
— Paul Pelletier, former federal prosecutor

The Goldman DPA is part of a sprawling global enforcement action against the bank, and offers a mix of elements that reflect both unusually aggressive tactics by U.S. prosecutors toward a financial firm while also containing classic hallmarks of prosecutorial timidity, according to experts.

Paul Pelletier, a former federal prosecutor who has been a vocal critic of the heavy use of DPAs, says that the government’s action against Goldman has plenty to laud, even for a critic like himself. Pelletier says he is impressed that the government actually prosecuted two Goldman bankers who were allegedly at the heart of the bank’s involvement with 1MDB. In November 2018, the Justice Department indicted Timothy Leissner, a former Goldman partner, and Roger Ng, a former Goldman managing director, for arranging bribes and laundering money in relation to their work with 1MDB. Leissner pleaded guilty and is awaiting sentencing while Ng maintains his innocence and is expected to take his case to trial next year, according to the Wall Street Journal.

“When a company does a DPA, they are acknowledging that someone in the company was acting criminally,” Pelletier said. “The DOJ got a bad name because, in a lot of cases, no one in the company was being held to account, but this shows an effort to do that.”

Yet others have questioned whether the Justice Department’s action against Goldman ultimately amounts to a meaningful punishment, given the scale of the bank’s wrongdoing.

What stands out about the DPA to Brandon Garrett, a law professor at Duke University who has extensively studied corporate prosecutions, is the size of the fine: he says it looks surprisingly small. U.S. prosecutors, according to Garrett, took a number of steps favorable to Goldman in calculating the fine, including deducting penalties the bank had paid foreign regulators from its own fine.

The Trump administration has vowed to grant corporations more of such deductions for what it calls the “piling on” of fines from multiple law enforcement agencies when a scandal engulfs a company. Such deductions are one reason for a dramatic reduction in corporate penalties in recent years, according to the New York Times.

“It looks like a big payment, but it’s actually a fairly good deal for Goldman Sachs,” Garrett said. Last month it was reported that, in the third quarter of this year alone, Goldman Sachs earned $3.6 billion in profits – more than the sum laid out in the Justice Department’s DPA.

Garrett said that the U.S. portion of the fine was “far below” the federal guidelines on what the government could have fined Goldman for the massive theft it admitted to aiding. Garrett says that federal prosecutors granted Goldman “credits” for favorable behavior during the investigation – although “it isn’t exactly clear what that credit was for.” The DPA states that Goldman had only partially cooperated with law enforcement during the investigation. At points, the bank dragged its feet on providing key information and failed to self-report FCPA breaches that it knew had occurred, according to the filing.

“Self-reporting is incredibly important,” Garrett said. “There should be an identifiable consequence for failing to self-report. Here, I don’t think there was.”

The post Goldman Sachs 1MDB settlement: a meaningful punishment for major financial crimes? appeared first on ICIJ.

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Election Integrity

Analyzing the Case for Election Fraud

Despite the overwhelming pressure, if you can’t help but feel that tingling sense of knowing that is telling you there’s more to the story, you are not alone. In fact, according to a new Rassmussen poll, nearly 50% of voters believe the election had issues. A quick look at the data blatantly shows that indeed, shenanigans abound (how can a state have 1+ million more mail-in ballots tallied than they sent out?). But was it fraud or masterful gamesmanship?

Adryenn Ashley

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The world, or at least the global media, has spoken: Biden won the 2020 Election.

UPDATED FREQUENTLY WITH NEW INFORMATION – Last update 12/21/2020

A quick Google search reveals pages upon pages of reports of why the Trump team’s assertions of vote fraud and election fraud and vote flipping are flat out fallacies. YouTube has announced a ban on any videos questioning the election results. And now on Monday all 538 electors have voted, formalizing Biden’s 306-232 win. And while there is still Congress to get through, and the inauguration, based on social media and television news and practically every other point of information bombarding society today, Biden is now the President-elect.

But why now, after Government officials confirmed during Senate testimony that a foreign adversary, Russia, attempted to interfere in the 2016 United States Presidential Election via “a multi-faceted approach intended to undermine confidence in our democratic process.” According to U.S. intelligence official reports, Russia targeted voter registration databases in at least 21 states and sought to infiltrate the networks of voting equipment vendors, political parties, and at least one local election board. And if their purpose was not so much to “hack” the election but create chaos and sow seeds of uncertainty around our election process, I would say they have won. But what if this cycle, it was Russia who somehow manipulated extra ballots and placed the blame on the Democrats? What if…?

Russian Experience With Voter Fraud

The 2004 presidential election in Ukraine saw suspiciously high turnout rates that “even Stalinist North Korea would envy,” the State Department declared!

Back then, the U.S. government decried as corrupt an earlier election where special voting boxes were created to help citizens vote from home, election observers were expelled from vote counts, pre-election polls were wildly off, and voter turnout in certain communities exceeded 90%.

But the story of that Ukrainian election as recounted by then-Ambassador John Tefft to a Senate committee in December 2004 raises a tantalizing question for voters distrustful of the Nov. 3 elections results in our own 2020 Presidential Election: If tactics and outcomes in the Ukrainian election back then were enough to cry foul, why can’t Americans debate similar concerns here?

Tefft’s testimony raises an important question: Should America, the greatest democracy in the world, share any of the fraudulent attributes of a Ukrainian election? The answer for most Americans is hopefully resounding “No.”

And despite continued and repeated headlines that there was no fraud, according to the Harvard Kenney School report on Election Integrity this cycle, expert assessments indicate that compared with 2016, the performance of this contest displays several warning flags, namely worsening confidence in the integrity of American elections and falling public trust, challenges to legitimacy arising from threats of campaign violence,legal disputes about the process and results, and public protests about the outcome, as well as growing attempts at voter suppression. 

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Advocates celebrate major US anti-money laundering victory

Landmark laws to thwart the use of U.S. shell companies by terrorists, human traffickers, arms dealers and kleptocrats are set to be enacted after more than a decade of lobbying and politicking with rare bipartisan support.

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Advocates celebrate major US anti-money laundering victory

The sweeping anti-money laundering reforms hitched a lift in the annual defense spending bill that passed the Senate 84-13 today, and was approved by the House 355-78 earlier this week.

The Corporate Transparency Act requires U.S. companies to report their true owners to the Treasury Department’s Financial Crimes Enforcement Network, known as FinCEN — largely ending anonymous shell companies in the country.

The International Consortium of Investigative Journalists has repeatedly documented how the rich, the powerful and the criminal have used anonymous entities to hide their wealth, including in the 2016 Panama Papers and the 2020 FinCEN Files investigations.

Welcoming the clampdown, Transparency International’s U.S. director Gary Kalman said, “It is rare for such a simple measure to promise such an enormous impact.” Kalman added that the long sought anti-corruption reforms would “move us into a new era of enforcement.”

The new legislation will allow law enforcement agencies and financial institutions to request company ownership information from FinCEN. The data will not be publicly available.

FinCEN Files was based on a trove of suspicious activity reports filed by banks and other financial institutions to FinCEN. BuzzFeed News obtained the secret documents and shared them with ICIJ and more than 100 other media organizations.

The global investigation exposed how a broken U.S.-led enforcement system allows banks to continue to profit from moving dirty money tied to drug cartels, trafficking rings fueling the opioid crisis, fraud, organized crime, sanctions evasion, ruinous real estate schemes, and terrorism.

“Too many times, people … think money laundering is a federal, victimless crime. It is certainly not that,” Sen. Sherrod Brown of Ohio, the top Democrat on the Senate banking committee, told reporters on a call organized by the advocacy group the FACT Coalition. “Sinaloa cartel actors, fentanyl traffickers have been destroying thousands of families in my state and across the country.”

Earlier this year, Brown credited FinCEN Files for revealing the lack of forceful enforcement against banks that repeatedly violate the law. Advocates said a number of proposed bipartisan bills, including one co-sponsored by Brown, were instrumental in generating the support needed to attach the reforms to the spending bill.

“This is a really big deal to get this passed,” Brown said Thursday. “No more hiding these abuses in anonymous shell companies. It also cracks down on bank officials who look the other way or actively aid money laundering.”

A long time coming

ICIJ has shown how offshore shell companies have been used for dubious financial dealings and tax avoidance through a series of global exposés, including the Secrecy for Sale investigation, Panama Papers and Paradise Papers. U.S. lawmakers have repeatedly cited the investigations in proposing reforms over the years.

Countries like the United Kingdom, Indonesia and members of the European Union also took steps toward ending anonymous shell companies in response to ICIJ reporting.

“When the Panama Papers leaked, there was a huge flurry of interest because there’s all of a sudden this recognition that it was kleptocrats, money launderers, corrupt officials the world over, as well as criminals, were all using a very common structure to help evade law enforcement, which was setting up an anonymous company,” Lakshmi Kumar, policy director of Global Financial Integrity, said.

The phenomenon is not limited to the exotic offshore tax havens of popular imagination. U.S. jurisdictions like Delaware, Wyoming and Nevada are among the world’s top locations to set up anonymous companies. Legislation to require corporations to disclose their true owners was first proposed in the U.S. over a decade ago, co-sponsored by then-senator Barack Obama, and similar bills have been introduced over the years.

Advocates credit years of lobbying a broad coalition of stakeholders, including the U.S. Chamber of Commerce which had previously been a leading opponent, in getting the reforms across the finish line this year.

“What’s changed now is a growing understanding among various constituencies about the harms that anonymous companies pose, and the threats that they pose for our financial system, to our businesses,” Clark Gascoigne, senior policy advisor at FACT Coalition, said.

But it’s not a done deal quite yet.

Although the anti-money laundering proposals have had the support of the administration, President Donald Trump has repeatedly threatened to veto the National Defense Authorization Act over provisions unrelated to financial secrecy.

Both the House and the Senate votes surpassed the two-thirds margin that would be needed to override a veto, although some Republicans have indicated that they would not support what would be the first veto override of the Trump presidency.

But the NDAA has been reliably passed by Congress every year for six decades and advocates are confident that the time has come for the landmark financial transparency measure that’s included in the omnibus bill.

“It’s one of the few areas where the outgoing Trump administration agrees with the incoming Biden administration,” Gascoigne said. “It may be the first bill in the history of Congress that has the support of both Dow Chemical and Friends of the Earth. Heck, the state of Delaware even supports reform.”

The post Advocates celebrate major US anti-money laundering victory appeared first on ICIJ.

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Muslim Brotherhood suspect and Saudi billionaire linked to same offshore companies, Austrian report says

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One of 30 people in Austria suspected to be members of the Islamic fundamentalist group Muslim Brotherhood was the director of offshore companies linked to a Saudi billionaire, according to an investigation by Austrian media outlets profil and Ö1.

The man, described as a 37-year-old Viennese entrepreneur with Iraqi roots, is suspected of “participating in a terrorist, subversive and criminal organization” and was a target of the police investigation into the group and the Palestinian extremist organization Hamas, the report said

The inquiry, which led 930 officers to raid 60 apartments, shops and clubs in four federal states last month, had no connection to the Vienna terror attack that killed four and injured 23 on November 2, according to officials cited by Deutsche Welle.

The Austrian report ー based on police records ー does not name the suspect, nor the Saudi businessman, for fear of hampering the ongoing probe into possible terror financing.

The pair’s link to shell companies in the British Virgin Islands and other offshore financial centers was revealed for the first time after the reporters’ examination of Paradise Papers, a trove of leaked documents obtained by Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists in 2017.

The 13.4 million files include incorporation documents, emails, contracts and other records from two offshore service providers and the company registries of some of the world’s most secretive countries.

The Austrian man was listed as the director of several companies in the BVI, Malta and the Bahamas, the media report said. His address on the documents referred to an apartment in Vienna that belongs to the wife of one of the main suspects in the police investigation, according to a review of Austria’s land registry records.

By cross-checking the confidential files with property records, the reporters also found that the shell companies owned properties in the U.K., including two office buildings, a commercial property and a retail park, worth about $73 million in total.

The documents show that a Liechtenstein trust owned by the Saudi businessman was behind those companies. The man is also known as a philanthropist who has financed Islamic studies at various European universities in recent years, including in Austria, the report added.

The complex offshore structure identified by the journalists is legal, the report said, but “can be used to disguise the flow of money and the identity of the true economic beneficiaries.”

Profil and Ö1, two ICIJ media partners in Austria, asked the Viennese suspect about the purpose of the offshore company network and his link with the Saudi billionaire. A lawyer representing him declined to comment.

The post Muslim Brotherhood suspect and Saudi billionaire linked to same offshore companies, Austrian report says appeared first on ICIJ.

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