A stake in the Park Lane Hotel in Manhattan was purchased with money looted from 1MDB According to the U.S. Justice Department (Photo Source: DOJ)
There’s something unsettling about the top law enforcement officer in the United States telling a brazen lie to the American people late on a Friday night when most folks have called it quits for the week on the news. Shortly after 9 p.m. last Friday evening, the U.S. Attorney General, William Barr, released a statement indicating that the top federal prosecutor for the Southern District of New York, Geoffrey Berman, was “stepping down.” In his place, Barr said this: “I am pleased to announce that President Trump intends to nominate Jay Clayton, currently the Chairman of the Securities and Exchange Commission, to serve as the next United States Attorney for the Southern District of New York.”
Two hours later, Geoffrey Berman released his own statement indicating that William Barr had just told a brazen lie to the American people. Berman’s statement was this: “I learned in a press release from the Attorney General tonight that I was ‘stepping down’ as United States Attorney. I have not resigned, and have no intention of resigning, my position, to which I was appointed by the Judges of the United States District Court for the Southern District of New York.”
On Saturday, Barr issued another statement indicating that President Trump was removing Berman from his post but would leave Berman’s Deputy in charge of the office on an interim basis. Barr had stated on Friday evening that he would be putting in Craig Carpenito, the sitting U.S. Attorney for the District of New Jersey, as acting head of the office until Clayton’s confirmation hearing. The acknowledgement by Barr that Berman’s Deputy would fill the post until a confirmation occurred appeased Berman and he agreed to step down.
Both the White House and media outlets have confirmed that Clayton asked for the job as U.S. Attorney in the Southern District of New York and that the President discussed the job with him and ultimately agreed to oust Berman in order to install Clayton. Thus the overarching question of why Clayton wanted this job so badly should be the focus of the growing investigations in Washington, as well as what criminal investigations Barr and the President may have wanted to snuff out in the Southern District of New York.
Clayton deserves all of the negative attention that is currently swirling about him. He was the source of upheaval in Geoffrey Berman’s life and career. He has fueled further shame and distrust on the Justice Department by suggesting that a golfing pal of the President can simply ask a favor and get a powerful law enforcement position. Clayton has never served a day as a prosecutor at a state or federal level.
But there’s far more to the story behind Clayton. Prior to Trump’s nomination of Clayton for Chair of the Securities and Exchange Commission, Wall Street’s top cop with only civil powers, Clayton had worked for the powerful Wall Street law firm, Sullivan & Cromwell, for more than two decades. At the time of his confirmation hearing in 2017, Clayton had been outside counsel to Goldman Sachs for years.
Goldman Sachs was, at the time of Clayton’s nomination to head the SEC, up to its eyeballs in one of the biggest financial frauds in history – a case involving a Malaysian sovereign wealth fund known as 1MDB. Goldman raised over $6 billion in bond offerings for 1MDB but, according to the Justice Department, $4.5 billion of that was “misappropriated” and used “to fund the co-conspirators’ lavish lifestyles, including purchases of artwork and jewelry, the acquisition of luxury real estate and luxury yachts, the payment of gambling expenses, and the hiring of musicians and celebrities to attend parties.” Goldman made more than $600 million in fees from the bond offerings, according to the Justice Department.
Two of Goldman’s senior bankers, Ng Chong Hwa (a/k/a Roger Ng) and Timothy Leissner, were indicted by the Justice Department for “conspiring to launder billions of dollars embezzled from 1MDB,” and “paying bribes to various Malaysian and Abu Dhabi officials.” Leissner pleaded guilty in the matter and is awaiting sentencing. Roger Ng’s trial, which is expected to be explosive for Goldman Sachs, has been stalled because of the COVID-19 pandemic but is now expected to begin in Manhattan in January of next year.
The alleged mastermind of the scheme, a Malaysian national known as Low Taek Jho (a/k/a Jho Low) is believed to be hiding out in China. He has also been indicted by the U.S. Justice Department.
Goldman Sachs itself is under indictment in Malaysia and under a criminal investigation by the U.S. Department of Justice. On June 6, Reuters reported that Malaysia would not accept $3 billion from Goldman to settle the case. On June 11 – just eight days before Berman was abruptly dismissed from his post — the New York Times reported the following:
“Goldman Sachs is trying to get federal prosecutors to ease up on the bank for its role in a brazen scheme to loot billions of dollars from a Malaysian sovereign wealth fund.
“Lawyers for the bank have asked Deputy Attorney General Jeffrey Rosen to review demands by some federal prosecutors that Goldman pay more than $2 billion in fines and plead guilty to a felony charge, according to three people briefed on the matter.
“The bank has sought to pay a lower fine and avoid a guilty plea, according to the people, who spoke on condition of anonymity because the talks are continuing.”
What most Americans have never heard about in this famous case is that Clayton’s law firm, Sullivan & Cromwell, was – wait for it – involved in making some of those luxury purchases on behalf of the gang of alleged criminals who looted 1MDB, according to the U.S. Department of Justice.
Let’s stop right there for a moment. What kind of embezzlers and money launderers would pick one of the largest Wall Street law firms with multiple former prosecutors among its ranks to help carry out an outrageously brazen crime spree? What kind of embezzlers and money launderers would loot a sovereign wealth fund that was being audited by first KPMG and then Deloitte? And yet, Sullivan & Cromwell’s name makes seven appearances in the criminal complaint filed in court by the Justice Department. The passages read as follows:
“…records from Citibank and Red Granite Pictures show that on or about June 20, 2012, $58,500,000 was wire transferred from the Red Granite Capital Account to the Shearman IOLA Account in the United States that held funds on behalf of AZIZ. On or about July 10, 2012, approximately $12,000,000 was transferred from the same IOLA Account to an attorney trust account held by Sullivan & Cromwell LLP (‘Sullivan & Cromwell’) for the purchase of the entity 912 North Hillcrest Road (BH). Sullivan & Cromwell served as counsel to Great Delight in connection with the transfer of ownership over 912 North Hillcrest Road (BH) LLC. Internal Shearman records show that each of these transactions set forth above were linked to internal Shearman accounts held for client 37965 (Riza Aziz).
“On or about August 13, 2012, Sullivan & Cromwell wire transferred $10,786,706 to a bank account at BSI Bank in Singapore held by ADKMIC, with payment details that contained reference to ‘GREAT DELIGHT LTD.’ As noted above, ADKMIC is an entity owned by LOW. On or about the same day, $10,500,000 was transferred from the ADKMIC BSI Account to LOW’s personal account at BSI Bank in Singapore, indicating that it was ‘PAYMENT TO SHAREHOLDER LTJ.’ This transfer of funds represented a payment from AZIZ to LOW for the purported sale of HILLCREST PROPERTY 1, through the transfer of ownership over 912 North Hillcrest Road (BH) LLC.”
Sullivan & Cromwell was also involved in the purchase of another luxury property using funds looted from 1MDB according to the Justice Department. The complaint explains:
“On or about November 16, 2012, $33,800,000 was transferred from AZIZ’s Red Granite Capital Account at BSI Bank in Singapore to the Shearman IOLA Account in the United States. Thereafter, $34,406,188 was wired from the Shearman IOLA Account to a Sullivan & Cromwell attorney trust account at Citibank on or about November 19, 2012, the date of the closing for the purchase of the PARK LAUREL CONDOMONIUM. That same day, $1,049,126 was wired from the Shearman IOLA Account to Chicago Title Insurance Company for closing costs. According to the contract of sale, Chicago Title Insurance Company was the escrow agent for the PARK LAUREL CONDOMINIUM sale. Shearman records indicate that the client on whose behalf the funds were transferred into and out of the Shearman IOLA Account was AZIZ.
“Citibank records show that on or about November 20, 2012, the day after the closing, $34,406,188 was transferred from the Sullivan & Cromwell attorney trust account to an account at Rothschild Bank AG held in the name of ‘Park Laurel NYC Ltd.,’ the seller of the property. This wire transfer represented payment to LOW for the sale of the PARK LAUREL CONDOMONIUM.”
While Sullivan & Cromwell is named 7 times in the complaint, the giant law firm Shearman & Sterling is mentioned 94 times. Shearman & Sterling has represented Goldman Sachs and other Wall Street banks on numerous occasions.
Something else that the public does not know is that J.P. Morgan, a bank that has previously pleaded guilty to three criminal felony counts, is named 61 times in the 1MDB complaint for its role in wiring the looted funds. While the Justice Department has not brought charges against J.P. Morgan in this matter, the Swiss regulator, FINMA, found in 2017 that the bank had committed serious anti-money laundering breaches in its handling of monies belonging to 1MDB.
That’s a serious black eye and one that J.P. Morgan most likely would like to keep out of the news. Why? Because two of its felony counts in 2014 stemmed from its negligence in how it ignored the money laundering going on for decades in the business bank account it handled for Ponzi schemer Bernie Madoff. J.P. Morgan’s third felony count came in 2015 for its role in rigging foreign exchange markets.
There’s an awful lot of folks in the Southern District of New York who would stand to benefit if it gets a Wall Street crony as its federal prosecutor.
This article first appeared on Wall Street on Parade.