An unlikely alliance with Falcon Private Bank is reportedly the latest chapter in Goldman Sachs' 1MDB woes. The embattled Swiss bank denies the ties are linked to the scandal-tarnished Malaysian fund.
Goldman Sachs is in deep with 1MDB: Chairman and ex-CEO Lloyd Blankfein reportedly met alone with Jho Low, the fugitive at the center of the alleged graft (Blankfein, who stepped down two months ago, says he doesn't remember meeting Low one-on-one), and U.S. prosecutors have charged two ex-employees of the investment bank in an investigation of its dealings with the wealth fund.
One of the bankers, former southeast Asia head Tim Leissner, accuses Goldman of fostering a culture which glossed over doubts about the dealings in favor of juicy fees. To be sure, Goldman itself hasn't been accused of wrong-doing, but the scandal shines a harsh light on the bank's compliance practices and extraordinarily high fees for run-of-the-mill bond deals.
A spokesman for Goldman said its fees for the bonds reflected risks taken by the bank at the time, which it said were far greater than other underwritings.
Manhattan to Paradeplatz
At least one strand of the Goldman story leads to Paradeplatz: via German businessman Lars Windhorst, according to «Bloomberg». Windhorst, feted by German chancellor Helmut Kohl in the 1990s as a German economic wunderkind, has experienced decidedly more mixed fortunes since then. Two of his business ventures have failed.
Windhorst ties to Falcon are unclear, but he introduced the Swiss private bank to Goldman and joined the two in a deal, according to the news agency. He couldn't directly trade with the U.S. powerhouse because of his past legal troubles.
A spokesman for Falcon denied that the transaction in question is linked to 1MDB. «Independent investigations have shown that there is no connection between the alleged transactions and the 1MDB case,» he said.
«Baked Deal»
Specifically, Windhorst reportedly conceived a «baked», or done, deal between Falcon and Goldman, which the U.S. investment bank apparently vetted and followed through on. The timing of the deal – August 2016 – was just months before Singapore arrested Falcon's branch manager in Singapore and revoked the bank's license to operate because of its 1MDB laundering.
A spokeswoman for Windhorst said that he had introduced Falcon to Goldman, but that had no further involvement, nor is he is involved in 1MDB. «We will fully refute any further speculation or allegations on this matter,» she said. Windhorst has drawn heavily on financing from Abu Dhabi for his Amsterdam-based investment firm in recent years, according to German media reports.
Abu Dhabi Charges
The Falcon-Goldman ties, which represent an unconventional alliance of the mightiest U.S. investment bank with a tiny Abu Dhabi-owned Swiss private bank, would not have come to light but for the deal which Windhorst made introductions for souring. After Goldman subsequently blamed and sacked a banker, he sued the bank for allegedly scapegoating him. The details of the Falcon-Windhorst-Goldman trade emerged in court as a result.
Falcon's 1MDB troubles are over, in regulatory terms. The bank, which is seeking a reinvention as a crypto wealth manager following the scandal, was heavily sanctioned by Switzerland's financial regulator last year. Two of its former directors face charges in Abu Dhabi. Switzerland’s attorney general is investigating Falcon as well as six undisclosed people over 1MDB.
