Liar's Poker Goldman Sachs
Ever bought a fake picture? The more you pay for it the less inclined you are to doubt its authenticity. That is how underlying motivation for the most sophisticated scams and frauds, from Madoff to 1MDB. While Goldman Sachs has been the subject of intense investigation and reporting, it may actually be the victim at the centre of an elaborate gambit. The case holds valuable high-level lessons for investment banking compliance, due diligence and KYC.
1MDB’s four-year fallout continues at Goldman Sachs as Andrea Vella recently became the third executive to be named and implicated. More than USD 4 billion was allegedly stolen from the Malaysian state development fund. Goldman is negotiating a fine of about USD 2 billion from the Department of Justice and trying to assign blame to the actions of its Singapore office. Glaring compliance failures were made evident in 2018 when Goldman partner Tim Leissner pleaded guilty to taking more than USD 200 million and paying bribes to government bureaucrats.
Liar's Poker Goldman Sachs Investments
In a post-GFC age of compliance, the cold hard lesson of 1MDB for financial institutions is that compliance – especially at the most senior levels – is only as effective as executives’ collective ability to self-police hazardous deals involving politically exposed individuals. And therein lies the opportunity to be exploited and deceived by even the most credible counterparties.
In May of 2010 Michael Lewis, a former Goldman Sachs bond salesman in London, had his book published called Liars Poker. He told his readers Goldman was defrauding their customers and had conflicts of interest. Michael Monroe Lewis (born October 15, 1960) is an American author and financial journalist. He has also been a contributing editor to Vanity Fair since 2009, writing mostly on business, finance, and economics.
Deception combined with greed corrodes judgement, no matter how well it is quantitatively supported. It can lead to a series of poor judgements, confirmation bias and even criminal conduct, in the way that high-risk clients are onboarded and complex structured transactions are executed. Goldman Sachs might have actually been set up as the “mark” from the very beginning.
The first step in a fraud is to understand what the “mark” really wants. Making them feel like they are doing you the favour is the key to ingratiating yourself. Besides lucrative fees and a large deal size, the public development purpose and top government leaders’ support of 1MDB helped it pass the initial test.
However, 1MDB appears to have been conjured up with the intention of defrauding investors without much effort to even hide behind economic development projects to cover the misdirection of funds. The ongoing trial of former Malaysian Prime Minister Najib Razak and investigation of the Malaysian financier Jho Low and his associates have so far yielded no clues for recovering the stolen funds.
Goldman Sachs Careers
It is especially disturbing to view the case as a massive fraud which from the beginning depended on enlisting a global investment bank to front the fund raising and transfer of monies.
Source: Liar’s Poker – The 1MDB Version