The fascinating Netflix series Dirty Money explores the world of high-level corruption. I discussed in an earlier post an episode of season 2 of the show about how Trump’s son-in-law Jared Kushner is a slumlord who preys on poor and vulnerable people. The show also examines how drug cartels launder their money. When it comes to laundering drug money the problem is always how to convert large amounts of cash in small currency bills collected on the streets into deposits in bank accounts without the authorities being alerted, where the money can be more easily transferred around the globe.
In season one in an episode titled Cartel Bank, the program showed how the banking giant HSBC laundered Mexican drug cartel money by allowing branches in small towns in Mexico to open accounts and not asking questions about who the new customers are and where the large deposits were coming from. In the season 2 episode titled Dirty Gold they examine how US companies help to launder drug money obtained in the US by smuggling the cash to Peru, using it to buy gold mined illegally by exploited and poorly paid workers, and then sending the gold to shady refineries in the US who do not ask questions about its provenance. Thus the money ends up in US banks and can then be sent around the world to shell companies. The dirty gold is even sold to the US treasury.
In a recent episode it looks at how when Najib Razak was prime minister of Malaysia, he set up a sovereign wealth fund knows as 1Malaysia Development Berhad (1MDB) into which was deposited one billion dollars of the country’s money and he installed Low Taek Jho, commonly known as Jho Low, one the friends of his stepson Riza Aziz, to manage it. That money was supposed to be invested but instead the money started going into various shady companies that sprang up and then disappeared so that soon all of the money vanished. The film shows Razak living a highly lavish lifestyle with his wife going on spending sprees around the world buying clothes and jewelry on such a scale that a plane had to be chartered to bring all their purchase back to the country. Jho Low and Aziz courted Hollywood celebrities by financing films like The Wolf of Wall Street and partying with people like Leonardo DiCaprio and Paris Hilton. (They gave DiCaprio a gift of a Picasso and Hilton was paid $100,000 to attend their parties.) After Razak lost his re-election bid, he was charged with corruption charges in a trial that is still ongoing. He claims ignorance of how the money disappeared though it is widely believed that he was actually controlling the action.
Here’s the trailer for season 2 of the series.
A key role in the Malaysian fraud was played in the fraud by the US investment bank Goldman Sachs and in an article in the May 2020 issue of Harper’s Magazine titled The Malaysian Job (subscription may be required), Andrew Cockburn explains how the bank used its prestigious name to hide the fact that the country’s money was essentially being transferred around in shell companies, all the while collecting hefty fees.
The first major payoff, like subsequent depredations, was both complex—involving a thicket of shell corporations and offshore money-laundering entrepôts—and crude, in view of the fraud’s effrontery. The fund’s initial stake was raised through the sale of $1.4 billion worth of bonds; $126 million was immediately siphoned off by Low. The Malaysians then teamed up with a pair of Saudis—one of whom was a son of then-king Abdullah—to form a joint venture with a company they pretended was backed by the Saudi government. Having paid a former U.S. State Department official to certify an inflated value for that company’s purported energy concessions (of which it actually had none), they then sent $1 billion raised from the earlier bond sale to the joint venture. Seven hundred million of that sum, disguised as the repayment of a loan—which didn’t actually exist—was then wired to a private Swiss bank account controlled by Low through a corporation in the Seychelles.
The bank, as is always the case when such frauds are exposed, blamed it on a few rogue executives acting on their own. This claim is preposterous because the involvement of such vast sums of money and huge fees would have to pass through multiple layers of internal checks and controls at the highest levels of the bank. It is suspected that the decision by its former CEO Lloyd Blankfein to step down (with a hefty severance package of course) was due to pressure from the board to minimize the scandal. Blankfein had met personally at least three times with the Malaysians now accused of defrauding the 1MDB, and had praised the actions of the executives who are now accused of acting on their own.
The bank has a long history of involvement in the most sordid of schemes. Using what Cockburn labels as “bewilderingly complex derivatives deals” (that the Wall Street banks specialize in that led to the financial collapse in 2008), the bank had earlier extracted $1.2 billion from Libya and pocketed $350 million in fees from that nation
As usual, the bank uses its strong contacts with politicians to escape criminal prosecution and to negotiate down fines to something that is small compared to its revenues, to make it into a slap on the wrist and just part of the cost of doing business.
Meanwhile, the Malaysian government has charged the bank and seventeen current and former directors with criminal activities, and is aggressively seeking as much as $7.5 billion in punitive damages, a potent threat to the bank’s already battered reputation, not to mention its bottom line.
More immediately, the Justice Department is mulling a deal with Goldman in which the company would issue a guilty plea and pay a fine for its behavior. Initially, the projected penalty was reported to reach as much as $6 billion, but more recent accounts suggest that the figure may be far lower—under $2 billion. (The bank has already set aside $1.1 billion for “litigation expenses.”) Such comparative leniency might be due to the presence of friendly faces around the bargaining table, where Goldman is represented by the powerful firm of Kirkland & Ellis and the government side is headed by Attorney General William Barr, himself a former Kirkland partner, who is said to be “directly immersed” in the negotiations. Barr obtained an ethical waiver permitting him to proceed with his involvement, as did Brian Benczkowski, head of the DOJ’s Criminal Division, another Kirkland alum and a close friend of his former boss at the DOJ, Mark Filip, who also joined the Goldman team.
“Everyone has always told me,” [Clare Rewcastle Brown, a freelance journalist resident in Malaysia journalist who first broke the story] remarked when we spoke, “that there’ll never be any action taken against Goldman Sachs. I would find that sickening, because it proves the corruption in America is every bit as bad as what I was sneering at in covering Najib.” The 1MDB criminals who poured so many millions into totemic American institutions, from Hollywood to Wall Street to the White House, evidently came to the same conclusion. It’s a big swamp.
Goldman Sachs should be treated as a criminal organization. Instead it has long been the source of people chosen to serve US treasury secretaries and others who occupy key economic posts in both Democratic and Republican administrations and are fawned upon by members of Congress and treated as financial oracles.
The system is corrupt all the way through.