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Tuesday
Nov132018

What happened at Tim Leissner's plea hearing?

Last week the transcript from Tim Leissner's August 28 plea hearing was unsealed and posted online, courtesy of the Financial Times.

Mr. Leissner was a managing director of Goldman Sachs and chairman of its Southeast Asia operations. He was the banker in charge of the 1MDB account, work that generated $600 million in fees for Goldman Sachs, and which eventually led to Mr. Leissner's guilty plea to FCPA and money laundering conspiracies for his role in the multi-billion-dollar looting the Malaysian sovereign wealth fund.

Reading the unsealed (although somewhat redacted) transcript of Mr. Leissner's plea hearing in federal court in New York City brought back some painful (albeit self-inflicted) memories from my own plea hearing. In September 2010, I pleaded guilty in federal court in DC to one count of conspiracy to violate the Foreign Corrupt Practices Act and other statutes.

In some respects, a plea hearing is more daunting and anxiety provoking than sentencing. It marks the beginning of what can be a long period of uncertainty, when an individual loses control of his or her daily routine in a way that’s difficult to describe. 

At the start of most federal plea hearings, the judge -- in my case Judge Richard Leon -- makes sure the defendant is fully aware and of sound mind with respect to the proceedings, and that he or she understands that they are giving up their constitutional rights to a trial by jury and waiving other means of defense. 

Echoing my experience, at Mr. Leissner's plea hearing Judge Margo Brodie (EDNY) reminded the defendant, “If you answer any of my questions falsely, you could face another prosecution for perjury or for making a false statement.”

Next come the details of the plea. Judge Brodie started by saying, “I am going to spend a little bit of time discussing that (the plea) and the elements of the crime to make sure you understand what it is you are pleading guilty to.” 

At my hearing, Judge Leon had a number of questions about my plea, including the names and professional details of all my co-conspirators, otherwise known just as “Employee A," "Individual B,” and so on, and about their specific roles and how they ended up as co-conspirators.

Judges then typically review the federal sentencing guidelines. They ask both the government and defense counsel if there is general agreement on the application of the guidelines, while making clear that the guidelines are advisory only, and that the actual sentence will be impacted by the pre-sentence report to be prepared by the Probation Department, as well as sentencing memorandums that will come from the government and defense counsel. But that’s not all.

As Judge Brodie said during Mr. Leissner's plea hearing: “I do have the authority to move upward or downward, and I do not have to sentence you within the guideline range.”

The sentence calculation in my case was simple. Pleading to a one-count conspiracy meant there was a five-year maximum. Judge Leon made clear that five years was the most he could impose, and anything less would be at “the discretion of the court.” He ended up at eighteen months (I ultimately served fourteen and a half months in a federal penitentiary).

For Mr. Leissner, it’s more complex. He's a German national.

As a non-U.S. citizen, he could also be subject to deportation. That means if Mr. Leissner does get less than life (which is the sentencing calculation according to the government’s guidelines for his two-count plea), at the end of his sentence he might be remanded to the U.S. Marshals Service, where he can be held for a long period of detention in preparation for his expulsion from the United States. 

Judge Brodie said to Mr. Leissner, “I believe you have waived or given up your right to appeal or collaterally attack all or part of your sentence if I sentence you, sir, to 300 months or less in custody.”

That means somewhere, either in the plea itself or in the redacted part of the hearing, there may be some agreement that the sentence will be 25 years or less. We also don’t know yet if Mr. Leissner is cooperating proactively in the 1MBD investigation, or if he’s pleading without cooperating.

One thing Mr. Leissner said during his plea hearing has likely already impacted Goldman Sachs.

I conspired with other employees and agents of Goldman Sachs very much in line of its culture of Goldman Sachs (emphasis added), to conceal certain facts from compliance and legal employees of Goldman Sachs…

He admitted to circumventing Goldman Sachs' internal controls and hiding his conduct, while at the same time testifying (under oath and penalty of perjury) that his conduct was “in line” with Goldman Sach's culture.

That admission was echoed by Goldman Sachs in an SEC filing the day after the DOJ announced Mr. Leissner's plea, along with the indictments of Ng Chong Hwa, another former Goldman Sachs managing director, and Low Taek Jho, a Malaysian businessman.

The disclosure said in part:

The indictment of Ng and Low alleges that the firm’s system of internal accounting controls could be easily circumvented and that the firm’s business culture, particularly in Southeast Asia, at times prioritized consummation of deals ahead of the proper operation of its compliance functions.

One of the more interesting chapters in the DOJ's ongoing 1MDB investigation will be the role Mr. Leissner's admissions, and the government's allegations, about the firm's culture, and how that might play in a possible FCPA resolution by Goldman Sachs.

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Richard Bistrong is a contributing editor of the FCPA Blog. His popular real-life compliance training video, Behind the Bribe, produced in cooperation with Mastercard, was released in 2017. To request a demo of the full eleven-minute video or a licensing fee schedule, please click here.