Yesterday I began a two-part homage to my favorite comic book characters, the Fantastic Four. I began with an explanation of how they got ‘fantastic’. Today, I want to highlight their fantastic powers and a bit about each one. I use this to introduce the four issues that are listed in the FCPA Corporate Enforcement Policy which went into effect just a little under a year ago and ask if Goldman Sachs can fall under them to obtain the benefits of the Policy?

The Fantastic Four starts with Mr. Fantastic, Reed Richards, a scientific genius and the leader of the group. He can stretch his body into incredible lengths and shapes. He is considered to be one of the smartest men on Earth. Reed excelled in mathematics, physics, and mechanics and was enrolled in college by the age of 14. He went to multiple colleges including Massachusetts Institute of Technology, California Institute of Technology, Harvard University, Columbia University, and Empire State University (EMU). While attending EMU he met and became a roommate of Ben Grimm.

Richards is married to the Invisible Girl, Sue Storm, who can render herself invisible. She is able to create invisible force fields of any shape and able to turn herself and anything she is in contact with invisible. In addition to being Richards’ wife , she is the mother of their children, Franklin and Valeria. According to Comic Vine, during the early days of the Fantastic Four, Sue was “somewhat maternal to her teammates. Team leader Reed was the scientist who was always busy in his lab. Team powerhouse Ben Grimm was lonely and depressed over his physical appearance and Johnny Storm acted like the quintessential rebellious teenager – irresponsible and reckless.” She was often presented as a female voice of reason and one that sought to more closely knit the team together.

My favorite of the Four is the Human Torch, Johnny Storm. He is Sue’s younger brother, who can generate flames, surround himself with them and fly. The second most powerful member of the Fantastic Four. While Johnny is known for his impetuous and sometimes reckless nature, he is also a loyal friend and fearless hero. Of course, he also has one of the greatest catch phrases of all-time Flame On!According to Comic Vine, “Still young and rebellious, Johnny was ecstatic to have his new-found powers. Labeled the hot head of the group, Johnny would often make brash decisions and disobey direct orders. Although his sister would try to calm him, Johnny often had issues with following Reed’s orders. He would quit the team early on (and many more times) because of his temper.”

Finally, is the monstrous Thing,  (Ben Grimm), the grumpy but benevolent friend of Richards. Grimm was a college football star and Richards college roommate before becoming a fighter pilot. The cosmic ray saturation gave him a rock-like exterior and superhuman strength, durability, and endurance. The Thing is the original quintessential tough-guy of the Marvel Universe and also its first tragic character. Ben’s exterior gives him a rather gruff disposition but deep down, he has a heart of gold. Ben shows this heart of gold during interactions with his perpetual fiancé Alicia Patterson, who is blind so cannot see his hideous form. Ben’s signature phrase is ““It’s Clobberin’ Time!” – which he often yells when going into battle or at the decisive moment of a fight.”

Yesterday, I considered four questions which the Department of Justice (DOJ) may ask Goldman Sachs. Today I want to consider what the company must show under the FCPA Corporate Enforcement Policy. It has four basic requirements: (1) the company must have “voluntarily self-disclosed misconduct in an FCPA matter”; (2) fully cooperated; (3) timely and appropriately remediated; and (4) “the company is required to pay all disgorgement, forfeiture, and/or restitution resulting from the misconduct at issue.” There is a presumption the company will receive a declination “absent aggravating circumstances, which are defined as “involvement by executive management of the company in the misconduct; a significant profit to the company from the misconduct; pervasiveness of the misconduct within the company; and criminal recidivism.””

At this point, it is not known if Goldman Sachs self-disclosed any potential Foreign Corrupt Practices Act (FCPA) violations. Given its strident statements that former partner Timothy Leissner, Roger Ng and all the other Goldman Sachs employees directly involved were rogue employees perhaps it did not self-disclose. Obviously, the scandal has long been in the public eye and Leissner’s conduct has been well-known and well-documented. Reuters reported that the US government was investigating 1MDB as far back as October 2015. Leissner was put on leave by Goldman Sachs in January 2016 and he resigned from the firm in February for violation of internal company rules by sending an unauthorized reference letter for Jho Low to a financial institution in Luxemburg. Did Goldman self-disclose to the DOJ before October 2015? If so, they never publicly reported it.

Is Goldman Sachs fully cooperating with the DOJ? Full cooperation means meeting several criteria. First a company must turn over everything it uncovers in its internal investigation, meaning “timely updates on a company’s internal investigation, including but not limited to rolling disclosures of information; all facts related to involvement in the criminal activity by the company’s officers, employees, or agents; and all facts known or that become known to the company regarding potential criminal conduct by all third-party companies (including their officers, employees, or agents).” It also means rolling updates and proactively figuring out what would help the criminal case. It is clear that Leissner is cooperating as demonstrated by the testimony at his guilty plea hearing. Will Goldman Sachs turn over all information about meetings the former Malaysian Prime Minister and Low, including those with former Chief Executive Officer (CEO) Lloyd Blankfein and other company senior executives?

How about full remediation? Given that both Leissner and current Goldman Sachs CEO David Solomon have identified the company’s culture as a factor which led to the scandal, it is fairly clear that the company has a long way to go to meet this requirement, “The company’s culture of compliance, including awareness among employees that any criminal conduct, including the conduct underlying the investigation, will not be tolerated”. How about the treatment of the compliance function at Goldman Sachs? How many compliance professionals have been promoted to the Partner level? If Leissner and the rest of the Asian group thought they not only could lie to the compliance function about the involvement of Low in 1MDB after he had been rejected as a customer of the firm, how will that be changed? It certainly appears that if there was ever a paper program, consisting of a Check the Boxmentality, it was Goldman Sachs. Finally, can the company meet the requirement of “additional steps that demonstrate recognition of the seriousness of the company’s misconduct, acceptance of responsibility for it, and the implementation of measures to reduce the risk of repetition of such misconduct, including measures to identify future risks.”

The final requirement is that Goldman Sachs must return its ill-gotten gains, which it appears were $600 million. The Star has reported that Malaysia has demanded a full refund of the profits that it generated from the bond sales at issue. Would that be enough to satisfy this prong or would Goldman Sachs be subject to an additional fine or penalty under the FCPA? Even with a 50% discount available under the Policy for a company which self-discloses or 25% discount for extensive cooperation and extensive remediation.

Finally, separate and apart from the FCPA Corporate Enforcement Policy, what about a monitor? The Benczkowski Memo adds several factors prosecutors must consider including, “(a) whether the underlying misconduct involved the manipulation of corporate books and records or the exploitation of an inadequate compliance program or internal control systems; (b) whether the misconduct at issue was pervasive across the business organization or approved or facilitated by senior management; (c) whether the corporation has made significant investments in, and improvements to, its corporate compliance program and internal control systems; and (d) whether remedial improvements to the compliance program and internal controls have been tested to demonstrate that they would prevent or detect similar misconduct in the future.” Will Goldman Sachs be able to demonstrate it has overcome these issues and does not need a monitor going forward, given the apparent pervasiveness of its unethical conduct and culture?

I hope you have enjoyed my homage to Stan Lee’s creation of the Fantastic Four and the thought-provoking questions for Goldman Sachs and the firm’s role in the 1MDB scandal.

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© Thomas R. Fox, 2018