Goldman Sachs Group Inc. stepped up scrutiny of Tim Leissner amid concerns about how he handled the involvement of an Indonesian businessman with an overturned corruption conviction in a mining deal the banker was pursuing, according to a person with knowledge of the matter.
Leissner, an 18-year Goldman Sachs veteran who left the firm earlier this year, has been drawn into a probe by U.S. authorities of a Malaysian state investment fund that the bank raised money for. Last year he was in talks to provide financing for a group of investors, including Sudjiono Timan, who were seeking to buy a controlling interest in Newmont Mining Corp.’s copper operations in Indonesia, according to two people familiar with the deal who asked not to be identified discussing confidential information.
Timan, whose ties to the Newmont deal haven’t been previously reported, was convicted on corruption charges in 2004. Even though Indonesia’s Supreme Court reversed the conviction in 2013, before the Newmont deal took shape, Goldman Sachs told Leissner it wouldn’t move forward on the transaction as long as Timan was a sponsor, the people said. Timan withdrew as an investor but acted as an adviser to the remaining sponsors, according to the people. When the New York-based bank learned of Timan’s continuing involvement, it decided not to proceed, they said.
The deal committee reviewing the transaction opted against it, one of the people said, in part because the bank didn’t think Leissner provided enough information about Timan’s involvement. When Goldman examined Leissner’s messages after pulling out of the Newmont deal, it discovered he had used the firm’s letterhead to write a reference letter in violation of company rules, according to the person.
Leissner, who was Goldman’s Southeast Asia chairman, resigned from the firm after he was placed on leave in January over “inaccurate and unauthorized statements” in the reference letter, according to Financial Industry Regulatory Authority records.
He hasn’t commented publicly on the matter. His attorney, Jonathan Cogan of Kobre & Kim, didn’t return phone calls. Efforts to reach Timan through former business associates were unsuccessful. A spokesman for Goldman Sachs in Hong Kong declined to comment.
Timan, a former head of government-owned brokerage holding company PT Bahana Pembinaan Usaha Indonesia, was convicted of corruption for making loans to companies that led to state losses. He was sentenced to 15 years in prison and ordered to pay $98 million in compensation, court documents show. Timan fled the country in 2004, according to media reports at the time. His conviction and sentence were overturned in July 2013.
In 1995, Goldman announced an agreement to jointly market and underwrite securities with Bahana, which was owned by Indonesia’s finance ministry and central bank. The relationship was dissolved a few years later.
Bloomberg reported in January that an Indonesian consortium led by former investment banker Agus Projosasmito was seeking funding to buy a controlling interest in Newmont’s copper operations in the country. The bidding group had approached banks about financing an offer for a majority stake in PT Newmont Nusa Tenggara, people familiar with the process said at the time. The company owns the second-biggest copper and gold mine in Indonesia. Projosasmito wasn’t immediately reachable.
The group is in talks to raise $1 billion of debt to back its bid, the financial adviser to the consortium said by e-mail on Friday. Banks including BNP Paribas SA and Malayan Banking Bhd. are currently in discussions to finance the offer, people with knowledge of the matter said. Spokesmen for BNP Paribas and Maybank declined to comment. Newmont Chief Executive Officer Gary Goldberg said Feb. 29 that no parties vying for the Indonesian assets have “secured fully committed financing.”
Leissner was issued a subpoena in February by the U.S. Justice Department, which is investigating 1Malaysia Development Bhd., a government investment fund at the center of a scandal over financial transactions, people with knowledge of the matter said this month. Since the fund’s beginning in 2009, controversy has raged over whether money was spent as intended for local projects like a financial center in Kuala Lumpur or siphoned off for the personal benefit of Malaysian politicians.
Investigators in Malaysia, Switzerland and the U.S. have been trying to trace what happened to the money. Prime Minister Najib Razak, who started 1MDB, has said accusations of misappropriations are politically motivated. The fund and the premier have repeatedly denied any wrongdoing.
Leissner helped oversee three bond sales that raised $6.5 billion for the Malaysian fund and were notable for the above-average commissions generated for Goldman Sachs, which subsequently defended the fees as representing its underwriting risks and market conditions at the time.
As Goldman Sachs reviewed its role in helping 1MDB raise capital, it started examining the e-mails of Leissner and other bankers involved in the deals, the people said. The bank stepped up scrutiny of Leissner after it decided not to proceed with the Newmont deal, according to one of the people.
Goldman’s internal examination of its involvement with 1MDB found no indication that the firm or Leissner engaged in any wrongdoing, according to people with knowledge of the process. The bank is cooperating with the Justice Department’s efforts to gather information, they said. Leissner was told by the government that he isn’t a target of the investigation, one of the people said.