Goldman Sachs Money Laundering Scandal (2016)

CONTROVERSY

                In June of 2015 a retired Swiss banker named Xavier Justo was opening a hotel on a beautiful Thailand island and while waiting for authorities to come and give him his paperwork for his license he was arrested. Six months earlier he had given a British journalist a series of emails

Prime Minister of Malaysia (Press Conference)

(227,000) from his former job as an associate for PetroSaudi which had shed on alleged theft of hundreds of millions of dollars (Forbes). Tim Leissner who is one of Goldman Sachs top investment bankers is under investigation along with Goldman Sachs as a whole. With the help of Leissner, a state fund in Malaysia was set up (1MDB), and suddenly Goldman was paid insanely high commissions for bond sales through this account. Then to make matters even worse $681 million dollars suspiciously ended up in the bank account of Malaysian Prime Minister Najib Razak. The FBI is investigating all the transactions under this account due to suspicion of money laundering that covers an area of about five countries. According to the New York Post “The sum of three bond sales for 1MDB back in 2012 and 2013, totaling as much as $6.5 billion, reportedly yielded fees, commissions and expenses for Goldman of almost $593 million, the equivalent of 9.1 percent of the money raised. The typical cut for an investment bank is about 5 percent” (Goldman Sachs Money Scandal, 2016). Goldman Sachs is claiming that they were unaware of Mr. Leissner’s actions during this time because he had been the financial advisor for that region of the world for roughly bout 8 years.

Tim Leissner investment banker

 Goldman Sachs underwrote three bond sales that raised over $6 billion for the fund, then the bank which the bonds were sold from received roughly $600 million. The DOJ believes that the misappropriated funds were the product of a money laundering scheme through shell companies in Singapore, Switzerland. From there the money was then invested in high end reality, and pieces of artwork to try to throw the United States off the trail (CNBC). 

STAKEHOLDERS

A stakeholder is anyone that is affected by a company not strictly the stockholders, or anyone that owns said business. In the case of Goldman Sachs the stakeholders for this case would be: Tim Leissner, the Prime Minister of Malaysia, Najib Razak, the company of Goldman Sachs, all of the shell companies laundering money through different countries, the FBI, and the Department of Justice (DOJ). Tim Leissner is directly involved because he is the root cause of all of the problems the company is having. He is the one that helped start the account and was also the manager for said account so any unethical decisions were either made by him or he turned a blind eye as to what was actually happening. The Prime Minister seems to be in the same boat as Tim Leissner because he was also a fund manager and was responsible for payment to the shell companies and was also responsible for taking funds from the investment account for personal gain. Goldman Sachs as a

Goldman Sachs Logo on Wall Street

company is responsible because when a company as big as Goldman Sachs misappropriates funds to this magnitude, the system of checks and balances within the company are either nonexistent or the people in charge are corrupted. Either way this is not good because the funds were being used for personal gain instead of for the good of the company. The FBI and DOJ are stakeholders because they are investigating what happened within the scheme to try to pinpoint blame so the appropriate actions may take place.

INDIVIDUALISM

Individualism comes directly from Milton Friedman who was an economist. His theory states that a company has a duty purely to its stockholders, and a company only has a duty to make a profit as long as it is legal. "In such an economy, there is one and only one social responsibility of business... to use its resources and engage in activities designed to increase profits so long as it stays within the rules of the game"(Desjardins 54). According to this outlook on ethics Goldman Sachs was unethical because the money was used for personal gain and the stockholders didn't get compensated to the fullest. Also Goldman Sachs broke the law, which is strike two in the eyes of Friedman because they used this money to invest in personal investments, and also distributed some of the wealth to offshore accounts the company didn't know about.

UTILITARIANISM

Utilitarianism is the thought process of maximizing happiness and minimizing sadness through a business transaction or any other decision that is made. Utilitarians weigh the happiness of all the stakeholders not only the stockholders. This method gives businesses the opportunity to take certain risks and to not have to worry about how the decisions they make affect certain individuals in the company as long as the overall mood of the company is happiness. According to utilitarianism Goldman Sachs acted unethically because the company as a whole suffered because of the actions of a few people. The roughly 34,000 employees Goldman Sachs has were upset and probably have to go through a series of new training or PR meetings, also the federal government is unhappy because Goldman Sachs broke the law which reflects poorly on Goldman Sachs.

KANTIANISM

Immanual Kant came up with theory Kantianism which states that individuals should should always do the right thing no matter what. Kant believed that everybody should act rationally and always tell the truth no matter what. Kant believed that businesses should never be devious, which includes actions like stealing, lying, and other unethical activities.  Kant believed that our duty is explained through the categorical imperative which states that our "maxims"(rule or principle on which you act) should be applied as a law to live which means it basically impacts everyone positively. He also created Formula of Universal Law, and the Formula of Humanity, all of which have a central meaning that our actions should be influenced by moral behavior, and if they are not than they are unethical. Goldman Sachs according to Kant acted unethically because they are also not moral. They followed none of the formulas that Kant created nor did they have any regard for them. Their rationality, and motivation for each of their actions were intended to be unmoral, and for personal gain (Desjardins 37-41)

VIRTUE THEORY

Virtue ethics is different than Kantianism and Utilitarianism. Virtue ethics is "a tradition within philosophical ethics that seeks a full and detailed description of those character traits, or virtues, that would constitute a good and full human life"(Desjardins 41). Virtue theory doesn't concern how a person should act but instead shifts the focus to what type of person you are. This theory requires inward reflection. However this theory can be skewed towards businesses as well. The four main virtues in business are: courage, honesty, temperance, and justice. Goldman Sachs expressed none of these values because they were dishonest, as well as impatient because they needed instant gratification in the form of money. 

ETHICS EVALUATION

Goldman Sachs is in the wrong 100% because they broke the law. However, I do have empathy for the parties involved because with power comes corruption, and by no means am I justifying what they did but by evaluating a problem from a different parties prospective it can help present reasons as to why someone would have acted a certain way. The main reason why someone breaks the law is because they think they can get away with it. With that said corporate greed got involved and ruined any application of ethical thinking and this is why they acted unethical.

REFERENCES

Byrne, John Aidan. "Goldman Sachs Banker Embroiled in Massive Overseas Money Scandal." New  

        York Post. New York Post, 13 Feb. 2016. Web. 01 Feb. 2017.

DesJardins, Joseph R. An Introduction to Business Ethics. New York City: McGraw-Hill Companies,  

        2014. 30-60. Print.

"Goldman Sachs under Spotlight in Malaysian Fund Scandal." Reuters. Thomson Reuters, 21 July    

        2016. Web. 01 Feb. 2017.

Officer, Executive, and Goldman Sachs Code Of Business. Our Shared Responsibility to Our   
       Clients, Colleagues and Communities (n.d.): n. pag. Web.

Popper, Nathaniel, and Matthew Goldstein. "1MDB Case Hangs Over Goldman Sachs as    

       Investigators Dig for Answers." New York Times. New York Times, 22 Dec. 2016. Web.  01 Feb. 2017.