Street crime is not the most expensive type of criminal activity in the U.S. White-collar crime or elite crime such as embezzlement and stock manipulation costs the U.S. nearly $1 trillion compared to $15 billion for street crime, according to the FBI.
Yet white-collar criminals are rarely punished because the system protects them. “Elite criminals benefit from institutionalized non-enforcement practices, regulatory policies, and legal representation not available to street criminals,” wrote criminologist and author Dr. Scott Bonn. “As a result, white-collar criminals are extremely difficult to apprehend and prosecute, even when they do tremendous harm to society.”
Goldman Sachs has been described as a “vampire squid,” a bank that sucks money instead of blood and that allegedly engineered every major market manipulation since the Great Depression.
McKinsey has been considered the gold standard in management consulting since its founding in 1926, but the world’s most prestigious consulting firm has spawned notable scandals. These include the collapse of Enron in 2001, the 2007–2008 financial crisis, involvement in authoritarian regimes, and its role in promoting sales of OxyContin that helped fuel the opioid epidemic.
“The first thing you need to know about Goldman Sachs is that it’s everywhere,” Matt Taibbi wrote for Rolling Stone in an April 5, 2010 article. “The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Goldman was criticized after the 2007-2008 financial crisis for misleading investors and for profiting from the collapse of the mortgage market. The bank insisted its customers knew it was betting against the mortgage-related security products it was selling to them.
Goldman has been accused of other misdeeds such as insider trading by some of its employees but has denied doing anything wrong.
Here are some Goldman Sachs bankers and McKinsey partners busted for fraud.
A U.S. jury convicted former Goldman Sachs banker Roger Ng on April 8 of bribery and money laundering related to the multibillion-dollar embezzlement of the Malaysian state investment fund, 1MDB. Ng, 48, was also found guilty of conspiring to evade Goldman’s internal accounting controls. He faces up to 30 years in prison, according to the U.S. Attorney’s Office for the Eastern District of New York, where the trial took place.
Set up in 2009, 1MDB was supposed to promote development in Malaysia through foreign investment and partnerships. Goldman Sachs arranged three transactions in 2012 and 2013 that raised about $6.5 billion, and more than two thirds was misappropriated to pay bribes to officials in Malaysia and Abu Dhabi, according to U.S. authorities. It became one of the biggest corruption scandals in the world with more than $4.5 billion stolen, according to the U.S. Justice Department.
“The scheme was massive in its scale . . . brazen in its execution . . . and it was obscene in its greed,” said Breon Peace, U.S. attorney at the Eastern District of New York.
Tim Leissner, the German-born former head of Goldman Sachs Southeast Asia operations, was one of the bank’s most powerful dealmakers in Asia. Now, he’s a key government witness who admittedly misled co-workers, investigators and his three wives. Leissner testified as a state’s witness against Ng at the trial over the 1MBD bribery scandal. He faces decades in prison but hopes to get a reduced sentence.
Prosecutors allege Leissner worked with Ng and Malaysian financier Jho Low to divert $4.5 billion from the 1MDB fund – some of which Goldman helped to raise through bond sales.
Leissner helped Goldman secure $600 million in fees on $6.5 billion worth of bond deals for the Malaysian government. He has pleaded guilty to money laundering but hasn’t been sentenced and is free on a $20 million bond.
Former McKinsey & Co partner Puneet Dikshit, who helped advise Goldman Sachs on its recent $2.24 billion purchase of fintech lender GreenSky Inc, was sentenced on April 6 to two years in prison for insider trading.
GreenSky’s share price rose 53 percent on the day the merger was announced. Dikshit, 41, was ordered to pay a fine of $455,017 after admitting that he bought GreenSky call options, betting that the company’s stock price would rise, before the merger was announced on Sept. 15, 2021.
Dikshit led McKinsey’s unsecured lending practice in North America. A native of India, he has lived in the U.S. for more than 10 years and will be deported after serving time.
“This conviction shows Wall Street and Main Street that corporate advisors who steal information entrusted to them and use it for their personal gain will be caught and prosecuted,” Manhattan U.S. Attorney Damian Williams said in a statement.
Dikshit expressed remorse, saying he was “profoundly sorry.”
Rajat Gupta, a former McKinsey CEO, Goldman Sachs board member and Bill Gates advisor, was sentenced to two years in prison in 2012 for insider trading. Despite a jury verdict against him on three counts of securities fraud and one charge of conspiracy, Gupta insisted he was innocent and remained “aggressively unrepentant,” New York Times reported.
His conviction revolved around a moment in 2008 during the height of the Great Recession when financial markets were in turmoil, the stock market had collapsed, and economic activity was in steep decline.
Warren Buffett agreed to make a crucial investment in Goldman Sachs and 16 seconds after Goldman’s board finished discussing the soon-to-be-announced investment, Gupta called then-hedge fund manager Raj Rajaratnam, founder of the New York-based Galleon Group. Rajaratnam started buying Goldman shares. Explaining the well-timed purchases later in a taped phone call, he said he had heard “something good might happen to Goldman,” the Times reported.
Gupta defended himself in his book, “Mind Without Fear” — a book that Times writer Andrew Ross Sorkin said “requires the reader to suspend disbelief in the judicial system.” Gupta also criticized Preet Bharara (the U.S. attorney for the Southern District of New York who prosecuted him) for prosecutorial overreach and for targeting fellow Indians like himself.
Gupta said he had learned not to get too attached to anything. “Your reputation, your accomplishments or any of it. I think about it now, what does it matter? O.K., this thing unjustly destroyed my reputation. That’s only troubling if I am so attached to my reputation.”
Anil Kumar, a former McKinsey partner, faced up to 25 years in prison after he admitted feeding insider trading information to hedge fund manager Raj Rajaratnam. Kumar also testified against Gupta. Instead, Kumar was sentenced in 2012 to two years of probation, fined $25,000 and forfeited $2.26 million. Prosecutors praised Kumar’s “extraordinary” cooperation.
Kumar was one of the first defendants to plead guilty in a sweeping insider trading government investigation, CNBC reported. He started cooperating with prosecutors in 2010, detailing how Rajaratnam, a former classmate at the University of Pennsylvania’s Wharton School of Business, recruited him in 2003 to share inside information about McKinsey clients. Kumar continued sharing information with Rajaratnam until both were arrested in 2009.
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Kumar, who was born in India, helped the government prosecute two of the most high profile defendants convicted of illegal insider trading in history, wrote Assistant U.S. Attorney Reed Brodsky. U.S. Circuit Judge Denny Chin praised Kumar for never accessing the money Rajaratnam gave him.
Former McKinsey partner Navdeep Arora was sentenced to two years in federal prison in 2018 for defrauding companies of hundreds of thousands of dollars in consulting fees. He and a client plotted to cheat their companies out of fraudulent consulting fees, using funds from McKinsey, State Farm and McKinsey clients for travel reimbursements for personal trips.
Arora was was of Indian origin.
The U.S. Securities and Exchange Commission in September 2021 charged former Goldman Sachs senior compliance analyst Jose Luis Casero Sanchez, of Spain, with insider trading. Sanchez made illegal trades involving banking clients while working in Warsaw, Poland, according to the regulator.
He learned non-public information about his employer’s clients through his work in a “control room” that tracked pending mergers, acquisitions and financing. His duties included updating the bank’s confidential “Grey List,” which tracked clients involved in such transactions, Reuters reported.
The SEC said Casero opened brokerage accounts in his parents’ names and used them to trade ahead of significant transactions at least 45 times from September 2020 until he resigned in May 2021, profiting by almost $472,000.
At least nine of Casero’s trades related to mergers involving SPACs — special purpose acquisition companies, the SEC said.