Last week I saw an interesting headline in the Weekend FT on the front page ‘Goldman Sachs settles 1MDB case with Malaysia for $3.9 billion’
Tim Leissner, a former top Goldman Sachs partner in Asia, pleaded guilty to having conspired with others, to circumvent the bank’s internal controls. He worked with Mr Low the alleged instigator of the scandal to bribe officials in Malaysia to secure the lucrative bond work for the bank
Goldman Sachs received $600 million in payments for this work, but despite this eye-popping fee it denied any wrongdoing and contends that Mr Leissner acted without the bank’s approval.
It is easy to point the finger after an event to say who should have known what or done something sooner -but criminals are clever, and accidents happen…
Mr Leissner, now married to fashion designer and model Kimora Lee Simmons, was a lady’s man. He fell for the lifestyle and glamour offered by Mr Low and now admits having personally profited from the scheme. He has agreed to forfeit up to $43.7 million.
This case also shows just how canny Goldman Sachs is. Although expected to pay between $6 and $7 billion it in fact paid only $2.5 billion together with a promise to make up any shortfall from the sale of $1.4 billion of assets seized by the Malaysian government including a $250 million yacht, several hotels in the US and a $33million Bombadier jet. Goldman Sachs is confident that the seized assets will meet the estimates and there will be no shortfall to pay.
Also, in the news last week was the German electronic payments transaction service Wirecard which collapsed on June 25th owing creditors more than E3.5 billion (almost $4.00 billion). A gaping hole was discovered in its books which its auditors EY said was the result of a sophisticated global fraud. EY was the auditors of Wirecard for more than 10 years but failed to spot that 2/3ds of its sales were faked.
Markus Braun the chief executor officer of Wirecard AG was arrested by German authorities on June 23rd.
Another heading from last week in the FT ‘Watchdog fines BDO over insurer audits’. This is a blow for BDO because it is relatively minor error and a first for 30 years. The Financial Reporting Council said that the UK’s fifth-largest accounting firm failed to meet a number of technical standards during its 2014 and 2015 audits of AmTrust because it did not sufficiently examine the work of third-party actuarial experts on the company’s accounts.
The watchdog fined BDO £200,000 which was reduced to £160,000 for early admission of its errors. However, it said the breaches were ‘not intentional, dishonest, deliberate or reckless’.
Whereas this is a blow for BDO it is a minor impairment, when compared to its competitors. The FRC fined the Big Four firms of KPMG, PwC, Deloitte and EY (together with a few smaller firms) a combined £43million in 2018.
No business organisation whatever its business; advice, manufacture, developer, retail, hospitality and so on, or wealthy individual is free from risk – and with risk comes potential loss – which is then hard to make up.
In our series of private client podcasts published on ‘How to Keep your Money’ on Spotify and Apple I Tunes we hear private client professionals give advice, provide assistance and help their clients ‘Keep their Money’ whether from natural disasters, excessive taxation, family disputes, third party litigation , poor investments, fraud, corruption, kidnapping, theft, reputation risk, cyber-ransom, and many, many more – all these risks can be mitigated with advice and planning – but then there is always a residual risk which can be covered by insurance if you want to avoid any loss and ‘Keep your Money’.
This week’s private client professional is Simon Fenn, partner of global family owned insurance company Lockton, whose area of expertise is professional indemnity insurance.
We as professionals can put in place the right protocols, rules and safeguards in our business and in the business and personal lives of our clients, but as the above three recent examples illustrate, these measures cannot protect businesses or wealth from criminal activity or negligence. This is why it is necessary to have an expert who can not only assess the risks a private client professional or their clients may be exposed to, but also to insure what cannot be mitigated – if losses are to be avoided.
Insurance is the safety net which seeps into every nook and cranny of life, work and business – for peace of mind and asset protection insurance is a cost worth paying for. To find out more listen to Simon Fenn professional indemnity insurance expert and partner with global privately owned insurance company, Lockton.
Episode 29-
Professional Indemnity Insurance, Simon Fenn: Lockton
In Episode 29, Caroline Garnham talks to Simon Fenn, Partner of global family owned insurance company, Lockton. Insurance is the safety net which seeps into every nook and cranny of life, work and business – for peace of mind and asset protection insurance is a cost worth paying for.