Morning Coffee: New Goldman Sachs CEO’s first real headache. Credit Suisse cuts haven’t healed

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Goldman's headache

This is not how David Solomon wanted to celebrate his one-month anniversary as chief executive of Goldman Sachs. Two former Goldman Sachs bankers have been charged with conspiring with a Malaysian financier to launder billions of dollars embezzled from a sovereign-wealth fund. What’s worse, prosecutors believe several other employees at the firm knew of the alleged bribery scheme but kept the bank’s compliance department in the dark, according to Bloomberg.

Former Goldman partner Tim Leissner, once one of the firm’s highest-paid employees, pleaded guilty to conspiring to launder money in a multiyear criminal enterprise that the Wall Street Journal has called “one of the biggest financial frauds in history.” Roger Ng, the other former Goldman banker who allegedly participated in the bribery scheme, was arrested on Thursday around the same time Leissner pled guilty.

Meanwhile, one of the firm’s most senior bankers in Asia, Andrea Vella, was placed on leave pending review of the allegations. Vella hasn’t been charged but people familiar with the matter confirmed to the Journal his identity as an unnamed co-conspirator. Vella co-headed Goldman’s Asian investment banking business until two weeks ago, when Solomon stripped him of his management duties. Vella remained at the bank, however, suggesting the move had nothing to do with the ongoing probe and that Goldman only learned of Vella’s alleged involvement this week. Leissner and Ng had been mentioned in previous reports regarding the ongoing probe, but Vella’s name first hit print on Thursday.

The difficulty that Goldman Sachs faces is that the fallout may have only just begun. Prosecutors said that “employees and agents” of the bank were aware of the deal reportedly masterminded by controversial financier Low Taek Joho, who had no formal position with the fund, and also knew of the alleged bribes and kickbacks to Malaysian and Abu Dhabi government officials to help win the $6 billion bond offering. However, prosecutors allege these unnamed employees worked to hide the details from the bank’s legal and compliance departments, according to Bloomberg, which cryptically asked: “Will others be next?”

Speaking at an event in New York on Thursday, former Goldman Sachs CEO Lloyd Blankfein was asked what the investigation means for the bank’s reputation. “Well, it’s not good,” he said.

Elsewhere, Credit Suisse laid a bit of an egg on Thursday. While on pace to report its first annual profit since 2014, the bank failed to inspire investors with its third quarter results as cost reductions cut into net revenues. The firm’s markets division performed particularly poorly, posting a surprising loss that forced the bank to abandon its $6 billion revenue target for the business.

Meanwhile:

UBS is preparing to relocate 64 roles from its London office to continental Europe in preparation for the UK’s exit from the European Union, with more likely to follow. (Financial News) 

Following gloomy report after gloomy report, it seems U.K. and EU officials are making progress toward a deal that would give London banks basic access to EU markets post-Brexit. (Reuters)

Thousands of Google employees walked out of offices around the globe on Thursday to protest its workplace culture and how the company responds to sexual misconduct claims. A total of 47 offices participated in the walkout. (The Guardian)

A New York hedge fund led by former J.P. Morgan CFO Douglas Braunstein has taken a large stake in Deutsche Bank, making it one of the lender’s largest shareholders. Braunstein said that Deutsche Bank’s management team was “as dysfunctional as you could basically find” back in 2017, but appears to be on board with the current regime. He believes the firm’s underperforming global-transaction-banking unit is the key to the bank’s turnaround. (WSJ)

A day trader who is on trial for insider trading was in contact with several other wealthy traders and financial journalists, though the only other person charged is former UBS compliance officer Fabiana Abdel-Malek, according to his lawyer. Walid Choucair and Abdel-Malek face up to seven years in jail. (Bloomberg)

Citigroup plans to move 63 employees from its trading unit and private bank outside of the U.K. as part of its post-Brexit plans. Quite an exact number for a proposal. (Bloomberg)

UBS has set up a confidential hotline for employees to report sexual misconduct and harassment following claims that the bank mishandled allegations from a graduate trainee who said she was raped by a senior employee. (Financial News)

Rothschild executive Nigel Higgins will succeed Barclays Chairman John McFarlane when he steps down in May of next year. (WSJ)

Another software engineer disclosed their entire salary history. (Humanwhocodes) 

Banking interns say very sycophantic things about their summer bosses. (Business Insider) 

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