Chalk up another victory for effective compliance programs: Goldman Sachs just avoided FCPA charges from the Securities and Exchange Commission because its compliance team uncovered a sketchy deal one of its bankers cooked up in Ghana — while the banker himself is now facing charges from the SEC.
The defendant in question is Asante Berko, a dual citizen of the United States and Ghana who worked in Goldman’s London offices in the mid-2010s. According to the SEC complaint against him, Berko became the bank’s specialist on Ghana projects, and in late 2014 he ended up on a team helping a Turkish energy company to bid on a power plant construction project there.
You know how these things go. Once Berko began working on the project, he reached out to some fixer firm in Ghana with close ties to the Ministry of Energy there. We don’t know the name of the intermediary, but Berko had worked with the company in the past and it had close ties with the brother of “one of the most senior officials of Ghana” at that time.
Soon enough, that led to Berko coordinating a bribery scheme in 2015 among the Turkish energy company (believed to be Aksa Enerji, although the SEC complaint doesn’t say so), the intermediary firm in Ghana, and Ghanian government officials. The Turks eventually funneled $4.5 million into Ghanian officials’ hands, steered through the intermediary firm to various other dummy accounts.
The SEC also says Berko personally paid $66,000 in bribes to Ghanian officials to get the power plant deal done; and accepted $2 million from the Turkish company for arranging the whole scheme, which he never disclosed to his bosses at Goldman.
Berko did all of this while deceiving Goldman’s compliance team at every turn. He lied on due diligence forms. He worked the bribery arrangements through personal email addresses and cell phone calls, a violation of Goldman policy. When Goldman’s compliance team asked the CEO of the Turkish energy company to clarify the role of the intermediary in Ghana, Berko even edited the CEO’s reply to throw Goldman’s compliance hounds off the scent.
You still know how these things go. Berko made a mistake that caught the compliance team’s attention, and everything began to unravel.
Enter Goldman’s Due Diligence
Goldman Sachs did have an approval process for risky transactions like the Ghana power plant deal. Namely, deal teams working on risky projects like the Ghana power plant deal had to compile documentation called a “posting memo,” so supervisors could assess the transaction.
Each posting memo asked whether any Goldman employees, the client involved (in this case, the Turkish energy company), or anyone else working on the transaction either hired or paid an intermediary as part of the deal; or did the same with any “adviser” who happened to be a politically exposed person.
Berko answered no on both counts. As the SEC complaint notes with the agency’s typical understatement: “Berko withheld this information… because he knew that if he disclosed the role of the intermediary company or the PEP, [Goldman Sachs] would order further diligence into the power plant project and possibly discover the bribery scheme.”
In our first victory for Goldman’s compliance team, that enhanced due diligence happened anyway. The bank’s review committee did give preliminary approval to the transaction, but had enough sense to classify the deal as “significant and complex” — a distinction that automatically triggered more due diligence, no matter what baloney Berko had written into the posting memo.
When the compliance community talks about risk-based due diligence, this is what that means. Applause for the executives at Goldman who pushed for such practices, because they helped the bank avoid a major FCPA failure.
As the compliance team performed that enhanced due diligence, it reviewed Berko’s work emails and discovered the existence of the intermediary company; that was the first thread to unravel. The compliance team alerted the legal team, and a formal investigation began.
Berko first tried to pin the intermediary on the Turkish client. So Goldman’s legal team asked the Turkish client CEO about that. The CEO waved off the inquiry, saying his company had only used the intermediary for a short while and would end up spending about $600,000 with the fixer. In reality, the Turkish company had already contracted with the intermediary for a long-term deal worth $42 million, “to obtain additional regulatory benefits.”
Attempts to Deceive Compliance
By May 2016, Goldman investigators followed up again with the CEO, asking for more detail. The CEO showed Berko his proposed reply to investigators — and Berko then edited the reply to deceive investigators more effectively.
Here are some of the edits, below. The CEO’s original answer is in plain text; Berko’s revisions are in bold:
They were quite useful to us last year. They were crucial in going around to the responses from government departments, arranging temporary work entry for our engineers and workers, environmental assessment, providing office space and accommodation. We also needed them to get temporary fuel storage and to arrange the local logistics in bringing fuel to the country. The fuel business can only be done with local companies that are licensed to do so and they introduced us to a company that could help. However as we got localized in Accra, our team lead by our Project Manager in Ghana started to accumulate local relationships and therefore the need for such local services became obsolete for us.
Berko’s baloney strikes me as clever. He’s providing specific examples of what the intermediary supposedly was doing, and why the Turkish company had to use a local intermediary in the first place.
Well, that’s exactly the evidence a compliance function is supposed to collect about intermediaries, per the Justice Department’s FCPA Guidance from 2012 (page 60):
Companies should have an understanding of the business rationale for including the third party in the transaction. Among other things, the company should understand the role of and need for the third party and ensure that the contract terms specifically describe the services to be performed.
That’s what Berko was trying to provide. It wasn’t true, of course — but he still knew what the compliance department was looking for.
By the end of May 2016, the Turkish CEO stopped answering investigators’ questions, and three months later Goldman executives scuttled the deal. Berko quit later that year.
The bottom line from the SEC is this: Goldman Sachs had made an honest effort to train Berko about anti-bribery policies, and he went rogue anyway. But thanks to thoughtful due diligence and steady, persistent investigation, Goldman sniffed out the scheme and high-tailed out of the transaction before the deal would sully the corporate name.
As Charles Cain, head of the SEC’s FCPA enforcement team, said: “Berko’s misconduct was egregious and individual accountability remains a key component to our FCPA enforcement efforts. The firm’s compliance personnel took appropriate steps to prevent the firm from participating in the transaction and it is not being charged.”
Imagine the hot water Goldman would face if it hadn’t persisted with due diligence, and Berko pulled this off under the bank’s nose. Yeesh. This is why compliance matters.