Here’s a surprise twist to that Goldman Sachs FCPA case from last week: even as the bank’s compliance team was investigating a bribery scheme one of its dealmakers is accused of arranging for a Turkish energy firm, Goldman had a minority ownership stake in that same Turkish company.

Goldman Sachs itself is not accused of any wrongdoing, but last week the SEC charged Assante Berko, who worked for Goldman in its London offices in the 2010s, with violating the FCPA as he brokered a deal between Turkish energy firm Aksa Enerji and the government of Ghana. 

According to the SEC’s complaint, Berko worked with Aksa and a Ghanian intermediary in 2015 and 2016 to funnel $4.5 million through the intermediary and into the pockets of Ghanian government officials. The SEC says Berko lied on documents, arranged the bribes through his personal email and cell phone accounts, and even paid some bribes directly from his own pockets.

Goldman Sachs’ compliance team sniffed out the scam in early 2016, and within a few months scuttled the bank’s involvement in the project. At first glance, it all seemed like a nice win for enhanced due diligence and a strong compliance function.

Now, however, comes an article from the Financial Times about Aksa Enerji itself. The article includes this eye-popping paragraph:

The Financial Times can reveal that Goldman continued to own a 16.6 per cent stake in Aksa Energy, which it acquired as part of a financing deal with its parent company that was struck in 2012 and extended the following year. The stake was bought back by the parent company, Kazanci Holding, in 2018 for $300m — almost three times its market value — thanks to a put option that was agreed six years earlier.

In other words, Goldman Sachs had a minority stake in Aksa Enerji before, during, and after one of its own bankers allegedly worked with Aksa to violate the FCPA

Oh dear. Goldman Sachs is already marinating in hot water with U.S. regulators over its complicity in the 1MDB fraud, where a senior Goldman banker in the Far East has already pleaded to charges that he helped swindle billions from the government of Malaysia. Suddenly this Berko business looks less flattering for Goldman than it first seemed. 

Back to Subsidiaries and FCPA Oversight

This raises some interesting points about oversight of subsidiaries and FCPA risk. By lucky coincidence, the SEC itself explained some of those issues in a separate case last week, where the agency settled charges with Italian oil firm ENI for FCPA shenanigans at one of ENI’s subsidiary businesses

As the SEC explained in its settlement with ENI, Section 13(b)(6) of the Exchange Act gives parent companies a bit of wiggle room trying to oversee the conduct of their subsidiary. The parent company only needs “to proceed in good faith” to use its influence to assure the subsidiary has sound internal controls.

That’s a lower standard that what a company needs to meet for its own affairs, where Section 13(b)(6) says the company must “make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer.”

In ENI’s case, ENI owned 43 percent of the subsidiary in question (a firm called Saipem), and both businesses operated in the same industry: oil & gas. 

Well, Goldman Sachs only owned 16.6 percent of Aksa Enerji, and presumably held that stake as a passive financial investor. That’s substantively different from ENI’s relationship with Saipem. So what were Goldman’s obligations to proceed in good faith and use its influence with Aksa?

On one hand, Goldman’s compliance team did root out the bribery scheme and ended Goldman’s involvement in the project; that’s a good faith effort at compliance. On the other hand, could Goldman have exerted more influence to get Aksa to clean up its behavior? 

It’s worth noting that Goldman got this 16.6 percent stake in Aksa thanks to a larger financing deal it struck with Aksa’s parent company, Kazanci Holding. If Kazanci held a majority interest in Aksa that entire time (which we don’t know), then perhaps Goldman couldn’t do much, or perhaps it didn’t want to perturb a lucrative relationship with a larger client. 

In theory, Goldman Sachs could have tried to sell off its stake in Aksa — except that’s easier said than done, and the put option to sell back to Kazanci Holdings at $300 million probably means Goldman made a killing. Does its “ability to influence” create a duty that might lead to less return for shareholders? Where does that line get drawn? 

I don’t know. But this case is a lot more interesting than it looked a week ago. 

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