With federal prosecutors finally handing down indictments in the long-running 1MDB probe, the Vampire Squid is lawyering up. And in typical Goldman fashion, the investment bank is hiring only the best, most politically-connected defense attorneys to join its legal team.

As the DOJ was preparing to file the first batch of federal charges against two former Goldman employees accused of conspiring to steal money and violate foreign anti-bribery laws, the investment bank retained Mark Filip, a prominent defense attorney and former deputy attorney general who was once the boss of the DOJ's head of criminal investigations. For those who are unfamiliar with the DOJ's depth chart, that's the division tasked with overseeing the case against the two former Goldman managing directors, a case that the bank warned could lead to criminal charges against senior employees, or maybe even the bank itself.

According to the Financial Times, the bank hired Filip in the months before the charges, which were filed last week, became public. By bringing on Filip, the bank has put Brian Benczkowski, the DOJ's criminal division chief, in a tough spot. Because back when Filip was a deputy AG, Benczkowski was his chief of staff. This obvious conflict of interest will likely force Benczkowski ro recuse himself from the case, creating disarray in the senior ranks of the DOJ.

Mark Filip

But as if this savvy maneuver didn't offer the bank enough of an advantage over the federal government, Goldman's new hire brings with him a particular set of skills that will definitely help the bank mitigate any blowback from the prosecution. Filip helped burnish his reputation as a prosecutor in the aftermath of the financial crisis by effectively writing the DOJ playbook for pursuing cases against major corporations - experience will no doubt come in handy when Filip joins the Goldman legal team for a sit-down with the DOJ later this month.

Goldman is scheduled to meet later this month in Washington with DOJ prosecutors to argue that it should not face criminal charges in connection to the 1MDB affair. Mr Filip will be part of the Goldman legal team making its presentation. Such a presentation is known colloquially as a "Filip Factors" presentation because of a 2008 memo that Mr Filip wrote when he was deputy attorney-general. The memo outlined the factors prosecutors should weigh when deciding whether to charge a corporation.

The bank refused to elaborate on the reasons for Filip's hiring when approached by the FT. saying only that he had been brought in to "supplement our legal team."

"We’ve brought in Mark Filip to supplement our legal team," said a spokesperson for Goldman Sachs. The bank approached Mr Filip before last week’s charges against the former Goldman employees, said one person familiar with the situation.

That Benczkowski will recuse himself isn't just likely - it's a virtual certainty. That's because Trump Administration ethics guidelines bar DOJ officials from working on matters involving a former employer for at least two years after their confirmation. Benczkowski was nominated in June 2017, but his confirmation was held up for a year by Democrats concerned with his work for Russian bank Alfa Bank.

While there's a slight chance that the DOJ or the White House could authorize a waiver, few believe this is likely - and Goldman is probably banking on the likelihood that they won't.

During the confirmation process, he promised to recuse himself from any matters involving Alfa-Bank and said that, in any other cases where he felt he may have to recuse, he would consult with career ethics officials at the DOJ. He took up his post at the DOJ in July 2018 from Kirkland & Ellis, where he was a partner. A Trump administration executive order bars executive branch officials from participating in matters for two years after their appointment if a party is represented by their former employer. Justice department ethics rules bar officials from such matters for one year. The White House may issue a waiver to the order, while DOJ ethics officials can override the justice department’s bar "if the interest of the department outweighs the appearance of a conflict."

For Goldman, a lot is riding on this case. While the bank paid billions of dollars in fines to settle civil actions after the financial crisis, it avoided criminal charges. The 1MDB scandal could change that. And with prosecutors reportedly setting their sights on a "mystery" senior banker (believed to be one of the bank's former co-heads of investment banking), the pressure being brought to bear is intensifying. And the bank is clearly doing everything within its considerable means to fight back.