Goldman Sachs has agreed to pay nearly $3 billion (€2.5 billion) to settle a probe into its role in Malaysia’s 1MDB corruption scandal, and its Malaysia unit pleaded guilty to violating foreign bribery laws, drawing a line under a saga that has dogged the bank for years.
The settlement resolves a probe by US authorities into the bank’s role in underwriting three bond offerings in 2012 and 2013 that raised $6.5 billion for Malaysia’s government.
Under the terms, Goldman has been slapped with a $2.3 billion penalty and about $600 million in disgorgement of ill-gotten gains.
The US Department of Justice said the deal was the largest penalty ever levied on a US company for breaching the Foreign Corrupt Practices Act and involved an unprecedented number of regulators across the globe.
Brian Rabbitt, acting head of the Justice Department’s criminal division, said the settlement reflected the bank’s central role “in a massive global scheme to loot billions of dollars” from the state Malaysian fund.”
Between roughly 2009 and 2014, Goldman paid more than $1.6 billion in bribes to foreign officials in Malaysia and Abu Dhabi to win 1MDB business, prosecutors said.
While the saga has proved a humbling and reputationally damaging episode for Wall Street’s powerhouse investment bank, the settlement will allow Chief Executive Officer David Solomon to accelerate his plan to reshape Goldman as a more conventional bank, analysts said.
The move follows a $3.9 billion settlement the bank reached with Malaysia in July to settle all charges against the bank there related to the matter.
The scandal dates to the government of former Malaysian Prime Minister Najib Razak, which set up the 1MDB fund in 2009. The Justice Department estimated $4.5 billion was misappropriated by high-level fund officials and their associates between 2009 and 2014 to pay for real estate, art and other luxury items. In November 2018, the US Justice Department filed criminal charges against two former Goldman Sachs bankers tied to the scandal, Tim Leissner and Roger Ng.
Goldman has been investigated by regulators in at least 14 countries, including the United States, Malaysia, Singapore and others. British regulators fined Goldman £96.6 million pounds (€107 million) as part of global action.
According to the Justice Department, Goldman earned $600 million in fees for its work with 1MDB. Leissner, Ng and others received large bonuses in connection with that revenue.
Since 2019, Goldman had set aside $4.39 billion to cover legal and regulatory matters. Some $2 billion was for matters it already resolved with the Malaysian government. – Reuters