Goldman Sachs has agreed to pay the U.S. government about $2.8 billion and admit fault for the 1MBD corruption scandal while deferring prosecution on the charges, the Wall Street Journal reported Tuesday, in a settlement that would cap a yearslong investigation and allow Goldman to avoid criminal charges.
The Goldman subsidiary in Asia that was involved in the Malaysian scandal is expected to plead guilty this week, people familiar with the matter told the Wall Street Journal.
Goldman is required to pay a penalty of about $2.2 billion and return roughly $600 million in ill-gotten gains, though the individuals said Goldman is able to offset some of that amount with fines paid to other authorities and agencies.
Goldman is not mandated to hire a compliance monitor, the individuals said, which would be costly and could have been long-term.
The settlement amount is lower than the $3.2 billion Goldman set aside for ongoing regulatory and legal matters as of Sept. 30 and was largely accounted for in its 2020 financial results, the Wall Street Journal noted.
Malaysia accused Goldman of misleading investors about three bond sales totaling $6.5 billion the bank helped raise for the state fund 1Malaysia Development Bhd, known as 1MBD for short, which was established in 2009 to promote economic development. Former Malaysian Prime Minister Najib Razak and Malaysian financier Low Taek Jho cofounded the fund. The U.S. Department of Justice said $4.5 billion was funneled to offshore bank accounts and shell companies, including many connected to Low. The funds were allegedly used to buy luxury assets and real estate for Low and his associates, including a private jet, a yacht, artwork by Pablo Picasso and Claude Monet and fine jewelry, according to U.S. lawsuits. An official described in U.S. legal filings as “Malaysian Official 1” allegedly received more than $1 billion. U.S. and Malaysian sources have said the official is Razak, according to Reuters. Razak has been slammed with 42 criminal charges concerning losses at 1MDB and other state entities. He was found guilty of abuse of power in July. Reuters reports that at least six countries launched money laundering, financial mismanagement and criminal investigations into 1MDB. Malaysian prosectors also charged Low, three Goldman departments and 17 current or former directors of the bank. The U.S. charged Low, former Goldman bankers Roger Ng and Tim Leissner and American rapper Pras Michel. Low has denied wrongdoing and his spokesperson told Reuters he has been granted asylum in an unknown country.
$2.5 billion. That is how much Goldman paid Malaysia to settle its case there in July.
Goldman Sachs to Pay $2.8 Billion, Admit Wrongdoing to Settle 1MDB Charges (Wall Street Journal)
Goldman Sachs Settles 1MDB Dispute With Malaysia for $3.9 Billion (Wall Street Journal)
Source: Forbes – Money