Tuesday, December 1, 2020

Goldman Sachs agrees $3 billion settlement with US DoJ over 1MDB corruption scandal

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Goldman Sachs has agreed to pay nearly $3bn (£2.3bn) in the US to end a probe of its role in Malaysia’s 1MDB corruption scandal.

The bank’s Malaysian subsidiary also admitted to violating US anti-bribery laws during its work raising money for Malaysia’s state-owned wealth fund.

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The settlement with the Department of Justice allows the bank to avoid criminal conviction.

Goldman did not immediately comment.

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In all, it is expected to pay about $5bn in penalties – about two thirds of its 2019 profits – to regulators around the world to resolve cases that have severely tarnished the firm’s reputation.

The bank has also said it may cut compensation awarded to executives, including retired chief Lloyd Blankfein, under whose watch the scandal happened.

What was the 1MDB scandal?

The 1MDB scheme was a global web of fraud and corruption, in which billions of dollars ostensibly raised for public development projects instead landed in private pockets, including those of Malaysia’s former PM Najib Razak.

Authorities in Asia, the US and Europe have spent years tracking down cash and assets paid for with money stolen from the fund, including condos, jewellery and art.

In July Najib was found guilty on all seven counts in the first of several multi-million dollar corruption trials and sentenced to 12 years in jail.

He had pleaded not guilty to the charges of criminal breach of trust, money laundering and abuse of power.

What was Goldman’s role?

Probes of Goldman Sachs focused on its help raising $6.5bn in 2012 and 2013 for the fund formally known as 1Malaysia Development Bhd (1MDB), work authorities said earned the firm the outsize sum of $600m.

On Thursday, the bank admitted that its Malaysian unit had “knowingly and willingly” paid bribes to foreign officials and agreed to pay nearly $3bn in penalties.

Goldman had long blamed rogue employees, asserting it had no idea the money it helped raise would be diverted from planned development projects within Malaysia.

One former Goldman Sachs partner, Tim Leissner, pleaded guilty in the US to conspiring to launder money and violating foreign bribery laws. Another executive was charged with foreign bribery offenses.

What other settlements have been announced?

Three months ago, Goldman Sachs reached a $3.9bn settlement with the Malaysian government for its role in the corruption scandal.

The settlement included a $2.5bn cash payout by Goldman, while the investment bank said it would guarantee that the government would receive at least $1.4bn from money recovered from the scheme.

The deal resolved charges in Malaysia that Goldman had misled investors.

Hong Kong regulators on Thursday announced a separate $350m fine, citing lapses in management controls.

In Singapore, authorities also plan to levy a financial penalty and issue a warning with conditions, according to Bloomberg sources.

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