Goldman Sachs has agreed to pay nearly $3 billion to settle a probe into its role in Malaysia’s 1MDB corruption scandal, and top executives will see millions in bonuses clawed back over the affair.
The Department of Justice said on Thursday that Goldman Sachs will pay more than $2.9 billion as part of a deferred prosecution agreement over the bank’s role in underwriting bond offerings that raised $6.5 billion for Malaysia’s government — of which an estimated $4.5 billion was embezzled by top government officials.
The Wall Street firm will also recoup millions in bonus payments from CEO David Solomon, his predecessor Lloyd Blankfein, and other current and former executives, people familiar with the matter told the Wall Street Journal.
The exact about of the executive clawbacks was unclear, but would total in the tens of millions of dollars, the sources said.
Under the terms of the DOJ settlement, Goldman was slapped with a $2.3 billion penalty and will forfeit about $600 million in ill-gotten gains.
In total, Goldman Sachs will have to pay out more than $5 billion in fines in the scandal, in which former Malaysian Prime Minister Najib Razak and his cronies looted billions from 1Malaysia Development Berhad, a government investment fund under Goldman’s oversight.
Goldman Sachs will recoup money from CEO David Solomon (left) his predecessor Lloyd Blankfein (right) and other top executives after reaching a settlement in the 1MDB scandal
In total, Goldman Sachs will have to pay out more than $5 billion in fines in the scandal, in which former Malaysian Prime Minister Najib Razak (above) and his cronies looted billions from 1Malaysia Development Berhad, a supposed government investment fund
Justice Department prosecutors hold a press conference on Thursday announcing the deferred prosecution agreement with Goldman Sachs
Thursday’s settlement did not require a guilty plea, but DOJ prosecutors defended it as a satisfactory resolution to the case.
‘Goldman Sachs today accepted responsibility for its role in a conspiracy to bribe high-ranking foreign officials to obtain lucrative underwriting and other business relating to 1MDB,’ said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division in a statement.
‘Today’s resolution, which requires Goldman Sachs to admit wrongdoing and pay nearly three billion dollars in penalties, fines, and disgorgement, holds the bank accountable for this criminal scheme and demonstrates the department’s continuing commitment to combatting corruption and protecting the U.S. financial system,’ Rabbitt said.
In a coordinated enforcement action, British regulators fined Goldman Sachs International £96.6 million ($126 million) on Thursday.
‘There is no amnesty for firms that tackle financial crime poorly, and the size of GSI’s fine reflects that,’ Mark Steward, executive director of enforcement and market oversight at Britain’s Financial Conduct Authority, said in a statement.
What is Malaysia’s 1MDB scandal? Billions of dollars were looted from the sovereign wealth fund in a fraud that allegedly involved former prime minister Najib Razak and his associates
Former Goldman partner Tim Leissner pleaded guilty in the US over his part in the controversy. Above, he is seen with wife Kimora Lee Simmons at a 2014 Weinstein Company event
Malaysia in September dropped criminal charges against three Goldman Sachs units after the bank agreed to pay $3.9 billion there to settle the probe.
Goldman Sachs had generated about $600 million in fees for its work with the Malaysian Sovereign wealth fund, which included three bond offerings in 2012 and 2013 that raised $6.5 billion.
The 1MDB scandal has been a distraction for Goldman as new CEO Solomon tries to push the bank in profitable new directions.
While the scandal surfaced in 2015, prior to Solomon’s tenure as CEO beginning in 2018, it was centered in a division that Solomon ran at the time.
The scandal dates back to 2009, when Razak created the 1MDB fund. He and his associates are accused of looting some $4.5 billion from the fund to pay for a luxury lifestyle, as well as funneling the cash to steal an election and keep Razak in power.
Investigators have alleged that $155 million was diverted from 1MDB to help finance the 2013 film The Wolf Of Wall Street (above)
The scandal’s alleged mastermind, jet-setting Malaysian financier Low Taek Jho (above), has been charged in Malaysia and the US but his whereabouts are currently unknown
In June 2017, the DOJ began actions to recover more than $1 billion from people close to Najib and 1MDB, seizing assets including high-end properties in Beverly Hills, Los Angeles, Manhattan, New York City and London.
Also seized were fine artwork, a private jet, a luxury yacht and royalties from the film The Wolf of Wall Street and its production company Red Granite Pictures.
Investigators have alleged that $155 million was diverted from 1MDB to help finance the 2013 film.
Goldman’s position is that a ‘rogue’ banker lied and fooled the investment bank’s management and compliance teams.
A former Goldman partner, Tim Leissner, has previously pleaded guilty in the US over his part in the controversy.
Alleged mastermind Low Taek Jo denies any wrongdoing, and his current whereabouts are unknown. Above, he is seen with Gigi Hadid at the 2014 Angel Ball at Cipriani Wall Street
A Malaysian former managing director at the bank, Low Taek Jho, has also been charged in the US and Malaysia over the scandal.
Low, the scandal’s alleged mastermind, is a jet-setting Malaysian financier. He denies any wrongdoing, and his current whereabouts are unknown.
Malaysian law enforcement officials believe Low is moving freely in mainland China, despite an Interpol Red Notice for his arrest.
The US Department of Justice, which is investigating the fraud as huge sums were allegedly laundered through the US financial system, says that about $4.5 billion was looted from 1MDB.