Copies of the Financial Daily newspaper with a front-page report on Goldman Sachs Group Inc. are on sale at a stand in Kuala Lumpur, Malaysia on Tuesday, December 18, 2018.
Nadirah Zakariya | Bloomberg | fake pictures
Goldman Sachs said Friday that it resolved a key part of an international scandal by agreeing on a $ 3.9 billion deal with Malaysia.
The bank will pay Malaysia $ 2.5 billion in cash for its central role in the 1MDB debacle and will ensure that the country will receive at least $ 1.4 billion in profits from seized assets worldwide.
“This Goldman Sachs deal represents its recognition of the misconduct of two of its former employees in the broader 1MDB fraud and corruption scheme,” Malaysia’s finance minister said in a statement.
The deal paves the way for Goldman to reach an agreement with US authorities for his role in the scheme, according to a person with knowledge of the situation. An agreement with the Justice Department is expected from earlier this year, and has reportedly been delayed as Goldman seeks to avoid a guilty plea in the case.
When it does happen, a deal with the US would remove a cloud hanging over CEO David Solomon since he took office at Goldman in late 2018. Goldman’s bankers were accused of helping a Malaysian financier to looting billions of dollars from the $ 6.5 billion 1MDB fund, money that was supposed to help develop the country’s economy.
Instead, the money raised in bond deals facilitated by Goldman in 2012 and 2013 was allegedly used by Malaysian financier Low Taek Jho to finance a wave of expenses of epic proportions, including real estate and art worldwide, a yacht. $ 250 million and a stake in Martin Scorsese’s movie “The Wolf of Wall Street.”
Malaysia is withdrawing from pending criminal charges and said it will not seek charges against the bank and its employees, with the exception of Tim Leissner and Roger Ng, the former Goldman bankers accused of helping Low. While Leissner pleaded guilty to his role in the plan, Ng pleaded not guilty and was extradited to the United States last year to face the Department of Justice charges.
Goldman said it would “materially increase” its litigation provisions for the second quarter, a period in which the bank posted box office gains amid a Wall Street trade boom.
According to Wells Fargo banking analyst Mike Mayo, the company’s total bill for the episode, considered by many to be its worst scandal since the financial crisis, will be $ 4.5 billion after it is settled with the United States for $ 2 billion. That is “well below” the maximum estimate of $ 10 billion in expenses borne by some investors, he said. The bank had reaped about $ 600 million in fees tied to 1MDB’s bond deals.
The $ 1.4 billion in asset guarantees for Malaysia are unlikely to cost the bank much, Mayo said.
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