KUALA LUMPUR / NEW YORK (Reuters) – Goldman Sachs will pay $ 3.9 billion to resolve Malaysia’s criminal investigation into the role of the US investment bank in the 1MDB multi-million dollar scandal, closing a key front in the multi-jurisdictional investigation that has been over Goldman.
Shares of Goldman Sachs rose 0.68% in New York morning trading on the Malaysian news, noting that the US Department of Justice may be close to closing a similar investigation.
A Justice Department spokesman declined to comment.
“We consider this to be positive, as GS is closer to eliminating a key over-indebtedness for investors, and this provides more comfort that the full settlement amount should be manageable,” wrote Steven Chubak, analyst at Wolfe Research, with based in New York.
“We don’t yet know how this will affect negotiations with US regulators, but we hope that some relief will be extended to Goldman, given the Justice Department’s guidance to avoid ‘piling up,'” Chubak wrote.
The deal includes a $ 2.5 billion cash payment by Goldman and its guarantee to return at least $ 1.4 billion in gains from assets linked to sovereign wealth fund 1Malaysia Development Bhd (1MDB), the two sides said.
In return, Malaysia will drop all criminal charges against the bank, which pleaded not guilty and consistently denied wrongdoing.
“We are pleased to have reached an agreement in principle with the Malaysian government to resolve the pending charges and claims against Goldman Sachs,” the bank said in a statement. “Today’s agreement is an important step to leave the 1MDB issue behind.”
Authorities in Malaysia and the United States estimate that $ 4.5 billion of 1MDB was stolen in an elaborate scheme that spanned the globe and involved high-level officials in the fund, former Malaysian Prime Minister Najib Razak, staff of Goldman and others.
Goldman had saved about $ 3 billion in reserves for legal matters, more than covering the deal with Malaysia.
It was unclear whether the bank has set aside enough cash to cover a possible deal with the Justice Department, which is reportedly analyzing whether the bank violated the US Foreign Corrupt Practices Act. The FCPA prohibits companies Americans pay foreign government officials for assistance in obtaining or maintaining business.
In recent years, the Justice Department has pledged to take side agreements into account when calculating corporate penalties. A source told Reuters in December that Goldman was in talks with the United States government and a state regulator to possibly pay up to $ 2 billion to resolve the investigation.
“If the leading cases of foreign corrupt practice in the past are a good indicator (which we believe to be), the agreement with the Department of Justice could eliminate most of the great second quarter they just filed,” wrote Friday. Evercore ISI analyst Glenn Schorr.
VICTORY OF MALAYSIA
The deal is the largest Malaysia has yet reached in its efforts to recover funds allegedly stolen from 1MDB, and is a major victory for Malaysian Prime Minister Muhyiddin Yassin’s four-month administration.
“We are confident that we are securing more money from Goldman Sachs compared to previous attempts, which were far below expectations,” Finance Minister Tengku Zafrul Aziz said in a statement.
US prosecutors said the money was used to buy works of art, including paintings by Vincent Van Gogh and Claude Monet, luxury properties, and to finance the movie “Wolf of Wall Street.”
Goldman helped the fund raise $ 6.5 billion in two bond offerings, earning $ 600 million in fees, according to the United States Department of Justice.
Malaysian prosecutors filed charges in December 2018 against three of the bank’s units, alleging that they misled investors.
Goldman has said that members of the former Malaysian government and 1MDB lied to him about how the proceeds from bond sales would be used.
Written by A. Ananthalakshmi in Kuala Lumpur and Elizabeth Dilts Marshall in New York; additional reported by Gui Qingl Edition by Martin Petty, Mark Potter, Jonathan Oatis and Michelle Price
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