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WASHINGTON: Goldman Sachs Group Inc admitted its role in the largest foreign bribery case in the history of US law enforcement, reaching multiple international settlements to end investigations into its fundraising for the Malaysian fund plagued by scandals known as 1MDB.
Goldman officials helped distribute US $ 1.6 billion (RM6.65 billion) in illicit payments in Malaysia and the Middle East as part of a scheme that diverted money raised for development projects into a wave of international spending on mansions and lavish parties, said the bank.
The bank will pay billions of dollars in new fines to the Department of Justice (DoJ) and other US authorities, as well as regulators in the UK, Hong Kong and Singapore. The payments raised his general account to more than $ 5 billion to settle investigations into bond deals he arranged for 1MDB.
Goldman agreed with the Justice Department’s findings that some executives in Asia and internationally participated in or were aware of bribery. The Wall Street giant will cut the salary of CEO David Solomon and other current leaders and recover compensation from his predecessor Lloyd Blankfein and several other former executives, the bank said Thursday.
A small Malaysian unit of the US bank pleaded guilty to a single count of conspiracy on Thursday, the first guilty plea filed by Goldman. But the parent company avoided a criminal conviction to settle the investigations, as part of a deal that allows the bank to postpone any prosecution as long as it cooperates with ongoing US investigations and files compliance reports.
The deferred prosecution agreement is a victory for Goldman Sachs, because a conviction could have risked losing some institutional clients who cannot work with financial firms with criminal records. The bank’s shares rose 1.2% on Thursday.
Global resolutions announced Thursday conclude more than half a decade of investigations into Goldman’s role in raising $ 6.5 billion for 1MDB in three bond offerings.
To pave the way for those bond deals, Goldman officials conspired with a 1MDB official to bribe Malaysian officials and officials of a sovereign wealth vehicle in Abu Dhabi, the Justice Department said.
US authorities said Goldman’s misconduct rose to the higher ranks of the bank, despite its insistence for years that those responsible were dishonest employees.
“The plan was carried out primarily by senior Goldman officials,” Acting US Attorney Seth DuCharme said.
In total, some $ 2.7 billion of the money raised for 1MDB was stolen by people connected to the country’s former prime minister and diverted for bribes, a luxury yacht, artwork, and even funds for the Hollywood movie “The Wolf of Wall Street “.
Greater grief
The Justice Department settlement concludes one of the most important banking investigations ever inherited by the Trump administration.
The bank will pay more than $ 2.3 billion in the plea deal, said US prosecutor Alixandra Smith, the largest penalty in US history for a violation of the Foreign Corrupt Practices Act. Airbus SE paid $ 2.09 billion earlier this year to settle global bribery investigations.
The case against the Wall Street firm centered on its fundraising work in 2012 and 2013 for the state-owned company 1MDB, formally known as 1Malaysia Development Bhd.
From about 2009 to 2014, the bank’s Malaysia unit “knowingly and deliberately agreed to violate the Foreign Corrupt Practices Act by making corrupt promises and paying bribes to foreign officials to obtain and retain business for Goldman Sachs,” the adviser said. Bank General Karen Seymour told US District Judge Margo Brodie in Brooklyn in a video hearing Thursday.
Goldman’s investment banking group, led at the time by Solomon, raised $ 600 million from bond sales.
Prosecutors in court filings described a corporate culture at Goldman that displayed a casual disregard for bribery, at least among some top executives.
In a statement of fact accepted by Goldman, prosecutors highlighted a call in which a bank partner discussed with a senior executive the problems the bank had in securing an investment from an Abu Dhabi mutual fund related to 1MDB.
The partner said it was clear that a government official in Abu Dhabi was “trying to get something extra in his pocket” from the deal. “I think it is quite disturbing to have found this information,” he added.
“What’s so unsettling about that?” The senior executive responded, according to the file, that he did not identify the people. “It’s nothing new, right?”
The alleged mastermind of the 1MDB fraud, a Malaysian financier known as Jho Low (Low Taek Jho), conspired with bankers Tim Leissner, Roger Ng and others to bribe high-ranking officials in the state-owned and controlled sovereign wealth fund from Abu Dhabi. , International Petroleum Investment Company (IPIC), and one unit, Aabar Investments PJS, the bank admitted. IPIC agreed to be the guarantor of a 2012 1MDB debt deal, a role that helped advance the bond offering.
The bribes also went to the Malaysian government and 1MDB officials, prosecutors said.
In a February 2012 meeting, Low explained to Leissner, Ng and others that “government officials from Abu Dhabi and Malaysia had to be bribed to obtain the IPIC guarantee and obtain the necessary approvals from Malaysia and 1MDB,” they said.
IPIC withdraws lawsuit
Earlier this week, IPIC dropped a lawsuit in New York alleging that Goldman conspired with Malaysians to bribe top executives to further their goals of looting 1MDB.
“Following collaborative discussions, International Petroleum Investment Company is dismissing its lawsuit against Goldman Sachs, related to 1MDB-related matters,” said a spokesperson for IPIC, now part of Abu Dhabi’s Mubadala Investment Co, in a statement.
Goldman’s compliance employees were on the lookout for any transactions that might involve Low, who was seen as a significant risk. However, in the 1MDB bond deals, they did not take “reasonable steps” to keep it out of the way, according to the statement of fact.
For example, Goldman did not review the electronic communications of members of the trading team for evidence of Low’s involvement, which in 2012 would have revealed Low’s role in the matter, the statement said.
Low, who has professed his innocence, remains at large. Leissner, who was the bank’s president in Southeast Asia, pleaded guilty in the United States to conspiring to launder money. He will be sentenced in January. Ng was charged with conspiring with Low to launder money. He has denied wrongdoing.
“The board views the 1MDB affair as an institutional failure, inconsistent with the high expectations it has for the company,” Goldman’s board said in a statement Thursday announcing the executive pay cuts.
The Justice Department fine against Goldman credits more than $ 1 billion in fines paid to other US agencies and foreign authorities. That includes $ 400 million for the Securities and Exchange Commission, $ 150 million for the New York Department of Financial Services, and $ 154 million for the Federal Reserve. After the return of Malaysia’s proceeds, the Justice Department puts the total fine in the United States at approximately $ 2.9 billion.
Goldman Sachs units will also pay US $ 350 million to the Hong Kong financial regulator, US $ 122 million to the Singapore government and £ 96.6 million (RM520 million) to the UK Financial Conduct Authority, those bodies announced on Monday. Thursday.
Goldman struck a deal in July with Malaysia, which included a $ 2.5 billion payment and an unusual provision that the bank would guarantee that the Asian nation would recover an additional $ 1.4 billion of 1MDB assets seized around the world. Malaysia dropped the criminal charges against the bank as part of that settlement.
Goldman will seek permission from the US Department of Labor before the Malaysian unit’s December ruling to continue handling retirement funds for Americans, its lawyers said. Banks must obtain a waiver from the department to continue handling such funds after an admission of criminal conduct.
The 1MDB saga turned into a plot to pressure the US to go soft on some of the alleged looters, launching a broader network that has involved a prominent Republican fundraiser, a Justice Department official and even a former rap star Fugees.
