Goldman Sachs Entity to Pay $2.9 Million in Corruption Probe Tied to 1MDB: DOJ

A subsidiary of Goldman Sachs pleaded guilty on Thursday and agreed to pay more than $2.9 billion in a foreign corruption probe tied to the Malaysian 1MDB sovereign wealth fund, which was looted of billions of dollars in a corruption scandal.

In addition, several current and former top executives at Goldman will have to return millions of dollars in pay and bonuses to the company, a financial penalty for those in charge when the scandal unfolded.

"The department filed criminal charges in New York against the Goldman Sachs Group and its Malaysian subsidiary, charging each with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act," said Brian Rabbitt, Acting Assistant Attorney General in Washington Thursday in a press conference.

Goldman Sachs Malaysia entered the plea in federal court in Brooklyn. As part of its plea, the company admitted that it "knowingly and willfully" conspired to violate U.S. anti-bribery laws.

The $2.9 billion includes payments to U.S. and overseas regulators. The penalties also include roughly $600 million in profits Goldman made off the 1MDB scandal that it will have to disgorge. Goldman had previously reached a $3.9 billion settlement with the government of Malaysia.

Goldman Sachs' board of directors decided to claw back pay and bonuses from top executives, including current CEO David Solomon and former CEO Lloyd Blankfein. The firm is in talks with additional executives to return part of their pay to the company over their role in the scheme. In total, more than $174 million in pay and bonuses are being returned to the company, the board said.

"The Board views the 1MDB matter as an institutional failure, inconsistent with the high expectations it has for the firm," Goldman's board said in a separate statement.

Malaysian and U.S. prosecutors had alleged that bond sales organized by Goldman Sachs provided one of the means for associates of former Prime Minister Najib Razak to steal billions over several years from a fund that was ostensibly set up to accelerate Malaysia's economic development.

"Senior Goldman bankers played a central role in this scheme, conspiring with others to siphon off approximately 2.7 billion dollars from one 1MBD. They then use those funds to line their own pockets and to pay approximately 1.6 billion dollars in bribes."

said Rabbitt.

In court on Thursday, Goldman Sachs' general counsel, Karen Seymour, said that agents and employees of Goldman Sachs Malaysia had violated the U.S. Foreign Corrupt Practices Act by "corruptly promising and paying bribes to foreign officials in order to obtain and retain business for Goldman Sachs."

The fund, 1Malaysia Development Berhad, was set up in 2009 by Najib to promote economic development. It relied primarily on debt to fund investment and economic development projects and was overseen by senior Malaysian government officials, according to court records.

Najib set up 1MDB when he took office in 2009, but it accumulated billions in debts, and U.S. investigators allege at least $4.5 billion was stolen from the fund and laundered by his associates.

Two Goldman Sachs executives have also been personally charged for fraud. Tim Leissner, who was the chairman of Goldman's Southeast Asia division, pleaded guilty to money laundering and violating the Foreign Corrupt Practices Act. Another Goldman executive, Ng Chong Hwa also known as "Roger Ng," will stand trial for money laundering and violating the FCPA in March 2021.

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