(Noted News) — After more than 5 years of ongoing litigation, Goldman Sachs has finally agreed to a $2 billion settlement with the US Department Of Justice for its role in the Malaysian 1MDB scandal of 2015.
The settlement stipulates that along with the fine, Goldman Sachs will admit it was at fault in the underwriting of bond offerings that eventually raised more than $6.5 billion for 1 Malaysia Development Berhad (1MDB), a state-run strategic development fund, which was later revealed as an embezzlement funnel for then Malaysian Prime Minister Najib Razak and his officials.
It is estimated that Goldman Sachs earned at least $600 million in fees during its role of helping the company raise money, though the banking giant disputes this figure.
The bond offerings that Goldman underwrote for the company came in three batches between 2012 and 2013, and of the $6.5 billion raised, roughly $4.5 billion of it was looted by Prime Minister Najib Razak and his top officials, with money going into personal bank accounts and shell companies.
Goldman’s attorneys managed to work out a deal where one of their smaller Asian subsidiaries would plead guilty and accept responsibility for the crime, letting the large parent company avoid a guilty plea and dodge fines that reportedly would’ve crippled their business.
The settlement with American authorities comes just months after their settlement with Malaysian authorities, who also charged them for a settlement of $3.9 billion; $1.4 billion in recovered lost money, and $2.5 billion worth of fines. The embezzlement managed to involve itself with law enforcement agencies of at least 10 different countries as the money was moved around into various places, including Australia, Hong Kong, Indonesia, Luxembourg, Seychelles, Singapore, Switzerland, United Arab Emirates, the United States, and the United Kingdom.
In total, the entire scandal, for which they made $600 million on, will cost Goldman upwards of $5 billion, or about 8 months of profit.
Heavily embedded within the scandal was Goldman Sachs now-former executives Tim Leissner and Roger Ng, who are ostensibly being blamed by Goldman as going rogue and facilitating the nefarious activities without any permission or knowledge from the rest of the company.
Leissner ended up consenting to the SEC’s order that he violated anti-bribery, internal accounting controls, and books and records provisions of federal laws. After pleading guilty, he was required to pay $43 million in ill-gotten gains.
Roger Ng on the other hand pleaded not guilty and has a pending court case in a federal court in Brooklyn.
Despite the mountains of evidence and overwhelming criticism from Malaysians regarding his involvement in the scandal, former prime minister Najib Razak still maintains that he “did not benefit from 1MDB”, and that the entire thing was pinned on him because of political reasons.
“I think [the police] wanted to tarnish my image in the court of public opinion. Maybe they were under instruction, but the least I would expect for them to say was that, ‘we were just coming in on the basis that these items are connected to 1MDB.’”
He also claims his life has been ruined because of the scandal.
“I’ve been subjected to raids and all the other things, I’ve had my security reduced. So in the minds of the public, they feel this is not the way that a former prime minister should be treated.”
Since U.S regulators sometimes disallow banks from doing certain deals while under criminal investigation, Goldman Sachs was under a lot of pressure to figure out a settlement so it could resume business. Settling with all parties involved should be a weight lifted off their shoulders as they look to make back lost time and revenue.
“Getting this overhang off the back of management and the company in general is a very big win,” analyst Marty Mosby from Vining Sparks brokerage said.
Mosby says now that the settlement is underway, they can start focusing on business as usual again.