The Strategist

Goldman Sachs pleads guilty to corruption scandal, commits to pay $2.8B fine

10/21/2020 - 06:28

The US investment bank Goldman Sachs will pay the US authorities a fine of $2,8 billion. In exchange for an end to further investigations for corruption in Malaysia's 1MDB public investment fund, its Asian branch will plead guilty. This was reported by The Wall Street Journal and Bloomberg, citing sources.

The arrangement with the U.S. law enforcement agencies will be reached in the form of so-called deferred prosecution in which the authorities may reopen the prosecution if, within a certain date, the defendant commits a new offence of this nature. It is estimated that the bank will pay the US Department of Justice a fine of $2.2 billion under the deal and refund $600 million of fraudulent earnings.

The Malaysian foundation controversy emerged as early as 2015, when an audit disclosed its $11 billion in debt. The inquiry uncovered fraud schemes involving senior Malaysian politicians, and in the personal accounts of then Malaysian Prime Minister Najib Razak, almost $700 million of that sum was disclosed. Another portion of the public fund was used to offer bribes to foreign leaders. The former prime minister is currently serving a corruption sentence in jail. 

Goldman Sachs reported in July that it had entered into negotiations with the Malaysian government to settle all claims, paying $2.5 billion in cash to the Malaysian authorities and promised the return of another $1.4 billion earned as proceeds from 1MDB-related properties. 

Overall, the U.S. press has reported that the Malaysian case would cost Goldman Sachs more than $5 billion in penalties and payments to the Malaysian and U.S. authorities.