AN Asian subsidiary of Goldman Sachs will plead guilty to US charges over the investment bank’s role in the defrauding of 1Malaysia Development Bhd, in a deal that will bring closure to a years-long probe, The New York Times reported today.

The report, quoting an unnamed person with knowledge of the agreement, said the parent company of the Wall Street bank will admit mistakes but will not itself have to enter a guilty plea as part of the arrangement with federal prosecutors. The bank will also avoid the appointment of an external monitor to review its compliance procedures.

To settle the case, the bank will pay more than US$2 million (RM8.4 billion) in penalties. A statement of facts is also to be released with the settlement 

People briefed on the plans said the agreement will be officially announced tomorrow.

The bank’s meeting of the Justice Department’s terms will end one of the worst scandals in Goldman Sach’s history.

A Goldman spokesman declined the NYT’s request for comment

Goldman pocketed US$600 billion in fees for helping 1MDB to raise US$6.5 billion via the sale of bonds in 2012-2013.

Goldman reached settlement with Malaysia in July to end criminal charges and claims for restitution over the losses suffered by the government in the 1MDB affair. Under the terms of the agreement, the bank would pay Malaysia US$2.5 billion upfront and guarantee the return of US$1.4 billion worth of seized assets linked to 1MDB.

In total, Goldman should pay roughly US$5 billion to settle the case with Malaysia, the Justice Department and other agencies.

1MDB was a state investment fund launched in 2009 by then prime minister Najib Razak shortly after taking office.

By 2014, it had racked up US$11 billion in debts, earning intense public scrutiny

The US Justice Department got involved after claims surfaced that stolen Malaysian public money was laundered through the American financial system. US prosecutors sought to seized some US$1.8 billion in assets allegedly purchased with the cash.

More than US$4.5 billion is said to have been stolen from 1MDB between 2009 and 2015 by the fund’s high-level officials and their associates. 

The US attorney-general in 2017 described the looting of the fund as ‘kleptocracy at its worst”. – October 21, 2020.