GLOBAL financial titan Goldman Sachs agreed to pay US$2.9 billion (RM12.1 billion) in penalties to settle criminal charges in the 1Malaysia Development Bhd bribery scandal, the largest US fine ever in a corruption case, the Justice Department said yesterday.

Acting US assistant attorney-general Brian Rabbitt said Goldman Sachs “accepted responsibility” in the case that involved US$1.6 billion in bribes, the largest ever recorded, and massive gains laundered through the US financial system.

Goldman Sachs helped raise US$6.5 billion for the government’s sovereign wealth fund. The US Justice Department has said more than US$4.5 billion was stolen from 1MDB by high-level officials at the fund and their associates between 2009 and 2015.

The investment fund “was looted by corrupt officials and their co-conspirators, including senior Goldman bankers” turning it “into a piggy bank for corrupt public officials and their cronies”, Rabbitt said at a press briefing.

In a first for Goldman Sachs, its Malaysian unit pleaded guilty in a US court yesterday for violations of American bribery law as part of a deal to end the criminal probe in the sweeping case that involved authorities in nine countries.

The guilty plea could curtail activities of Goldman Sachs Malaysia but allows the parent company to avoid admitting wrongdoing in court – which would have damaged its ability to do business.

The parent company pleaded not guilty in US court and agreed to “deferred prosecution” for 3½ years, during which time the firm will face increased monitoring by regulators.

But Rabbitt stressed that despite the deal, the company has been charged in the bribery scandal, “so there has been a significant amount of criminal liability” for Goldman Sachs and “imposes meaningful consequences” in the cases.

The Justice Department has charged three individuals in the case, including two former Goldman executives. Tim Leissner, the former Southeast Asia chairman, has pleaded guilty, while Ng Chong Hwa, also known as Roger Ng, former head of investment banking for GS Malaysia, is awaiting trial, and Low Taek Jho remains a fugitive.

“Goldman admitted today that, in order to effectuate the scheme, Leissner, Ng, Employee 1, and others conspired with Low Taek Jho” to pay the bribes and ignored red flags, the statement said.

In another stunning turn, the company said it will demand repayment of US$174 million in salary and bonuses paid to current and former executives, including CEO David Solomon and his predecessor Lloyd Blankfein.

These so-called clawbacks are almost unheard of in corporate cases.

The Malaysian government dropped the charges against Goldman Sachs in July after reaching a US$3.9 billion settlement with the financial giant.

The firm, which posted profits of US$3.5 billion in the latest quarter, had set aside more than US$3.1 billion as of September 30 “for litigation and regulatory proceedings”. – AFP, October 23, 2020.