Global financial titan Goldman Sachs has agreed to pay the largest ever penalty of $2.9 billion in the US to settle criminal charges in the 1MDB Malaysian bribery scandal. The case pertains to Goldman officials helping spread $1.6 billion in illicit payments across Malaysia and the Middle East as part of a scheme that diverted money raised for development projects into an international spending spree on mansions and lavish parties, the bank said.
Acting US Assistant Attorney General Brian C. Rabbitt said Goldman "accepted responsibility" in the case that involved $1.6 billion in bribes, the largest ever recorded, and massive gains laundered through the US financial system. The bank agreed to the new penalties to the Justice Department and other US authorities, as well as to regulators in the UK, Hong Kong and Singapore.
Goldman Sachs helped raise $6.5 billion for the Malaysian government's sovereign wealth fund. The US Justice Department has said more than $4.5 billion was stolen from 1MDB by high-level officials at the fund and their associates between 2009 and 2015.
The Wall Street giant will cut the pay of Chief Executive Officer David Solomon and other current leaders and claw back compensation from his predecessor Lloyd Blankfein and several other former executives, the bank said Thursday.
In a first for Goldman Sachs, the company's Malaysian unit pleaded guilty in a US court Thursday 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.
Included in the total penalty amount, Goldman will pay a $400 fine to the SEC and repay $600 million in earnings, and pay a $154 million fine to the Federal Reserve, which also will require the company to improve its risk management and internal oversight. The Malaysian government dropped the charges against Goldman in July after reaching a $3.9 billion settlement with the financial giant. The firm, which posted profits of $3.5 billion in the latest quarter, had set aside more than $3.1 billion as of September 30 "for litigation and regulatory proceedings." Goldman shares closed US trading 1.2 percent higher after settling the uncertainty.