New York Goldman Sachs Group Inc. has reached a deal that would see Malaysia drop all criminal charges against the bank in exchange for $3.9 billion (Dh14 billion) of reparations for its role in raising money for the troubled sovereign wealth fund 1MDB.
The deal includes a cash settlement of $2.5 billion paid to Malaysia, the ministry of finance said on Friday. At least another $1.4 billion will come from seized 1MDB assets being returned with the help of US Department of Justice and Goldman Sachs.
This along with monies Malaysia received from the Justice Department would amount to more than $4.5 billion. It's unclear how the settlement with Malaysia will impact discussions between Goldman Sachs and US Justice Department. The bank is close to an agreement in the US after tussling over a potential guilty plea.
A legal shadow
The deal moves Goldman closer to ending its biggest legal threat since the darkest days of the 2008 financial crisis. Goldman helped the Malaysian government raise $6.5 billion for the 1MDB fund, collecting some $600 million in fees from bond sales in 2012 and 2013, according to court filings. Prosecutors allege that part of that money was diverted to 1MDB officials and their associates.
Malaysian prosecutors brought charges against three units of the bank in 2018, then followed with additional accusations against Goldman's 17 current and former executives last year. The bank has consistently denied wrongdoing, saying that former Malaysian officials lied about how proceeds from the bond sales would be used.
The deal won't affect charges against fugitive financier Low Taek Jho or other parties, Malaysia's finance ministry said.
Goldman's former Southeast Asia chairman Tim Leissner has pleaded guilty to US charges, including conspiracy to launder money, and admitted to bribing officials to get bond deals for the bank. Former Goldman banker Roger Ng has been extradited from Malaysia to the US to face similar charges.
"This settlement represents Goldman's acknowledgment of the misconduct of two of its former employees in the broader 1MDB fraudulent and corruption scheme," Malaysia's finance ministry said.
The settlement is a major milestone for Prime Minister Muhyiddin Yassin, a step toward ending the nation's years-long effort to recover billions of dollars lost through the scandal. In 2018, the affair led to the country's first change of government since its independence, when Mahathir Mohamad took over as prime minister from Najib Razak, who now faces multiple charges related to 1MDB.
The Mahathir government demanded as much as $7.5 billion from Goldman Sachs, while its negotiators had touted figures of around $2 billion to $3 billion in private discussions.