#Goldman Sachs unit pleads guilty to US charges in 1MDB scandal

Goldman Sachs is shelling out nearly $3 billion to settle charges related to its role in a star-studded corruption scandal that has dogged the bank for years — and the resulting pain will spread to the C-Suite.

The Wall Street giant reportedly will discipline both Chief Executive David Solomon and his predecessor Lloyd Blankfein, seizing tens of millions of dollars from them and other top executives in the form of clawbacks, pay cuts and shrunk bonuses as Goldman settles federal charges for its role in the debacle, which started in Malaysia and reached the highest echelons of Hollywood before law enforcement got involved.

Goldman’s Malaysian unit on Thursday pleaded guilty to US Department of Justice charges that it violated the anti-bribery provisions of the Foreign Corrupt Practices Act for its role in creating the 1MDB fund for the Malaysian government, which was spent on corrupt purposes instead of building the country’s economy.

Many of the wild splurges, according to prosecutors, were led by fugitive financier Jho Low, who allegedly siphoned away funds from three bond offerings worth $6.5 billion that were underwritten by Goldman in 2012 and 2013. Low, who remains at large, allegedly spent the funds on yachts, lavish parties with celebrities like Paris Hilton and Leonardo Di Caprio, and even helped bankroll the Martin Scorsese flick “Wolf of Wall Street.”

In the largest monetary penalty ever paid to the United States by a corporate entity for a foreign bribery case, Goldman will pay more than more than $2.3 billion and forfeit $606 million more. The staggering sum includes $400 million to the Securities and Exchange Commission, $154 million to the Federal Reserve and $150 million to the New York Department of Finance.

Other regulators will also take a cut as Hong Kong’s Securities and Futures Commission announced early Thursday that it has fined Goldman $350 million.

Adding in the $2.5 billion settlement Goldman reached earlier this year with the Malaysian government, the bank will pay well north of $5 billion for its Malaysian misadventure, a vast sum that is equal to almost a full year’s profit.

That number has also prompted Goldman to take some internal disciplinary measures.

Senior executives who oversaw the bank during the 1MDB bond offerings are facing penalties — clawbacks for former executives and pay cuts for current ones — and bonuses for this year are likewise in danger, according to the Wall Street Journal (paywall).

That’s despite Goldman’s previous efforts to portray two Goldman bankers at the center of the scandal — Tim Leissner and Roger Ng — as rogue employees who kept their shenanigans hidden from top brass. The DOJ filed criminal charges against Leissner, husband of Kimora Lee Simons, and Ng in November 2018.

Federal officials said financier including Low, Leissner and Ng paid $1.6 billion in bribes to create a slush fund for corrupt officials, leaving Malaysian taxpayers on the hook for more than $11 billion in debt.

“Greed is not good,” said William Sweeney, Assistant Director in Charge of the FBI’s New York City field office. “Greed eventually exacts an immense cost on society, and unchecked corrupt behavior erodes trust in public institutions and government entities alike.”

Goldman will also enter into a deferred prosecution agreement on a separate but related charge. That deal will allow the bank to avoid criminal charges for three and a half years if it demonstrates good conduct during that time period.

The scandal dates back to the government of former Malaysian Prime Minister Najib Razak, which set up the 1MDB fund in 2009. The Justice Department estimated $4.5 billion was misappropriated by high-level fund officials and their associates between 2009 and 2014.

Goldman has been investigated by regulators in at least 14 countries, including the US, Malaysia, Singapore and others, for what its leadership did and did not know about the transactions.

According to the Justice Department, Goldman earned $600 million in fees for its work with 1MDB. Leissner, Ng and others received large bonuses in connection with that revenue.

With Post wires