Goldman to pay Malaysia $3.9 bln over 1MBD scandal, U.S. settlement seen close

KUALA LUMPUR/NEW YORK, (Reuters) - Goldman Sachs will pay $3.9 billion to settle Malaysia’s criminal probe over the U.S. investment bank’s role in the multibillion-dollar 1MDB scandal, closing a key front in the multi-jurisdictional investigation that has hung over Goldman.

Goldman Sachs shares rose 0.68% in New York morning trading on the Malaysia news and signals the U.S. Department of Justice could be near closing a similar probe.

A spokesman for the Justice Department declined to comment.

“We view this as positive as GS is closer to removing a key overhang for investors, and this provides added comfort that the total settlement amount should be manageable,” wrote Steven Chubak, an analyst at New York-based Wolfe Research.

“We still do not know how this will impact negotiations with the US regulators, but we expect some relief to be extended to Goldman given DOJ guidance to avoid ‘piling on’,” Chubak wrote.

The deal includes a $2.5 billion cash payout by Goldman and its guarantee to return at least $1.4 billion in proceeds from assets linked to sovereign wealth fund 1Malaysia Development Bhd (1MDB), the two sides said.

In return, Malaysia will drop all criminal charges against the bank, which had pleaded not guilty and consistently denied wrongdoing.

“We are pleased to have reached an agreement in principle with the Government of Malaysia to resolve outstanding charges and claims against Goldman Sachs,” the bank said in a statement. “Today’s settlement is an important step towards putting the 1MDB matter behind us.”

Malaysian and U.S. authorities estimate $4.5 billion was stolen from 1MDB in an elaborate scheme that spanned the globe and implicated highlevel officials in the fund, former Malaysian Prime Minister Najib Razak, Goldman staff and others.

Goldman had socked away around $3 billion in reserves for legal matters, more than covering the settlement with Malaysia.

It remained unclear whether the bank has put aside enough cash to cover a potential settlement with the Justice Department, which is reportedly looking at whether the bank violated the U.S. Foreign

Corrupt Practices Act. The FCPA bars U.S. companies from paying foreign government officials for help in getting or keeping business.

In recent years, the Justice Department has pledged to take into account parallel settlements when calculating corporate penalties. A source told Reuters in December that Goldman was in talks with the U.S. government and a state regulator to possibly pay up to $2 billion to resolve the investigation.