Goldman pays $3.9bn to settle 1MDB claim
US bank reaches deal with Malaysian authorities over its role in raising cash for the scandal-hit fund
GOLDMAN SACHS will pay $3.9bn (£3.3bn) to Malaysian authorities following a massive fraud in which the country’s sovereign wealth fund was allegedly raided to buy Picasso paintings, jewellery and a mega-yacht.
The settlement ends a long-running investigation over Goldman’s role raising money for the scandal-hit 1MDB fund in 2013.
It is a major blow for the reputation of the investment bank, which has pinned the blame on rogue employees.
1MDB was set up to fund infrastructure projects in Malaysia. But as much as $4.5bn was allegedly siphoned off to fund the lavish lifestyles of some of Kuala Lumpur’s most influential families – including Najib Razak, its former prime minister, who lost power following a public outcry and is facing a verdict on corruption charges next week.
Police seized 284 boxes of luxury handbags and 72 bags filled with jewellery, cash and watches from Mr Razak’s property.
Jho Low, a Malaysian financier accused by prosecutors of leading the alleged heist, is believed to be on the run.
He is claimed to have taken out enough money to buy a $30m Manhattan penthouse and the 300ft yacht Tranquility, which was later seized and sold for $126m.
The financier – who is facing criminal indictments in the US – cultivated an image as a hard-partying playboy.
He spent $8m on jewellery and a glass piano for Australian model Miranda Kerr and bought a Picasso painting for actor Leonardo Dicaprio’s birthday.
Mr Low denies wrongdoing. US authorities allege that some of the proceeds of the scandal were laundered through real estate assets and even funded Hollywood movies such as The Wolf of Wall Street, in which Dicaprio starred as a corrupt trader.
Goldman’s investment banking unit was paid $600m for selling bonds on behalf of 1MDB in a deal overseen by star employee Tim Leissner, who has since admitted bribery and moneylaundering in the US.
At the time, the investment bank was run by David Solomon, who is now Goldman’s chief executive.
He has not been accused of any wrongdoing.
Malaysia’s finance ministry said: “This settlement represents Goldman’s acknowledgement of the misconduct of two of its former employees in the broader 1MDB fraudulent and corruption scheme.”
The Malaysian government said in November that it had rejected an offer of less than $2bn from the bank.
It had previously been holding out for as much as $7.5bn.
Goldman is still under investigation in the US and is reported to be nearing a deal with the Department of Justice.
Mike Mayo, an analyst at Wells Fargo, predicted that Goldman’s 1MDB settlements would cost a total of $4.5bn – higher than earlier estimates of $3bn to $4bn.
In return for the Malaysian settlement, the country’s government will drop all criminal charges against Goldman.
The bank pleaded not guilty and has consistently denied wrongdoing.
It has claimed it was lied to by people in the former Malaysian government, and that 1MDB lied to it about how the proceeds from the bond sales would be used.
A spokesman for the bank said: “We are pleased to have reached an agreement in principle with the government of Malaysia to resolve outstanding charges and claims against Goldman Sachs.
“Today’s settlement is an important step towards putting the 1MDB matter behind us.”
The bank said it expected to restate its earnings for the second quarter of 2020, setting aside extra cash to cover the 1MDB settlement.