Goldman Sachs Malaysia pleads guilty in fraud

Goldman Sachs admitted its Malaysian subsidiary “knowingly and willingly” conspired to violate the Foreign Corrupt Practices Act because some former employees paid bribes to officials in connection with the looting of a sovereign wealth fund, a scandal that toppled that country’s leader and triggered criminal cases that spanned the globe.

The subsidiary pleaded guilty to a conspiracy charge Thursday in Brooklyn, New York, federal court, and the bank itself entered into a three-year deferred prosecution agreement to resolve one of the biggest scandals in the Wall Street giant’s long history.

Separate from the penalties the bank will pay, the board of Goldman Sachs said it was taking steps to withhold or recoup $174 million in compensation from current and former executives including its chief executive, David Solomon, and his predecessor, Lloyd Blankfein either in lost pay or the return of money already paid.

All told, Goldman will pay billions in penalties and disgorgement in Malaysia, the United States and Hong Kong for its role in the looting of the 1Malaysia Development Berhad fund. The scandal ultimately brought down

the government of Malaysia’s prime minister at the time, Najib Razak, and turned a financier with expensive tastes named Jho Low into an international fugitive.

As part of the plea deal, Goldman has agreed to a statement of facts compiled by federal authorities that it will not be able to dispute. That document outlines a number of internal control failings at Goldman that authorities said should have detected the wrongdoing by its former employees, as well as the involvement of Low in helping to arrange the deals and pay more than $1 billion in bribes to official in Malaysia.