Goldman Sachs Malaysia Subsidiary to Plead Guilty to Conspiring to Violate U.S. Anti-Bribery Laws
October 22 2020 - 11:25AM
Dow Jones News
By WSJ staff
Breaking News:
*Goldman Sachs Malaysia Subsidiary to Plead Guilty to Conspiring
to Violate U.S. Anti-Bribery Laws
*Goldman Appears in Brooklyn Federal Court This Morning
(Developing)
Hong Kong's financial regulator fined Goldman Sachs Group Inc.
$350 million, one in a series of penalties the investment bank
faces for its role raising billions of dollars for a corrupt
Malaysian sovereign-wealth fund.
The fine comes as the Wall Street bank is finalizing a
settlement with the U.S. Department of Justice in which it will pay
about $2.8 billion and admit wrongdoing to end a bribery probe
related to 1Malaysia Development Bhd., or 1MDB, according to people
familiar with the matter. In July, the bank agreed to pay the
Malaysian government at least $2.5 billion to resolve a parallel
investigation there.
The fines and settlements aim to bring to a close one of the
worst scandals in the bank's history. It made outsize profits in
helping 1MDB raise $6.5 billion of bonds in 2012 and 2013.
Prosecutors in the U.S. have accused an international cast of
characters -- including two former Goldman bankers -- of embezzling
billions of dollars from the fund, and U.S. officials had been
preparing a case that the bank ignored signs of fraud in pursuit of
fees.
Taken together, the 1MDB scandal will cost Goldman more than $5
billion, about two-thirds of a year's profits. Goldman shareholders
had long expected substantial penalties.
In Thursday's action, Hong Kong's Securities and Futures
Commission said it is fining Goldman Sachs's Asia unit for what it
described as "serious regulatory failures" related to the
misappropriation of $2.6 billion from 1MDB bond offerings. It said
Hong Kong is Goldman's regional compliance and control hub,
overseeing deals in the region.
The SFC said Goldman Sachs Asia lacked adequate controls to
monitor staff and detect misconduct, and allowed the 1MDB bond
offerings to proceed when numerous red flags surrounding the
offerings had not been properly scrutinized.
The SFC said that Goldman generated more revenue from three 1MDB
bond sales -- $567 million -- that it did arranging 213 other bonds
across Asia between 2011 and 2015.
The Goldman Asia unit's "fitness and properness to remain a
licensed corporation has been called into question," said the SFC
statement. It noted that Goldman had made improvements in its
internal audit function to help bring the matter to a close. The
SFC said Goldman accepted its findings.
Goldman said it would release a statement on the matter in due
course.
A decade ago, Goldman looked to Malaysia as a place to do
business when U.S. and European markets suffered under the 2008
financial crisis. The Asian country had just launched the 1MDB
government fund to spur economic development.
Most of the money Goldman helped raise went missing and was
allegedly stolen by an adviser to the fund, Jho Low, and his
associates, according to prosecutors. Nearly $700 million ended up
in the bank account of the country's prime minister, who was later
convicted of abuse of power for his role in the scandal.
Mr. Low, who has denied wrongdoing, allegedly spent much of the
rest on luxury condos in New York and London, fine art and a giant
yacht, throwing huge parties in Las Vegas and bankrolling the film
"The Wolf of Wall Street."
Goldman's settlements allow it to resolve the matter without
some of the harsher punishments regulators sought. In the U.S. case
a Goldman subsidiary tied to the misconduct in Asia is expected to
plead guilty but the parent company won't face prosecution, the
people familiar said. This avoids a felony mark that could have
crippled its ability to do business. The arrangement, known as a
deferred prosecution agreement, would allow officials to pursue
charges later if Goldman errs again.
(END) Dow Jones Newswires
October 22, 2020 11:10 ET (15:10 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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