Goldman Sachs Malaysia Subsidiary Pleads Guilty in 1MDB Case -- 2nd Update
October 22 2020 - 7:51PM
Dow Jones News
By Liz Hoffman
A unit of Goldman Sachs Group Inc. pleaded guilty on Thursday
morning to conspiring to violate U.S. antibribery laws, the first
step in an expected resolution of a long-running investigation into
its role in a Malaysian corruption scandal.
Lawyers for Goldman, appearing remotely in Brooklyn federal
court, said the bank's subsidiary in Malaysia would plead guilty to
violations of the Foreign Corrupt Practices Act, which bars U.S.
companies from paying bribes to government officials abroad.
The Wall Street firm also agreed to pay nearly $3 billion to
officials in four countries to end a yearslong probe into its
dealings with the 1Malaysia Development Bhd. investment fund, known
as 1MDB. That is on top of the $2.5 billion it agreed in July to
pay the government of Malaysia. Earlier Thursday, Hong Kong's
financial regulator fined Goldman $350 million for its role in the
scandal.
All in, the penalties exceed $5 billion, or about eight months
of profit for the Wall Street firm.
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.
A decade ago, Goldman looked to Malaysia as a place to do
business when the 2008 financial crisis slammed U.S. and European
markets. The Asian country had just launched the 1MDB fund to spur
economic development.
In 2012 and 2013, Goldman helped raise $6.5 billion for 1MDB by
selling bonds to investors. Prosecutors say much of that money was
stolen by an adviser to the fund named Jho Low, aided by two
Goldman bankers and associates in the Malaysian and Emirati
governments.
Goldman had long portrayed the bankers -- Timothy Leissner, who
has pleaded guilty, and Roger Ng, who has maintained his innocence
-- as rogue employees who hid their activities and Mr. Low's
involvement in the deals from their bosses. Mr. Low has denied the
allegations against him.
Critics have long said that the fees Goldman earned from 1MDB,
which were far higher than is typical for the kind of work it did,
should have been a warning sign that something wasn't right.
In its reprimand Thursday, Hong Kong's Securities and Futures
Commission said the nearly $600 million in fees Goldman generated
from the 1MDB bond deals was more than double the total revenue it
earned on 213 other bond offerings across Asia between 2011 and
2015.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
October 22, 2020 19:36 ET (23:36 GMT)
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