American lender Goldman Sachs will be paying out almost $3bn to close a probe over its role in the 1MDB corruption scandal of Malaysia.
According to the an admission in the US court by the bank’s Malaysian subsidiary, it had paid bribes worth more than $1bn to win the contract to raise money for the Malaysian state-owned wealth fund 1MDB.
Goldman’s “central” role in a “massive corruption scheme” was reflected in the record settlement fee, said US officials.
Calling its role in the scam as an “institutional failure”, Goldman admitted that it had fallen “short”.
About two thirds of its 2019, amounting to about $5bn is to be paid by the investment bank in overall penalties related to the 1MDB scandal to various regulators all over the world. That includes fine sin the in the United Kingdom. The case has severely tainted the brand image of the bank.
$174m in compensation awarded to executives, including retired boss Lloyd Blankfein, under whose watch the scandal happened would be recouped or withheld by it, Goldman’s board also said.
“The board views the 1MDB matter as an institutional failure, inconsistent with the high expectations it has for the firm,” it said in a statement.
Described as a global web of fraud and corruption, the 1MDB scheme was a ploy to raise billions of dollars in the name of being invested in public development projects in Malaysia. However once the money as raised, it landed in private pockets which included the then and now former prime minister of Malaysia – Najib Razak.
Years have been spent in trying to track down the cash and assets paid for with money stolen from the Malaysian fund which included money spent for property, jewellery and art, by regulators and authorities in Asia, the US and Europe.
Goldman Sachs had enabled a scheme that caused “significant harm”, said US Department of Justice officials while announcing the settlement.
“That harm was borne principally and in the first instance by the people of Malaysia, who saw a fund created to benefit them… instead turned into a piggybank for corrupt public officials and their cronies,” said Brian Rabbitt, acting assistant attorney general of the Justice Department’s criminal division.
In the first of several multi-million dollar corruption trials, Najib was found guilty in Malaysia on all seven counts in July. He was sentenced to 12 years in jail.
After pleading not guilty on the changes which included criminal breach of trust, money laundering and abuse of power, he is currently putting up an appeal against the ruling.
The investigations into the scandal probed the role of Goldman Sachs around the help the bank provided in raising $6.5bn in 2012 and 2013 for the fund 1Malaysia Development Bhd (1MDB). Authorities said this earned the bank more than $600m.
Rogue employees have been blamed for the role by Goldman while also asserting that it did not have any idea about the mishandling of the money that it was raising.
(Adapted from BBC.com)