Multinational investment bank Goldman Sachs has agreed to a $3.9 billion settlement deal with Malaysia on claims regarding its role in the 1MDB corruption scandal.
Under the $3.9 billion settlement agreement, the government of Malaysia will drop all criminal and regulatory cases against Goldman Sachs regarding its role in the corruption scandal at sovereign wealth fund 1Malaysia Development Berhad or 1MDB.
All proceedings will be dropped, including pending cases against subsidiaries of Goldman Sachs and certain current and former directors of the bank.
Goldman Sachs and 1MDB scandal
The existing criminal and regulatory proceedings were related to bond sales that Goldman Sachs arranged and underwrote for 1MDB, from which the US Justice Department claims $4.5 billion was stolen.
According to the Justice Department, Malaysian financier Jho Low masterminded a plot to channel the money from the sovereign wealth fund to former Malaysian Prime Minister Najib Razak's bank accounts.
Razak, who denied any wrongdoing, has been charged by the Malaysian government with numerous cases, including money laundering. A verdict in his case is scheduled to come out on Tuesday.
Meanwhile, Low formed a settlement deal with the US in October 2019 return $700 million in assets, including high-end real estate and a luxury hotel. Currently, he is a fugitive and may have been hiding in Wuhan, China, where the coronavirus outbreak began in February.
Malaysian prosecutors first filed charges against Goldman Sachs and its two former employees in 2018 but in 2019, it filed cases against 17 current and former Goldman Sachs employees, including Richard Gnodde, the chief executive officer (CEO) of Goldman Sachs International.
Last February, the US Federal Reserve Board placed a permanent ban on senior Goldman Sachs executive Andrea Vella from working in the banking industry for engaging in "unsafe and unsound practices" in relation to the scandal.
The settlement deal will not include Roger Ng and Tim Leissner, two former Goldman Sachs bankers. Leissner pleaded guilty to multiple money laundering charges filed by the Justice Department.
Settlement agreement
The deal involves Goldman Sachs paying the Malaysian government $2.5 billion and providing a guarantee that it also receives "at least $1.4 billion in proceeds from assets related to 1MDB seized by governmental authorities around the world".
Malaysia's Minister for Finance Sri Zafrul Aziz said: "This settlement represents assets that rightfully belong to the Malaysian people."
In a statement, Goldman Sachs said: "Today's settlement is an important step towards putting the 1MDB matter behind us and will help enable the Malaysian government to move forward with additional recovery efforts and to execute on its economic priorities."
Malaysia's Ministry of Finance said that "this settlement by Goldman Sachs represents its acknowledgment of the misconduct of two of its former employees in the broader 1MDB fraudulent and corruption scheme".
The finance ministry added that the deal does "not affect Malaysia's claims against Jho Low and other parties related to the 1MDB scandal."
The investment bank mentioned that it expected "to materially increase its provisions for litigation and regulatory proceedings" for the second quarter as a result of the settlement.
