- Goldman Sachs is set to pay a fine nearing $2 billion and admit guilt to the US government to resolve an investigation into its 1MDB scandal, The Wall Street Journal reported Thursday.
- The deal would involve Goldman admitting it ignored warning signs as billions of dollars were stolen from a Malaysian government fund it worked with.
- US authorities and Goldman are in talks on a deal in which a Goldman subsidiary in Asia would plead guilty to US bribery law. Goldman would also hire an outside monitor to recommend compliance policy changes, according to WSJ.
- A roughly $2 billion fine would be one of the largest issued to a bank since the mortgage-crisis settlements following the 2008 financial crisis.
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The bank and the Department of Justice are nearing an agreement for the settlement, according to WSJ. The deal would involve Goldman admitting it ignored warning signs as billions of dollars were stolen from the 1Malaysia Development Berhad.
US authorities and the bank discussed a settlement in which a Goldman business in Asia would plead guilty to US bribery laws, not the parent company. The deal also involves Goldman hiring an independent party to oversee and recommend compliance policy changes, WSJ reported.
Settlement discussions between the Justice Department and Goldman are ongoing and a deal could be reached in early 2020, according to WSJ.
Goldman raised $6.5 billion for the government fund and netted roughly $600 million in fees through the deal. Much of the money raised was stolen by Malaysian government adviser Jho Low and two Goldman bankers, and prosecutors allege the firm did little to curb the actions.
Bloomberg first reported the possibility of a $2 billion settlement fine on December 6.
Low agreed to hand over more than $700 million in assets to the US government in October, according to WSJ, but the adviser remains a fugitive and hasn’t admitted guilt.
One of the Goldman bankers, Tim Leissner, pleaded guilty to stealing more than $200 million from the government fund and is scheduled to be sentenced in 2020, according to WSJ. The other banker, Roger Ng, pleaded not guilty in New York and faces charges in Malaysia.
Goldman began selling billions of dollars worth of bonds to 1MDB in 2012. The sales were meant to fund power plant purchases by the government fund.
A fine nearing $2 billion would be one of the largest issued to a major bank since the post-financial crisis settlements. The firm’s board reserves the right to decrease CEO compensation to pay the fee, potentially putting chief executive David Solomon’s salary on the chopping block pending ongoing investigations. Former CEO Lloyd Blankfein could also see his pay docked due to the scandal.
It’s not yet known of Goldman would receive any credit from the Justice Department if the bank pays fines levied by Malaysia, WSJ reported. The country has filed criminal charges against Goldman and 17 bank employees in its Asia offices.
Goldman closed at $230.45 per share Wednesday, up about 38% year-to-date.
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