Goldman Sachs is negotiating with federal prosecutors to pay a fine of as much as $2 billion, and have a subsidiary plead guilty, to settle claims about its role in a scheme to loot billions from a sovereign wealth fund in Malaysia, a person with knowledge of the matter said.
The case stems from a scheme to siphon off more than $2.7 billion of the $6.5 billion raised for the 1Malaysia Development Berhad, known as 1MDB. Federal authorities have that said Jho Low, a flamboyant Malaysian financier, was the principal architect of the plot to bribe public officials that has led to the guilty plea of a former Goldman Sachs partner and criminal charges against another of the bank’s executives.
The investigation is focused on violations of money laundering and foreign bribery laws. The settlement could include a guilty plea from Goldman’s subsidiary in Asia, the person said, asking not to be identified because the talks are ongoing. The bank may agree to include an outside monitor to review its compliance procedures, this person said.
A separate fine paid to the government of Malaysia and other regulatory agencies could raise the total financial penalty to above $2 billion, another person said. The settlement could be completed by the end of January, the people said.
“Resolution discussions are ongoing, and it is irresponsible to speculate on an outcome,” said Andrew Williams, a spokesman for Goldman Sachs. A spokesman for federal prosecutors in New York who are overseeing the investigation declined to comment.
The Wall Street Journal earlier reported the potential guilty plea.
Federal authorities have said a group of senior Malaysian officials — including the former prime minister — and others used money looted from the fund to buy more than $1.7 billion in real estate, yachts, jets, jewelry and even finance a Hollywood movie, “The Wolf of Wall Street.” The U.S. government has already seized hundreds of millions of dollars in assets it says were bought with the stolen money, and authorities in Malaysia have also brought criminal charges, including against the former prime minister,
Last year, a former Goldman partner, Tim Leissner, pleaded guilty to helping orchestrate the fraud, which involved the sale of Malaysian government bonds. The bank has said that Leissner acted on his own and that it was cooperating with the U.S. government to help the investigation.
On Monday, Leissner was barred by securities regulators from working in the banking industry. The settlement said unnamed “senior executives” at Goldman knew Leissner did not tell the truth during an October 10, 2012, meeting when he was asked whether Low, whom Goldman’s compliance department had declined several times to approve as a client, had any involvement in the bond deals. Prosecutors in charging documents have tended to avoid using the phrase “senior executives” to refer to others at Goldman who may have known about the bribery scheme.
The bank has said Leissner’s conduct was not sanctioned or approved by his bosses.
Low, who was also charged by federal prosecutors and Malaysian authorities, is believed to be living in China and has not made an appearance in court to respond to the charges.