Goldman Sachs admits criminal liability in Malaysia bribery case– to pay $1B in settlement before Securities & Exchange Commission

File:U.S. Securities and Exchange Commission headquarters.JPG - Wikimedia Commons

SECURITIES & EXCHANGES COMMISSION, US, Copyright credits wikimedia commons

International investment bank Goldman Sachs, Oct 24 admitted criminal wrongdoing by a Malaysian subsidiary of the bank in a settlement with the Securities and Exchange Commission filed in New York.

The SEC settlement agreement summarizes the bank’s wrongdoing as “a scheme perpetrated by now former senior employees of Goldman Sachs who authorized and paid bribes and kickbacks to government officials in Malaysia and the Emirate of Abu Dhabi (“Abu Dhabi”) in order to secure lucrative business for the Company and benefits for themselves.” In doing so, “Goldman Sachs violated the antibribery, books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act.”

The criminal activity begin in 2009, with the formation of 1MDB, “a strategic investment and development company wholly-owned by the Malaysian government.” Goldman Sachs became the underwriter or bonds that 1MDB would issue to fund “investment projects for the economic benefit of Malaysia and its people.”

Though Goldman Sachs’s compliance department raised corruption concerns about
one of the Malaysian government officials who would play a central role in the transactions, Goldman Sachs employees ignored these concerns. Instead, employees cooperated with this official to misappropriate more than $2.7 billion of the approximately $6.5 billion raised by the bond transactions, using this money to pay bribes and kickbacks to members of the Malaysian government and of foreign governments whose investment they wanted to attract, particularly Abu Dhabi.

Goldman Sachs has had a level of notoriety in the public consciousness since its involvement in the 2008 financial crisis; a famous article in Rolling Stone magazine called the firm “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” But this is the first time that Goldman Sachs has ever admitted criminal wrongdoing in a US court.

The settlement agreement calls for the bank to pay over $1 billion: a disgorgement of over $600 million to the Government of Malaysia and 1MDB and a civil penalty of $400 million to the SEC.

“Accordingly, pursuant to Section 21C of the Exchange Act, it is hereby ORDERED that: A. Respondent Goldman Sachs cease and desist from committing or causing any violations and any future violations of Sections 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78m(b)(2)(A), 78m(b)(2)(B), and 78dd-1]; B. Respondent Goldman Sachs shall pay to the Commission disgorgement of $606,300,000, which shall be deemed satisfied by the payment previously made to the Government of Malaysia and 1MDB pursuant to a parallel Settlement Agreement entered into by Goldman Sachs on August 18, 2020; C. Respondent shall, within 21 days of the entry of this Order, pay a civil money penalty in the amount of $400,000,000 to the Securities and ExchangeCommission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717; and D. Payment must be made in one of the following ways: (1) Respondent may transmit payment electronically to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request; (2) Respondent may make direct payment from a bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or (3) Respondent may pay by certified check, bank cashier’s check, or United States postal money order, made payable to the Securities and Exchange Commission and hand-delivered or mailed to: Enterprise Services Center Accounts Receivable Branch HQ Bldg., Room 181, AMZ-341 6500 South MacArthur Boulevard Oklahoma City, OK 73169 Payments by check or money order must be accompanied by a cover letter identifying The Goldman Sachs Group, Inc. as the Respondent in these proceedings, and the file number of these proceedings; a copy of the cover letter and check or money order must be sent to Charles Cain, FCPA Unit Chief, Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.”

See the settlement