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09 December 2019

US discusses Goldman 1MDB settlement below $2 billion

Goldman Sachs’ involvement with 1MDB has triggered one of the biggest blows to its reputation in recent years, leading to a litany of investigations and embarrassing revelations of a former banker bribing government officials.

Goldman Sachs/Bloomberg

Goldman Sachs Group could end up paying less than $2 billion to resolve US criminal and regulatory probes over its role in raising money for scandal-ridden Malaysian investment fund 1MDB, reported Bloomberg.

The US Justice Department and other federal agencies, in internal discussions held in recent weeks, have weighed seeking penalties between $1.5 billion and $2 billion—that is less than what some analysts have signalled Goldman might have to pay.

While a settlement could be announced as soon as next month, the terms could change before a deal is finalised.

The bulk of the penalties would be paid to the Justice Department. Attorney General William Barr has directly immersed himself in the case. Earlier this year, Barr obtained a waiver to let him oversee the investigation, even though his former law firm, Kirkland &Ellis is representing Goldman. It’s unclear whether the Justice Department is seeking a guilty plea from the bank.

The Wall Street firm has been eager to move past the scandal, and a US settlement below $2 billion would put it on track to avoid the worst-case scenario that some analyts pegged at as much as $9 billion in global fines.

Goldman is separately negotiating a settlement with Malaysian authorities, who have in recent discussions floated much lower figures than their public stance of wanting to recover $7.5 billion. The lender is still privately seeking to reduce its sanctions, arguing that the crimes were committed by a rogue employee and that the bank was not aware of the misconduct.

If it pays anywhere close to $2 billion, Goldman would join other banks that have been subjected to massive US penalties this decade. In 2012, HSBC Holdings set a new bar when it agreed to pay more than $1.9 billion to settle allegations that it violated sanctions and enabled money laundering.

Additionally, BNP Paribas was then hit with the largest financial penalty ever in a US criminal case when it paid $9 billion over sanctions violations.

1MDB became the hub of a global corruption and embezzlement scandal in which a massive amount of cash was allegedly diverted to corrupt officials and financiers. Goldman helped the state investment fund raise cash, with the Wall Street bank making about $600 million from $6.5 billion in bond sales in 2012 and 2013.

RELATED STORIES: Goldman Sachs Group US Justice Department 1MDB





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