Goldman Sachs reaches $2.9bn deal to settle US-led 1MDB inquiry

Goldman Sachs has agreed to pay $2.9bn (£2.2bn) to settle a US-led investigation into its role in the 1MDB corruption scandal.

The settlement is expected to draw a line under a years-long saga that has cast a shadow over one of the most recognisable names on Wall Street. Goldman Sachs’ Malaysia division also agreed to plead guilty to violating foreign bribery laws linked to the alleged looting of the country’s sovereign wealth fund, 1MDB.

The settlement, which covers criminal fines, penalties and disgorgement, was part of a coordinated agreement between the bank and the US Department of Justice (DoJ) along with regulators in the US, UK, Singapore and Hong Kong.

Goldman Sachs allegedly failed to act while an estimated $4.5bn was siphoned from the state-owned fund. The bank has entered into a deferred prosecution agreement with the DoJ and is not subject to a criminal conviction.

Goldman Sachs underwrote and arranged bond sales for the fund totalling $6.5bn and earned $600m in fees for helping raise the cash, according to the DoJ.

The fraud was said to have involved Malaysia’s former prime minister Najib Razak, the Malaysian financier Jho Low and his associates. The funds were allegedly used to buy items ranging from yachts to artwork and to fund the production of Hollywood films including The Wolf of Wall Street.

In July Goldman agreed to pay $3.9bn to Malaysia over its alleged role in the scandal.

“As the bank admitted today, senior Goldman bankers played a central role in this scheme, conspiring with others to siphon over $2.7bn from 1MDB,” the DoJ said. “They used those funds to line their own pockets and to pay $1.6bn in bribes. In addition to the involvement of several Goldman executives, other personnel at the bank allowed this scheme to proceed by overlooking or ignoring clear red flags.”

Goldman Sachs’ chairman and chief executive, David Solomon, said on Thursday that the bank was “pleased to be putting these matters behind us”.

He said: “We have to acknowledge where our firm fell short. While many good people worked on these transactions and tried to do the right thing, we recognise that we did not adequately address red flags and scrutinise the representations of certain members of the deal team, most notably Tim Leissner, and the outside parties as effectively as we should have.”

Leissner, a former partner at Goldman Sachs in Asia, pleaded guilty in the US in August 2018 to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act, and agreed to forfeit $43.7m.