Goldman Sachs considers $2 billion settlement for Malaysian corruption scandal

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Goldman Sachs

Goldman Sachs (NYSE: GS) made the financial headlines on Thursday when it announced that it is in talks with the U.S. government to pay off a $2 billion fine and admit its guilt in an ongoing criminal investigation regarding its Malaysian corruption issue. At the same time, the investment bank agreed that it would adopt additional compliance procedures from the Justice Department.

Specifically, Goldman and U.S. regulators have officially agreed to settle allegations that the investment bank ignored potential red flags while billions of dollars were pilfered from a Malaysian government fund known as 1MBD. U.S. officials have discussed a deal with the bank where, in addition to paying $2 billion to settle the case, an unnamed Goldman Sachs subsidiary in Asia would plead guilty to violating U.S. bribery laws. Additionally, the deal would involve Goldman installing an independent overseer to recommend changes to the company’s culture.

There are still some more details to be ironed out, however, and an official agreement could be reached sometime in early 2020 according to The Wall Street Journal. However, even if Goldman Sachs did agree to this settlement, it wouldn’t resolve the other major investigation from Malaysian authorities, which are demanding billions of dollars as well in fines from the company.

“Resolution discussions are ongoing, and it is irresponsible to speculate on an outcome,” a Goldman spokeswoman said. “We don’t control the outcome, obviously. We’re one party. We have a number of people to talk to … we’re working as hard as we can to try to get it resolved sensibly,” added Goldman’s President John Waldron last week in response to the scandal.

Goldman Sachs originally raised $6.5 billion for 1MBD, which is short for 1Malaysia Development Bhd. However, U.S. authorities have said that much of this money was stolen by a major government advisor, Jho Low, as well as a duo of ex-Goldman Sachs bankers. One of the bankers, Tim Leissner, has since pleaded guilty to personally stealing over $200 million from 1MBD.

Shares of Goldman Sachs didn’t really move much in response to the news, staying roughly the same over the course of Thursday’s markets. Since the beginning of the year, the company has seen gains of around 30%, which is pretty reasonable for a company of its size but a far cry from some of the better performing large-cap stocks, mainly those in the tech sector.

Overall, the story isn’t all that surprising, with corruption scandals within Wall Street being something that has become ingrained in the minds of people following the 2008 housing collapse. Interestingly enough, this $2 billion fine would be the largest the government has levied against a bank since the housing crisis over a decade ago.

Goldman Sachs Company Profile

Goldman Sachs is a global investment banking firm whose activities are organized into investment banking, institutional client services, investing and lending, and investment management segments. Approximately 60% of the company’s net revenue is generated in the Americas, 15% in Asia, and 25% in Europe, the Middle East, and Africa. In 2008, Goldman reorganized itself as a financial holding company regulated by the Federal Reserve System. – Warrior Trading News

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