Goldman Sachs agrees to record $2.9B settlement in embezzlement scandal

Pete Williams
·2 min read

The international investment bank Goldman Sachs agreed to pay $2.9 billion and admit wrongdoing for its involvement in the plundering of an economic development fund meant to benefit Malaysia, under the terms of a settlement announced Thursday by the U.S. Justice Department.

Instead of helping develop Malaysia's economy, the fund's overseers embezzled roughly $4 billion and bought real estate in Beverly Hills and New York, yachts, a jet and works by Vincent Van Gogh and Claude Monet, prosecutors said. Some of the money, they said, was used to cover gambling debts at Las Vegas casinos and to help finance the hit movie, "The Wolf of Wall Street."

The scandal also brought down the government of Prime Minister Najib Razak in 2018. In July, he was convicted of corruption. His 12-year prison sentence has been stayed while it is being appealed.

Goldman agreed to pay a penalty and to give back the millions in fees it earned from its work in arranging bonds for the fund managers. Goldman admitted that two former executives participated in an agreement to pay $1.6 billion in bribes to help secure the business.

Brian Rabbitt, the acting assistant attorney general, said the settlement includes the largest monetary penalty ever paid to the U.S. government in a corporate criminal foreign bribery case, which he called "a reflection of the seriousness of the bank’s conduct."

A Justice Department statement said Goldman admitted ignoring or giving scant attention "to significant red flags raised during the due diligence process and afterward."

Federal prosecutors have said most of the money was stolen by Jho Low, who was a fund adviser. He has denied any wrongdoing.

On Tuesday, a Republican fundraiser, Elliott Broidy, pleaded guilty to violating a foreign lobbying law on behalf of Low. He admitted that Low paid him to try to influence the Justice Department investigation. Broidy agreed to forfeit the $6.6 million he received for the work.

In July, Goldman Sachs reached a $3.9 billion settlement with the government of Malaysia. Authorities there said Goldman paid bribes to help arrange for its participation in the fund work, but they agreed to drop further investigations as part of the settlement.