Goldman Sachs has reached a $3.9bn (£3.1bn) settlement with the Malaysian government over the multibillion-dollar 1MDB corruption scandal.
The deal struck by the Wall Street bank, which allegedly failed to act while $4.5bn was looted from its client, Malaysia’s sovereign wealth fund 1MDB, involves a cash payment of $2.5bn and a guarantee to recover $1.4bn in assets bought with the fraudulently diverted money. Goldman Sachs underwrote and arranged bond sales for the wealth fund totalling $6.5bn.
The Malaysian finance ministry said including the fine and what it had already received from the US Department of Justice, more than $4.5bn “will be returned to the people of Malaysia”.
“This settlement represents assets that rightfully belong to the Malaysian people,” said Tengku Zafrul Aziz, the Malaysian finance minister. “We are securing more money from Goldman Sachs compared with previous attempts, which were far below expectations.”
In November, the former Malaysian prime minister, Mahathir Mohamad, confirmed he had rejected an offer from Goldman Sachs worth $1.75bn. “We are not satisfied with that amount,” he said at the time, adding that the bank needed to “respond reasonably”.
“We are also good to be able to resolve the outside the court system, which would have cost a lot of time, money and resources,” said Tengku Zafrul. “With this settlement we will have the return of the monies expedited.”
The scandal has in recent years cast a shadow over Goldman Sachs, one of the most recognisable names on Wall Street. In a statement on Friday the bank said the settlement meant that Malaysia would not pursue criminal charges against the organisation or current or former directors or employees.
The Malaysian settlement will remove a large source of financial uncertainty from the bank. Goldman said it would increase the amount of money it sets aside to cover litigation and regulatory costs, after last week booking charges worth $945m for the second quarter of the year.
However, Goldman still faces an investigation by the US Department of Justice, with talks over a potential settlement thought to be at an advanced stage. In unrelated cases the DoJ has previously agreed settlements worth billions of dollars against other companies involved in corruption cases.
In a statement, Goldman Sachs said the settlement was “an important step towards putting the 1MDB matter behind us”, as well as allowing the Malaysian government to progress with efforts to recover more of the stolen money.
“There are important lessons to be learned from this situation, and we must be self-critical to ensure that we only improve from the experience,” the statement said.
The funds were allegedly siphoned off from 1MDB in a fraud said to have involved the former Malaysian prime minister Najib Razak, the Malaysian financier Jho Low, and his associates.
The funds were allegedly used to buy everything from from yachts to artwork, and fund the production of Hollywood films including The Wolf of Wall Street, starring actor Leonardo Di Caprio.
Razak, 66, faces several corruption trials in Malaysia, and has pleaded not guilty, with the first ending last month with a verdict due to be handed down on 28 July.
The former prime minister, who was voted out of power in 2018, also faces dozens of criminal charges relating to the fraud at 1MDB, a fund he co-founded in 2009.
Low, who has also denied wrongdoing, faces charges in Malaysia and the US.
Last year, the Goldman Sachs chief executive, David Solomon, apologised to the people of Malaysia over the role of the bank’s former employee Tim Leissner in the 1MDB scandal and the effect it had on the country.
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.
Leissner and another former employee, Roger Ng, were excluded from the Malaysian settlement, meaning legal proceedings already started against them could continue.