By Elizabeth Hearst
Goldman Sachs has reached a €3.9 Billion settlement with the Malaysian government for their involvement in the 1Malaysian Development Berhad (1MDB) corruption scheme.
The settlement comes as a result of Malaysian charges against the investment bank after it was alleged that the firm had misled investors when the firm helped raise funds used by former Malaysian leader Najib Razak to launder billions.
The country’s development investment fund was set up to attract investment and accelerate Malaysia’s economic growth and development.
Goldman Sachs has agreed to pay $2.5 Billion cash to the Malaysian government and has committed that at least $1.4 Billion of its proceeds from seized assets will also be earmarked for the government.
In a statement the investment firm described the settlement as an “important step towards putting the 1MDB matter behind us” and said that the assets will “help enable the Malaysian government to move forward with additional recovery efforts and to execute on its economic priorities”.
The bank added that this settlement would serve as a learning curve and said: “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”.
Malaysia’s new minister of finance, Tengku Dato’ Sri Zafrul Aziz welcomed the settlement and said it “represents assets that rightfully belong to the Malaysian people”. He stressed that this deal meant the government had recovered more than $4.5 Billion in their investigations and this settlement meant recovering funds would not be “held up by lengthy and costly court battles and legal process”.
This settlement comes as a result of an investigation into bond sales arranged by Goldman Sachs in 2012 and 2013 which raised funds for the state investment fund.
According to Malaysian state officials, they suspect that billions of dollars were embezzled in an extensive operation where funds were used to buy property, a private jet and yacht.
Former Prime Minister of Malaysia, Najib Razak has been found guilty on seven charges of criminal breach of trust, money laundering and abuse of power. Razak is accused of funnelling up to $700 Million from the investment fund and could face decades in prison.
Razak is expected to appeal the verdict and denies any wrongdoing. Razak states that he was misled by financial advisors such as Jho Low who faces charges in the United States and Malaysia for his role in the multi-billion dollar scandal.
As a result of reaching the settlement, Goldman Sachs is protected from further charges in Malaysia, but may still face additional charges in the United States relating to the deal. The scandal has seen more than a dozen of Goldman Sachs executives charged in Malaysia last year and follows former Goldman partner, Tim Leissner guilty plea in the US to conspiring to launder money and violate American anti-bribery laws.
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