Two years ago, Goldman Sachs, one of the leading global investment firms on Wall Street, found itself embroiled in a money laundering scandal in Malaysia. The firm has settled with both Malaysian authorities and the United States Department of Justice in a deal that will result in a payout of nearly $4 billion.
Here’s a snapshot look at what caused the scandal and ultimately drove the Goldman Sachs settlement.
The 1Malaysia Development Berhard (1MDB) was a fund aimed at promoting economic development in the southeast Asian nation. Goldman Sachs helped 1MDB raise money to the tune of $6.5 billion through a series of bond sales.
But the money never got to the people that needed it. The Malaysian government charged Goldman with misleading investors about the bond sales.
1MDB’s overseers include Goldman banker Tim Leissner, Malaysian Prime Minister Najib Razak and Jho Low, a financier based in Malaysia. Money began to disappear. In a scam that seems fit for Hollywood, the money went to offshore banks and shell companies.
The funds ended up going to “causes” like real estate in Beverly Hills, private yachts and jets and some of the finest artwork in the world, including works by Van Gogh and Monet. Money was supplied to back production of the hit movie The Wolf of Wall Street. Prosecutors have also found money used to pay off gambling debts in the casinos of Las Vegas.
Revelation of the scandal led to Razak’s ouster as PM and U.S. investigators were a part of a broad-based look into bribery and corruption. By the time the investigation was complete, 3 Goldman departments and 17 of its officials were hit with criminal charges.
Leissner pleaded guilty and has agreed to forfeit over $40 million. Leisnner admitted to a conspiracy to get around Goldman’s internal controls and safeguards to bribe officials in Malaysia. He continues to cooperate with the investigation. Leissner’s colleague, Roger Ng, was also implicated, but Ng has pleaded not guilty and will stand trial in 2021.
Low has been charged with money laundering and agreed to forfeit $900 million in assets. But Low also denies wrongdoing. He sought and has been granted asylum in a country that is officially unknown, but believed to be China.
Goldman Sachs hopes the settlement can put behind them a period of turmoil that has seen their stock share price run behind competitors. Wall Street analysts report that Goldman trades at just 80 percent of the actual value of its assets. Moving beyond this investigation can give investors more of the certainty they crave. One can also hope that it bodes well for the future of legitimate investment overseas in countries that depend on economic development for their futures.