Crime Pays: Goldman Strikes $2BN Deal With DoJ To Avoid All Charges Tied To 1MDB

Crime Pays: Goldman Strikes $2BN Deal With DoJ To Avoid All Charges Tied To 1MDB

Tyler Durden

Tue, 10/20/2020 – 07:30

Goldman Sachs is reportedly on the cusp of settling one of the biggest criminal cases involving a Wall Street bank since the financial crisis: According to a Bloomberg News report published late Monday evening, the Vampire Squid has reached a tentative agreement with the DoJ to pay more than $2 billion in penalties – a figure that BBG noted is “broadly in line with analysts expectations” – and – here’s the key bit – allows the bank to avoid all criminal penalties.

That last bit is especially important, because, as we’ve chronicled over the past few years, many of the bank’s top executives appeared to have been personally involved with the deal, which was initially brought in by Tim Leissner, formerly the bank’s top man in Southeast Asia, before he was suspended over the deal, before agreeing to cooperate with the Feds against his former employer (where he reportedly told authorities about the endemic “culture of corruption” at play within the bank).

Though we can’t be certain, we suspect that the timing of former Goldman chief Lloyd Blankfein’s departure was influenced by the unfurling scandal; he suddenly left the bank right around the time that Leissner flipped. Word on the street was that Goldman would be made to admit guilt as part of the deal. Indeed, a leak about an ‘imminent’ deal published nearly 1 year ago claimed that the bank had reluctantly agreed to the plea. Apparently, the bank’s legal team was able to avert this, amid whispers that connections between Goldman’s representatives and the current leaders of the DoJ might create conflicts of interest (a negotiating tactic that the bank appears to have leveraged to its advantage; note the deal is reportedly coming just weeks before a close American presidential election).

The deal comes just months after Goldman agreed to pay $3.9 billion in “reparations” to the government of Malaysia for its role in raising the $6.5 billion that seeded the 1MDB sovereign wealth fund, which was supposed to be used to finance public projects, but was instead drained by cronies of former Malaysian Prime Minister Najib Razak, who has been convicted in Malaysia for his role in the region’s largest-ever financial fraud.

That settlement included $2.5 billion in cash payments from Goldman to the Malaysian government.

But the fraud’s true ringleader was a mysterious financier named Jho Low, who allegedly orchestrated the siphoning off of money from the fund, which was disbursed to bank accounts controlled by Razak, and others controlled by Low and presumably other cronies. Low went on to spend the money on a seemingly endless stream of luxury goods – jewels, fine art, yachts – Low even used some of the money to finance the film “the Wolf of Wall Street”, and to make illegal campaign contributions to the campaign of former President Barack Obama (this, after Razak was once criticized for his “golf diplomacy” with the former president while his country struggled with historic floods).

The DoJ has seized billions of dollars of these ill-gotten gains, and even returned some of the stolen money to Malaysia.

Goldman has struck deals with prosecutors in at least three countries over its role in 1MDB: in Singapore, the bank could face serious criminal penalties if it is caught violating its settlement agreement. All told, the bank will pay $5 billion in cash penalties tied to 1MDB, an amount that’s roughly in line with expectations.

In return, the bank and its top executives will simply walk away, while Leissner (who pleaded guilty two years ago per his plea deal) and another banker who was arrested in connection with the investigation are left to face the music.

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Author: Tyler Durden

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