Goldman Sachs will pay $3.9bn (£3.3bn) to the Malaysian government to settle a “long-running” investigation into its role in raising $6.5bn of bonds for the “scandal-hit” 1MDB fund in 2013, says Michael O’Dwyer in The Daily Telegraph. The fund was set up by Malaysian businessman Jho Low and then prime minister Najib Razak to finance infrastructure projects in Malaysia, but as much as $4.5bn was allegedly “siphoned off” in order to fund the “lavish lifestyles” of some of Kuala Lumpur’s most influential families. Goldman Sachs’s investment banking unit was paid $600m in fees for its dealings with 1MDB.
The deal represents a major setback for Goldman Sachs, which had previously argued that members of the former Malaysian government and 1MDB lied to it “about how proceeds from the bond sales would be used”, says Katherine Griffiths in The Times. What’s more, although the deal draws to a close part of the “long-running investigation” into the matter, the investment bank remains under investigation in the US. Tim Leissner, the ex-Goldman Sachs partner who led the deal with 1MDB, has already pleaded guilty to American charges of money laundering and bribery.
Shrugging off the penalty
The penalties are not as large as they seem, says Brooke Masters in the Financial Times. Firstly, $1.4bn of the settlement involves Goldman Sachs guaranteeing that Malaysia will receive “at least another $1.4bn from selling seized assets” acquired with stolen funds, a guarantee that is likely to cost it “basically nothing”. This effectively cuts the fine to $2.5bn, which is a lot less than “the $7.5bn the finance minster had originally demanded”. The Malaysian government will also drop further legal proceedings against the bank and 17 of its current and former directors, while Goldman Sachs also hopes that the settlement will encourage leniency from the US Department of Justice. Not so fast, say Alexandra Stevenson and Matthew Goldstein in The New York Times. Negotiations with US prosecutors have proceeded in “fits and starts”, while it seems that Goldman Sachs ignored misgivings from its own compliance departments about Jho Low. As a result, it could end up not only paying “another multibillion-dollar fine”, but also having to appoint a monitor to review its compliance procedures. It may also have to plead guilty to charges in the United States, which would be a “black eye” for a firm that has “never had to admit guilt in a federal investigation”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The bill will be “just another item on Wall Street’s mile-long rap sheet”, says John Foley on Breakingviews. After all, the bank has paid out “more than $55bn in dividends and stock buybacks since it first helped 1MDB raise funds in 2012”. Even the fallout from any guilty plea is likely to be minimal: it never stopped Citigroup and JP Morgan carrying on “as normal”.
-
Rachel Reeves faces £23 billion capital gains tax “black hole” – will she be forced to look elsewhere?The fiscal watchdog has downgraded its forecast for capital gains tax revenues, leaving chancellor Rachel Reeves with £23 billion less than previously expected
-
Protests erupt in Turkey after the arrest of Erdogan's rivalTurkey's president has jailed his main political opponent, Ekrem Imamoglu
-
Large cap stocks start to struggle – is it time for investors to reassess their focus?Buying quality large caps worked very well last decade. A more volatile world will be a bigger challenge for these star stocks, says Cris Sholto Heaton
-
How to generate income with fixed-interest investmentsPublic debt is overvalued, but other fixed-interest investments now look like a bargain, says Max King
-
Three top-notch Taiwanese companies cashing in on the advent of AIOpinion Eric Chan, investment director and co-manager of the Aberdeen Asian Income Fund, highlights three potential Taiwanese winners in the technology industry
-
Weight-loss drugs could revolutionise the economy – the investments to buy nowThe new generation of weight-loss drugs are a boon for the overweight, but they also promise to change our relationship with food and revolutionise the economy
-
Find tomorrow’s Asian giants while they are still smaller companiesOpinion Nitin Bajaj, portfolio manager of the Fidelity Asian Values trust, picks three Asian companies to invest in.
-
AI will maintain Moody’s market lead, says Stephen ConnollyOpinion Veteran data provider Moody's has adapted well to the modern world, and is one of Warren Buffett’s longest-held investments
-
Is BlackRock World Mining gearing for a recovery?Opinion After a frustrating year, BlackRock World Mining is positioned for growth and to capitalise on the sector's recovery
-
Should you limit exposure to US tech stocks?An end to the AI boom would shake both US funds and global trackers. Here’s one way to trim exposure to US tech stocks
