Wall Street rises on stimulus hopes, Goldman Sachs fined $US3 billion over 1MDB corruption scandal



Wall Street investment bank Goldman Sachs has agreed to pay $US2.9 billion ($4.1 billion) over its role in Malaysia’s 1MDB corruption scandal while US stocks have increased despite little signs of progress in stimulus negotiations.

The settlement with the US Department of Justice and other US and overseas regulators resolved an investigation into the role played by Goldman in helping to steal cash from the Malaysian state fund.

The bank underwrote three bond offerings in 2012 and 2013 that raised $US6.5 billion for Malaysia’s government.

The US Department of Justice said the deal was the largest penalty ever levied on a US company for breaching the Foreign Corrupt Practices Act and involved an unprecedented number of regulators across the globe.

Acting head of the Justice Department’s criminal division Brian Rabbitt said the settlement reflected the bank’s central role “in a massive global scheme to loot billions of dollars”.

Prosecutors said that between around 2009 and 2014, Goldman paid more than $US1.6 billion in bribes to foreign officials in Malaysia and Abu Dhabi to win 1MDB business.

The move follows a $US3.9 billion settlement the bank reached with Malaysia in July to settle all charges against the bank related to the matter.

The scandal relates to the government of former Malaysian prime minister Najib Razak, which set up the 1MDB fund in 2009.

The Justice Department estimated $US4.5 billion was misappropriated by fund officials and their associates between 2009 and 2014 to pay for real estate, art and other luxury items.

Goldman Sachs shares rose 1.2 per cent to $US205.40.

Wall Street cautious over hopes for more stimulus spending

US stocks have gained in another day of volatile trade on optimism that new coronavirus assistance would be approved by Congress.

US House Speaker Nancy Pelosi said there had been progress in talks with the Trump administration for another round of financial aid and said legislation could be “hammered out” soon.

Ms Pelosi and US Treasury Secretary Steven Mnuchin have been in discussions on a $US2 trillion economic rescue package but Senate Republicans oppose such a large bill.

However, uncertainty remained after US President Donald Trump yesterday accused the Democrats of being unwilling to compromise.

And Senate Appropriations Committee chairman Richard Shelby told reporters that he thought the negotiations were “not going anywhere.”

As coronavirus assistance runs out, the number of Americans filing new claims for unemployment benefits dropped 55,000 to 787,000 last week, which was better than forecast by economists.

The figure is still high with the labour market recovery apparently stalling, although new claims are far lower than the record 6.9 million applications filed in March.

Continuing unemployment claims fell from 9.4 million to nearly 8.4 million last week.

Other data showed that home sales had jumped 9.4 per cent to a 14-week high.

The Dow Jones index rose 0.5 per cent to 28,367, the S&P 500 index added 0.5 per cent to 3,453, and the Nasdaq Composite increased by 0.2 per cent to 11,506.

Oil stocks and banks boosted the S&P 500.

Electric car sales boost Tesla

Electric car maker Tesla jumped after it reported its fifth quarterly profit in a row.

It made a revenue record of $US8.8 billion, boosted by a rise in vehicle deliveries and sales of environmental regulatory credits to other carmakers.

Tesla said it was on target to deliver half a million vehicles by the end of this year.

That goal will require it to significantly increase car sales over the fourth quarter.

Tesla shares rose 0.7 per cent to $US425.79.

European stocks recover ground after UK stimulus

New stimulus measures in the UK saw European stocks come off their lows.

The UK Finance Minister Rishi Sunak announced billions of pounds in financial aid for pandemic hit firms.

However rising coronavirus cases worried investors with Spain becoming the first Western European nation to surpass 1 million infections.

The FT100 index rose 0.2 per cent to 5,786, the DAX in Germany fell 0.1 per cent to 12,543 and the CAC 40 in Paris was little change, down 3 points to 4,851.

The Australian share market is expected to open flat today with the ASX SPI 200 futures index up 1 point to 6,170.

The ASX 200 fell 0.3 per cent yesterday, coming off steep falls earlier in the day.

The Australian dollar is little changed at around 71.2 US cents.

Spot gold fell 1.1 per cent to $US1904 an ounce

Brent crude oil rose 1.9 per cent to $US42.50 a barrel.



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Hong Kong fines Goldman Sachs record US$350 million over 1MDB failings


HONG KONG: Hong Kong’s markets watchdog on Thursday (Oct 22) fined Goldman Sachs’s Asian business US$350 million for its role in Malaysia’s multibillion-dollar 1MDB scandal, the largest single fine ever levied by the regulator in the Asian financial hub.

The Securities and Futures Commission (SFC) said serious lapses and deficiencies in management controls at Goldman Sachs (Asia) LLC had contributed to the misappropriation of US$2.6 billion raised by the Malaysian sovereign wealth fund.

1Malaysia Development Berhad (1MDB) raised the funds in three bond offerings in 2012 and 2013.

A Goldman Sachs spokesman said the Wall Street bank would issue a statement in due course.

READ: Goldman Sachs’ US settlement over Malaysia 1MDB scandal to lift dark cloud

The 1MDB scandal has been a costly and long-running sore for the US investment bank, though there are signs it may be close to drawing a line under the affair.

In July, Goldman agreed to pay US$3.9 billion to settle Malaysia’s criminal probe and this week it is expected to agree to pay more than US$2 billion to settle US charges over its role in the scandal.

Malaysian and U.S. authorities estimate US$4.5 billion was stolen from 1MDB in an elaborate scheme that spanned the globe and implicated high-level officials in the fund, former Malaysian Prime Minister Najib Razak, Goldman staff and others.

The three bond offerings, which raised a combined US$6.5 billion, were arranged and underwritten by UK-based Goldman Sachs International, with work conducted by deal team members in multiple jurisdictions, who shared the revenue generated.

The SFC said Goldman Sachs Asia, the bank’s Hong Kong-based compliance and control hub for the region, had significant involvement in the origination, approval, execution and sales process of the three bond offerings.

The bank’s Asia hub had earned US$210 million from the offerings, the largest share among the various Goldman entities.

READ: Former Trump fundraiser Elliott Broidy charged with illicit lobbying on 1MDB, China

“This enforcement action is the result of a rigorous, independent investigation conducted by the SFC,” said Ashley Alder, the SFC’s chief executive.

RED FLAGS

The 1MDB bond deals were obtained for Goldman by its banker Tim Leissner, who in August 2018 admitted that he had conspired with Malaysian financier Jho Low and others to pay bribes and kickbacks to Malaysian and Abu Dhabi officials to obtain and retain the business from 1MDB for the bank.

Low denies any wrongdoing.

US court documents show Low was rejected as a private wealth management client on several occasions as his source of wealth could not be verified, resulting in a potential money laundering risk.

Nonetheless, Goldman’s regional and firm-wide committees that vetted the bond offerings accepted Leissner’s false assertions that Low had no roles in the bond offerings without making further inquiries, the SFC said.

“Apart from the involvement of Low, there were a number of red flags present in the bond transactions which should have called for a closer examination of the corruption and money laundering risks involved,” its statement of disciplinary action said.

READ: Ex-Goldman Sachs banker seeks review of 1MDB charges in Malaysia

These included the fact that the amount raised far exceeded the actual needs of 1MDB, and the sovereign wealth fund’s willingness to pay high fees and repeated emphasis on confidentiality and speed of execution, the SFC said.

“Despite the scrutiny of the bond transactions by various regional and firm-wide committees, … these issues had not been looked into in-depth and properly addressed before the deals were approved.”

Thursday’s fine from the SFC dwarfed the previous record of US$51 million, which it levied on a private banking unit of HSBC in 2017, and on UBS last year.



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Goldman Gets Record 1MDB Fine; CEO Solomon Faces Clawback


(Bloomberg) — Goldman Sachs Group Inc. will pay a record foreign bribery penalty in the U.S. and will enter a guilty plea for the first time ever for its role in the plundering of Malaysia’s 1MDB investment fund.

A Goldman subsidiary in Malaysia pleaded guilty to a single charge for its role in a scheme to divert billions of dollars raised for economic development in Malaysia. The Wall Street giant will also force Chief Executive Officer David Solomon and his predecessor Lloyd Blankfein to return some of their compensation, according to a person briefed on the matter.

The parent company avoided conviction in a deal known as a deferred-prosecution agreement, according to a court proceeding in Brooklyn, New York, on Thursday. That designation is a win for Goldman Sachs, because a conviction might have risked losing some institutional clients that are restricted from working with financial firms with criminal records.

The bank will pay more than $2.3 billion in the plea deal, U.S. prosecutor Alixandra Smith said, the largest penalty in U.S. history for a violation of the Foreign Corrupt Practices Act. In all, Goldman’s penalties will exceed $5 billion globally.

The U.S. penalty credits more than $1 billion in fines paid to other U.S. agencies and foreign authorities. In the U.S., that includes $400 million to the Securities and Exchange Commission, $150 million to New York’s Department of Financial Services and $154 million to the Federal Reserve. After disgorgements of Malaysia profits, the Justice Department places the total U.S. penalty at roughly $2.9 billion.

From about 2009 to 2014, the bank’s Malaysia unit “knowingly and willfully agreed to violate the Foreign Corrupt Practices Act by corruptly promising, and paying bribes to foreign officials in order to obtain and retain business for Goldman Sachs,” the bank’s general counsel, Karen Seymour, told U.S. District Judge Margo Brodie in a video hearing on Thursday.

Goldman to Claw Back Pay From CEO Solomon, Blankfein on 1MDB

The deal, which was expected, concludes one of the biggest bank probes inherited by the Trump administration. It holds Goldman Sachs to account for its role in raising $6.5 billion for 1MDB, much of which U.S. authorities say was stolen by people connected to the country’s former prime minister and diverted into high-end art and real estate, a super yacht and the Hollywood movie “The Wolf of Wall Street.”

In July, Goldman Sachs agreed to a settlement with Malaysia that included a payment of $2.5 billion and an unusual provision that the bank would guarantee that the Asian nation would recoup an additional $1.4 billion from 1MDB assets seized around the world. Malaysia dropped criminal charges against the bank as part of that deal.

The case against the Wall Street firm focuses on its fundraising work in 2012 and 2013 for the state-owned fund formally known as 1Malaysia Development Bhd. Goldman’s investment-banking group, led at the time by Solomon, collected $600 million from the bond sales.

Much of the case centered on Jho Low, a Malaysian financier whom prosecutors accused of orchestrating the theft. Low, who has professed his innocence, remains at large. But the probes also drew in several Goldman Sachs employees.

Goldman’s former Southeast Asia Chairman Tim Leissner pleaded guilty in the U.S. to conspiring to launder money. He told a judge he bribed foreign officials to get bond deals and conspired with “several other employees of Goldman Sachs” to hide the theft, bribe payments and money-laundering from others at the bank. He’ll be sentenced in January.

A Leissner subordinate, Roger Ng, was charged with conspiring with Low to launder money. He has denied wrongdoing.

U.S. documents referred to other top Goldman officials, though not by name. At least one top Goldman executive met with Low after the bank’s compliance department had raised flags about him, according to the U.S. government.

Another executive, Leissner’s boss in Asia at the time, was briefed on a plan to pay bribes and kickbacks to ensure 1MDB’s fundraising proceeded, according to previous government filings. That executive matches the description of Andrea Vella, who has since left the bank. Vella agreed to a lifetime ban from banking by the Federal Reserve without admitting or denying wrongdoing.

The 1MDB scandal set off investigations in Asia, the U.S. and Europe. Authorities on three continents spent years tracking funds that allegedly flowed from 1MDB into ornaments of wealth. Goldman Sachs’s Asian unit was fined $350 million by Hong Kong’s financial regulator and 96.6 million pounds ($126 million) to the U.K.’s Financial Conduct Authority, the agencies said Thursday.

Goldman Sachs will seek U.S. Labor Department permission before the Malaysia unit’s December sentencing to continue handling retirement funds for Americans, its lawyers said. Banks must secure a waiver from the department to continue handling such funds after an admission of criminal conduct.

The 1MDB saga devolved into a plot to pressure the U.S. to go easy on some of the alleged looters, casting a wider web that has embroiled a prominent Republican fundraiser, an official in the Justice Department and even a former Fugees rap star.

MORE:

Inside Goldman’s Five-Day Race to Seal a 1MDB Deal With MalaysiaGoldman’s 1MDB Charges Dropped by Malaysia After SettlementHow Malaysia’s 1MDB Scandal Shook the Financial World: QuickTakeEx-Trump Fundraiser Broidy Pleads Guilty to Illegal LobbyingNajib Sentenced to 12 Years in Jail in Former 1MDB Unit Case

(Updates with U.S. penalties totaling $2.9 billion)

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Abu Dhabi’s IPIC drops lawsuit against Goldman Sachs over 1MDB scandal


October 21, 2020

(Reuters) – Abu Dhabi’s International Petroleum Investment Co (IPIC) dropped a lawsuit against Goldman Sachs Group Inc <GS.N> to recover losses suffered from the U.S. investment bank’s dealings with Malaysian state fund 1MDB, a court filing showed on Tuesday.

The lawsuit had alleged that Goldman conspired with unidentified people from Malaysia to bribe its two former executives – former IPIC managing director Khadem Abdulla al-Qubaisi and Mohamed Ahmed Badawy al-Husseiny, former CEO of Aabar, an IPIC unit – to further their business at its expense.

Goldman Sachs did not immediately respond to a Reuters request for comment. Abu Dhabi state fund Mubadala, which controls IPIC, could not be immediately reached for comment.

Malaysia in September dropped criminal charges against three Goldman Sachs units after the bank agreed to pay $3.9 billion to settle the probe.

Goldman Sachs had generated about $600 million in fees for its work with the Malaysian Sovereign wealth fund, which included three bond offerings in 2012 and 2013 that raised $6.5 billion.

(Reporting by C Nivedita in Bengaluru; Editing by Anil D’Silva)





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Ex-Malaysian PM Najib Razak sentenced to 12 years in jail after first trial over 1MDB scandal


Former Malaysian primary minister Najib Razak was sentenced to 12 years in jail on Tuesday following getting discovered responsible in his 1st demo about the multi-billion-dollar 1MDB scandal.

The Kuala Lumpur Significant Courtroom also purchased him to pay back a fine of 210 million ringgit ($69 million AUD) following he was convicted of 7 prices linked to the looting of sovereign prosperity fund 1Malaysia Improvement Berhad.

Billions of dollars were being stolen from the investment decision car and used on anything from higher-finish authentic estate to pricey artwork, though investment decision financial institution Goldman Sachs also became embroiled in the scandal.

Anger at the looting performed a big component in the shock decline of Mr Najib’s lengthy-ruling coalition in elections in 2018, and he was arrested and strike with dozens of rates pursuing his defeat.

The verdict was a examination of Malaysia’s rule of regulation. It arrived about 5 months right after Mr Najib’s scandal-plagued bash returned to electric power as element of a coalition, which observers had feared could impact the final result.

Mr Najib is going through quite a few 1MDB-linked trials and the first, which began just about 16 months ago, centred on the transfer of 42 million ringgit ($13.8 million AUD) from a former device of the fund into his lender accounts.

The 67-year-old experienced vehemently denied wrongdoing.

But Decide Mohamad Nazlan Mohamad Ghazali took aside all the arguments place ahead by his defence, and observed him guilty on the 7 prices he confronted.

“In summary, immediately after thinking of all the evidence in this trial, I locate the prosecution has effectively verified the case,” the choose told the Kuala Lumpur Substantial Courtroom.

Mr Najib looked calm and bowed his head after the verdict was read. Outside the house court docket, hundreds of indignant supporters chanted “Very long lifestyle”.

Then Malaysian Key Minister Najib Razak on Aug. 6, 2015.

AP

Abuse of power

The costs were being 1 of abuse of power, 3 of legal breach of have confidence in and three of revenue-laundering.

The counts of abuse of energy and legal breach of belief are punishable by up to 20 many years in jail just about every, though the dollars-laundering rates are punishable by up to 15 yrs just about every.

It was not instantly clear whether or not sentence would be passed later Tuesday or at a later on date. The 67-year-aged will probably enchantment and he may perhaps not be despatched to jail straight away.

Mr Najib had insisted he was ignorant of the transactions from the 1MDB device, SRC International.

The defence team portrayed Mr Najib as a sufferer and as a substitute sought to paint financier Lower Taek Jho, a essential determine in the scandal who has been charged in the US and Malaysia, as the mastermind.

Mr Lower, whose whereabouts are unfamiliar, maintains his innocence.

Former Malaysian Prime Minister Najib Razak, center, arrives at the Kuala Lumpur High Court complex, Tuesday, July 28, 2020.

Former Malaysian Prime Minister Najib Razak, center, arrives at the Kuala Lumpur High Court docket elaborate, Tuesday, July 28, 2020.

AP

The choose however ruled that the plan Mr Very low experienced tricked Mr Najib was “much-fetched”, and also dismissed the argument the ex-leader considered the dollars in his account was a donation from Saudi royalty.

The return of Mr Najib’s party to ability as element of a coalition in March followed the collapse of Mahathir Mohamad’s reformist administration.

Due to the fact then, 1MDB-joined prices have been unexpectedly dropped from the ex-leader’s stepson Riza Aziz in exchange for him agreeing to return assets to Malaysia.

Cash stolen from the financial commitment fund was allegedly utilised to bankroll Riza’s Hollywood creation business and fund the hit film “The Wolf of Wall Road”, which starred Leonardo DiCaprio.

Prosecutors also dropped dozens of rates versus Najib ally Musa Aman, the previous chief of Sabah point out.

But analysts mentioned the conviction versus Mr Najib would enhance self confidence in the new govt, headed by Key Minister Muhyiddin Yassin, and in the justice process.

Mr Muhyiddin will be “found as putting nation in excess of politics, and achieve guidance from these who wanted to see justice in case,” Bridget Welsh, a Malaysia qualified from the College of Nottingham, advised AFP.

There has been speculation a responsible verdict could destabilise the ruling coalition, which has a razor-thin greater part in parliament, if Mr Najib subsequently decides to withdraw the backing of people who nevertheless guidance him.

The amounts included in Mr Najib’s first scenario are small in comparison to these in his next and most sizeable demo, which centres on allegations he illicitly acquired more than $500 million.

Malaysia had billed Goldman Sachs and some present-day and former staff members, proclaiming substantial quantities have been stolen when the financial institution organized bond issues for 1MDB.

But the two sides agreed to a $3.9 billion settlement previous week in exchange for costs getting dropped.



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