Report: Goldman books US$2b in legal fees to settle 1MDB case

Last month, it was reported that Goldman Sachs reached a settlement with the Malaysian government over the multibillion-dollar 1MDB scandal that would see it avoid criminal liability for over charges filed here. — Reuters pic

KUALA LUMPUR, Aug 8 — US investment bank Goldman Sachs has made provisions for US$2 billion (RM8.4 billion) to cover the legal fees involved in settling its criminal charges in Malaysia related to the 1MDB scandal.

According to the Financial Times (FT), the provisions that effectively wiped out the bank’s profits from a bumper second quarter were reported to the US Securities and Exchange Commission in a recent filing

Last month, it was reported that the US investment bank reached a settlement with the Malaysian government over the multibillion-dollar 1MDB scandal that would see it avoid criminal liability for over charges filed here.

The two sides reportedly said the deal included a US$2.5 billion cash payout by Goldman and a guarantee by the bank that Malaysia would receive at least US$1.4 billion in assets linked to the bonds.

However, former attorney general Tan Sri Tommy Thomas, among others, have pointed out that Goldman’s exposure was limited to the cash settlement as the assets involved in the settlement were those already seized by governments worldwide including the US.

Former officials from the Pakatan Harapan government also contend that the US$2.5 billion settlement represented around a quarter of Malaysia’s liabilities from the problematic 1MDB bond issue undertaken by Goldman.

Despite the billions that the bank would pay to settle the criminal charges here, insiders believed  Goldman was still set to gain from the agreement with the Malaysian government.

Among others, they told the FT that the Malaysian settlement would provide the catalyst to help Goldman resolve the US Justice Department’s pending case against it over the same scandal.

Goldman said in its filing to the SEC that talks for a settlement “being principally led by the DoJ, are progressing”.

Although the settlement has upset former officials in Malaysia, the FT said financial analysts were largely positive about the development.

“Goldman is paying a premium, but one that makes sense, to eliminate the legal and political tail risk,” the FT quoted analyst Mike Mayo of Wells Fargo as saying previously.

“It absolutely needs to be done. After the [US presidential election] they could become political fodder.”

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