Goldman in talks with the U.S. to settle 1MDB scandal for $2 billion

David M. Solomon, Chairman and CEO of Goldman Sachs, speaks during the Milken Institute’s 22nd annual Global Conference in Beverly Hills, April 29, 2019

Mike Blake | Reuters

Goldman Sachs is in advanced negotiations with the U.S. Department of Justice to pay about $2 billion in fines tied to its role in the 1MDB scandal, according to people with knowledge of the matter.

While the talks haven’t been finalized, a deal could be reached next month, according to the people, who declined to be identified. An Asian subsidiary of the investment bank may plead guilty to violating U.S. anti-bribery laws and Goldman will have to create an independent monitor to oversee compliance efforts, the people said.

A settlement would lift a cloud that has hung over Goldman and its CEO David Solomon since he took over for Lloyd Blankfein in late 2018. Goldman bankers have been accused of helping a Malaysian financier plunder billions of dollars from the $6.5 billion 1MDB investment fund, money that was meant to spur the country’s economic development.

The bank has previously said that just two ex-employees were responsible for the scandal and that it is difficult to prevent determined staffers from circumventing controls. Tim Leissner, a former Goldman partner, pleaded guilty to the fraud last year and this week was barred from working in the finance industry.

Spokeswomen for the bank and Justice Department declined to comment. The Wall Street Journal first reported the details of the potential settlement, and Bloomberg was first to report the $2 billion figure.

With this deal, Goldman may be avoiding the worst potential outcome from the international scandal. Analysts including Wells Fargo’s Mike Mayo have estimated that costs tied to resolving 1MDB could be as high as $5 billion. The fact that Goldman’s Asian subsidiary, rather than the parent company, is likely to plead guilty to a crime will likely contain any potential business impact from the admission.

The New York-based bank is still in the midst of separate negotiations with Malaysian authorities, who have filed criminal charges against the firm.

Shares of Goldman ticked 73 cents higher to $231.18 on Thursday and are up 37% this year.

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