Like most global investment banks, Goldman Sachs would prefer not to have a guilty plea on its books—but the recent 1MDB scandal required one.
We talked earlier about the $3.9 billion fine Goldman agreed to pay to extricate itself from the litigation around 1MDB, a Malaysian investment fund plundered by the Malaysian prime minister and his cohorts with the help of a division of Goldman Sachs.
According to the Department of Justice (DOJ), Goldman Sachs Malaysia violated the Foreign Corrupt Practices Act (FCPA) to participate in the scheme. Goldman paid over $1 billion in bribes to obtain business that ultimately created three bond deals for 1Malaysia Development Bhd. 1MDB valued at approximately $6.5 billion. A Goldman employee worked with Jho Low, a Malaysian business man and now fugitive, who is alleged to be the architect of the 1MDB scheme.
For its efforts, Goldman earned about $600 million—which is far less than the fines they will pay as a result, even if those fines do amount to pocket change for the institution.
A guilty plea was entered by Goldman Malaysia for criminally violating the FCPA. The parent company, Goldman Sachs, entered into a deferred prosecution plea for a FCPA charge as well. The deferred prosecution plan means the criminal charge will be dismissed if Goldman Sachs remains in compliance for three years.
In discussing the corrupt practices for which Goldman Sachs is admitting guilt, the DOJ notes, “Over a period of five years, Goldman Sachs participated in a sweeping international corruption scheme, conspiring to avail itself of more than $1.6 billion in bribes to multiple high-level government officials across several countries so that the company could reap hundreds of millions of dollars in fees, all to the detriment of the people of Malaysia and the reputation of American financial institutions operating abroad.”
Despite tax fraud, money laundering, and other covert forms financial chicanery, Goldman Sachs has skated through numerous regulatory and legal difficulties without too much trouble. This time, Goldman’s general counsel stood before a federal judge and stated that the multinational corporation knowingly committed the acts of which it is accused.
A new chapter for Goldman Sachs? A new day for financial and operational transparency and steering clear of shady but lucrative deals? We’ll see.
Experienced legal advice on civil and criminal tax matters
With offices in Cleveland and Chicago, the tax lawyers at Robert J. Fedor, Esq., LLC provide experienced representation on the full range of domestic and international tax issues. If you have a question about payroll tax, your FBAR, or other offshore tax concern, we can help. Call 800-579-0997 or contact us.
