Investment banking
firm Goldman Sachs has agreed to pay a record fine of $2.9 billion, the highest-ever
levied in the United States in a corruption case, to settle charges in the 1MDB
Malaysian bribery scandal, the US Justice Department confirmed on Thursday.

Goldman has
“accepted responsibility” in the $1.6 billion bribery case, the largest ever on
record, which also includes charges of money laundering through the US financial
system, acting US Attorney General Brian C Rabbitt said.

The firm
helped the Malaysian government raise $6.5 billion for their sovereign wealth
fund. Between 2009 and 2015, over $4.5 billion was stolen from 1MDB by
high-ranking officials and their associates, the US Justice Department said.

Addressing
a presser, Rabbitt said the fund was “looted by corrupt officials and their co-conspirators,
including senior Goldman bankers” which he said turned it “into a piggy bank
for corrupt public officials and their cronies”.

Goldman Sachs’
Malaysian unit pleaded guilty in a US court, accepting charges of violating
American bribery law as part of a deal to end the probe that involved authorities
from as many as nine countries.  

While
Goldman Sachs Malaysia could see a lot of their activities being curtailed, the
guilty plea clears the parent company’s name from any wrongdoings in court,
which could have potentially dealt a huge blow to their business.

Pleading
not guilty in court, the parent company agreed to “deferred prosecution” for
three and a half years, during which time it will be subjected to increased scrutiny
from regulators.

However,
Rabbitt underscored that despite the deal, there is a “significant amount of
criminal liability” for Goldman as it has been charged in the bribery case, adding
it “imposes meaningful consequences” in the case.

Three
individuals, including two former Goldman executives, have been charged by the
Justice Department in the case.

Former Southeast
Asia chairman Tim Leissner has pleaded guilty, while former head of investment
banking for GS Malaysia Ng Chong Hwa, also known as “Roger Ng” is awaiting
trial. The third individual, Low Taek Jho, remains a fugitive.

“Goldman
admitted today that, in order to effectuate the scheme, Leissner, Ng, Employee
1, and others conspired with Low Taek Jho” to pay the bribes and ignored red
flags, a statement said.

In another
stunning turn, the company said it will demand repayment of $174 million in
salary and bonuses paid to current and former executives including chief
executive David Solomon and his predecessor Lloyd Blankfein.

These
so-called ‘clawbacks’ are almost unheard of in corporate cases.

Solomon, in a statement, said, “it is abundantly clear that certain former employees
broke the law, lied to our colleagues and circumvented firm controls,”
adding, “we recognize that we did not adequately address red flags.”

Included in
the total penalty amount, Goldman will pay a $400 fine to the SEC and repay
$600 million in earnings, and pay a $154 million fine to the Federal Reserve,
which also will require the company to improve its risk management and internal
oversight.

The
Malaysian government dropped the charges against Goldman in July after reaching
a $3.9 billion settlement with the financial giant.

The firm,
which posted profits of $3.5 billion in the latest quarter, had set aside more
than $3.1 billion as of September 30 “for litigation and regulatory
proceedings.”

Goldman
shares closed US trading 1.2 percent higher after settling the uncertainty.