Goldman Sachs admitted its Malaysian subsidiary “knowingly and willingly” conspired to violate the Foreign Corrupt Practices Act because some former employees paid bribes to officials there in connection with the looting of a sovereign wealth fund, a scandal that toppled that country’s leader and triggered criminal cases that spanned the globe.
The subsidiary pleaded guilty to a conspiracy charge on Thursday in Brooklyn federal court, and the bank itself entered into a three-year deferred prosecution agreement to resolve one of the biggest scandals in the Wall Street giant’s long history.
All told, Goldman will pay billions in penalties and disgorgement in Malaysia, the United States and Hong Kong for its role in the looting of the 1Malaysia Development Berhad fund. The scandal ultimately brought down the government of Malaysia’s prime minister at the time, Najib Razak, and turned a financier with expensive tastes named Jho Low into an international fugitive.
As part of the plea deal, Goldman has agreed to a statement of facts compiled by federal authorities that it will not be able to dispute. That document outlines a number of internal control failings at Goldman that authorities said should have detected the wrongdoing by its former employees and the involvement of Mr. Low in helping to arrange the deals and pay more than $1 billion in bribes to official in Malaysia.
“Other personnel at the bank allowed this scheme to proceed by overlooking or ignoring a number of clear red flags,” said Brian C. Rabbitt, acting assistant attorney general for the Justice Department’s criminal division during a news conference.
More than $2.7 billion raised for the fund in bond offerings arranged by Goldman financed lavish lifestyles for powerful Malaysians, including friends and family of Mr. Najib. The money bought paintings by van Gogh and Monet, a mega-yacht docked in Bali, a grand piano made of clear acrylic that was given to a supermodel as a gift, and a king’s ransom in jewelry. Pilfered money also financed a boutique hotel in Beverly Hills, a share of the EMI music publishing portfolio and the Hollywood movie “The Wolf of Wall Street.”
Goldman Sachs earned $600 million in fees to arrange the bond sales.
Federal prosecutors had already brought charges against two Goldman bankers and Mr. Low, who is believed to be living in China. One of the bankers — Tim Leissner, the husband of the fashion designer and model Kimora Lee Simmons — has pleaded guilty and agreed to forfeit up to $43.7 million.
Malaysian prosecutors also brought criminal charges against Goldman and more than a dozen executives, but the bank agreed in July to pay $2.5 billion to resolve that investigation. Goldman also pledged to cover any shortfall from the sale of $1.4 billion in assets that have been seized by prosecutors in the United States and Malaysia.
Much of the property that’s been seized belonged to Mr. Low, who has never appeared in court to face charges in the case. He has denied wrongdoing through representatives in the United States, but nonetheless agreed last year to give up all claims to the seized assets worth as much as $900 million.
While the legal saga is essentially over for Goldman, it will continue for some individuals: Mr. Leissner still awaits sentencing, and the other banker charged in the United States, Roger Ng, has pleaded not guilty and awaits trial.
In Malaysia, Mr. Najib was convicted last July in a corruption case and sentenced to up to 12 years in prison, but the sentence was stayed on appeal.
Mr. Low’s exact whereabouts remain a mystery.
This is a developing story. Check back for updates.