Update (1330ET): WSJ is now reporting that Goldman will pay a total of $2.2 billion plus an additional $600 million (some of which has already been paid to foreign regulators) as part of a deferred prosecution agreement with the DoJ. As part of the deal, one of the bank's Asian units will plead guilty to charges in the US.
The US-based parent company meanwhile will be bound by a DPA that could allow prosecutors to target the bank with criminal penalties if the agreement is violated.
On the bright side (for Goldman), the deal won't require the bank to hire an independent monitor, an extremely costly process (as WSJ pointed out, the bank is still making quarterly updates to the monitor it was forced to hire in the wake of claims it deliberately sold customers worthless mortgage bonds during the run-up to the crisis).
The settlement will be announced later this week.
* * *
Goldman Sachs is reportedly on the cusp of settling one of the biggest criminal cases involving a Wall Street bank since the financial crisis: According to a Bloomberg News report published late Monday evening, the Vampire Squid has reached a tentative agreement with the DoJ to pay more than $2 billion in penalties - a figure that BBG noted is "broadly in line with analysts expectations" - and - here's the key bit - allows the bank to avoid all criminal penalties.
That last bit is especially important, because, as we've chronicled over the past few years, many of the bank's top executives appeared to have been personally involved with the deal, which was initially brought in by Tim Leissner, formerly the bank's top man in Southeast Asia, before he was suspended over the deal, before agreeing to cooperate with the Feds against his former employer (where he reportedly told authorities about the endemic "culture of corruption" at play within the bank).
Though we can't be certain, we suspect that the timing of former Goldman chief Lloyd Blankfein's departure was influenced by the unfurling scandal; he suddenly left the bank right around the time that Leissner flipped. Word on the street was that Goldman would be made to admit guilt as part of the deal. Indeed, a leak about an 'imminent' deal published nearly 1 year ago claimed that the bank had reluctantly agreed to the plea. Apparently, the bank's legal team was able to avert this, amid whispers that connections between Goldman's representatives and the current leaders of the DoJ might create conflicts of interest (a negotiating tactic that the bank appears to have leveraged to its advantage; note the deal is reportedly coming just weeks before a close American presidential election).
The deal comes just months after Goldman agreed to pay $3.9 billion in "reparations" to the government of Malaysia for its role in raising the $6.5 billion that seeded the 1MDB sovereign wealth fund, which was supposed to be used to finance public projects, but was instead drained by cronies of former Malaysian Prime Minister Najib Razak, who has been convicted in Malaysia for his role in the region's largest-ever financial fraud.
That settlement included $2.5 billion in cash payments from Goldman to the Malaysian government.
But the fraud's true ringleader was a mysterious financier named Jho Low, who allegedly orchestrated the siphoning off of money from the fund, which was disbursed to bank accounts controlled by Razak, and others controlled by Low and presumably other cronies. Low went on to spend the money on a seemingly endless stream of luxury goods - jewels, fine art, yachts - Low even used some of the money to finance the film "the Wolf of Wall Street", and to make illegal campaign contributions to the campaign of former President Barack Obama (this, after Razak was once criticized for his "golf diplomacy" with the former president while his country struggled with historic floods).
The DoJ has seized billions of dollars of these ill-gotten gains, and even returned some of the stolen money to Malaysia.
Goldman has struck deals with prosecutors in at least three countries over its role in 1MDB: in Singapore, the bank could face serious criminal penalties if it is caught violating its settlement agreement. All told, the bank will pay $5 billion in cash penalties tied to 1MDB, an amount that's roughly in line with expectations.
Goldman pays $2 Bn in 1MBD corruption probe, avoids criminal conviction.— zerohedge (@zerohedge) October 20, 2020
That's how the legal system really works
In return, the bank and its top executives will simply walk away, while Leissner (who pleaded guilty two years ago per his plea deal) and another banker who was arrested in connection with the investigation are left to face the music.