Goldman Sachs officials have reached a $79.5 million settlement with shareholders over the bank's links to the Malaysian 1MDB sovereign wealth fund scandal.
The financial settlement has been agreed to resolve shareholder claims that poor oversight by the banking group's officers and directors contributed to it becoming involved in the problems surrounding 1MDB.
US prosecutors have said Goldman Sachs helped 1MDB arrange $6.5 billion of bond sales but $4.5 billion was then diverted illegally to Malaysian government officials, bankers and other figures.
A preliminary settlement of the shareholder derivative lawsuit has been filed at Manhattan's federal court. It now requires approval by a US district judge. Under the settlement, the defendants' insurers will pay the $79.5 million to Goldman, which would use it for improved compliance and governance measures. These measures will include greater powers for its chief compliance officer and the creation of an anonymous hotline for employees to raise concerns.
Shareholders led by Atlanta's Fulton County Employees' Retirement System were claiming that Goldman Chief Executive David Solomon, his predecessor Lloyd Blankfein and others had disregarded their oversight obligations as the bank failed to heed warning signs about the huge fraud being conducted involving 1MDB. In agreeing the settlement, none of the defendants admitted any wrongdoing or liability.
Goldman Sachs has previously agreed to pay billions of dollars to authorities in the US and other countries over its 1MDB activities. 1MDB also led to the bank entering a three-year deferred prosecution agreement with the US Department of Justice. Former Goldman Sachs banker Roger Ng has been convicted in the US on bribery and money laundering charges relating to 1MDB.
Although the settlement is subject to court approval, it will come as a relief to the bank and its shareholders that additional, protracted litigation can now be avoided.
The payment of $79.5 million will go some way towards improving and overhauling Goldman Sachs' compliance programme. This should reduce the risk of the bank facing similar problems in the future.
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