U.S. investment bank Goldman’s GS involvement has heightened in the scandal related to the multibillion-dollar 1Malaysia Development Bhd (1MDB) as the bank is expected to be under the purview of Singapore’s ongoing criminal investigation related to fund flows of the fund, Bloomberg reported.
Notably, Goldman’s local unit has come under the state’s probe recently though the bank’s relation with the Malaysian state investment company has been already under the city-state’s police examination since the end of 2017. In November, Malaysia's minister of finance, Lim Guan Eng, announced the plan of recouping "full refund" of the fees earned by the bank from the 1MDB deals. Notably, nearly $600 million has been earned by the bank, including three bond offerings in 2012 and 2013, which raised $6.5 billion. Therefore, Singapore authorities are investigating the involvement of the Singapore subsidiary in partly movement of these fees.
The heightened investigation follows criminal charges slapped by Malaysia on Goldman and two of its former employees in relation to the 1MDB scandal, last week. However, the bank continues to deny any wrongdoing. Notably, Singapore is in full co-ordination with the U.S. Justice Department which has levied criminal charges against two former bankers of Goldman.
“The firm continues to cooperate with all authorities investigating this matter,” Goldman spokesman Edward Naylor said.
The Malaysian government seeks to charge a total penalty of more than $2.7 billion worth funds that were allegedly misused and the $600 million that Goldman had received as fees. Moreover, the two employees, if proven guilty, will have to serve prison terms of up to 10 years.
Goldman has been scrutinized for playing a role in raising funds through bond offerings for 1MDB — the fund — which is facing corruption and money-laundering probes in roughly six countries. Notably, per the U.S. Department of Justice, misappropriation of funds, worth nearly $4.5 billion, from 1MDB by top officials of the fund and their colleagues from 2009 through 2014 also included funds raised through Goldman.
Early this December, the Federal Reserve sped up the investigation of the matter. Goldman’s representatives met with the central bank and defended the bank’s controls.
Although Goldman has resolved quite a few litigation issues, it still faces probes and queries from several federal agencies, and a few foreign governments for its businesses conducted during the pre-crisis period. As a result, the company’s legal expenses are expected to remain elevated, which may partially impede its bottom-line growth in the near term.
Hit by the scandal and other global issues, shares of Goldman have tumbled in the last few days on rising investors’ worries. Shares of the company have lost around 31.2% in the past three months compared with the 25.4% decline of the industry.
Goldman currently carries a Zacks Rank #3 (Hold).
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