Goldman Sachs has been slammed for “inexcusable” behaviour in its work for Malaysian investment fund 1MDB. Multi-jurisdiction legal and regulatory issues now arise
US prosecutors have filed criminal charges against two former Goldman bankers and a Malaysian financier over the alleged theft of billions of dollars from the fund. Goldnman Sachs will also have to answer to various regulatory and law enforcement authorities with conflict of interest issues already on the cards.
Conflicts of interest
The recent addition of Mark Filip to Goldman’s legal team has raised questions. Mr Filip formally held the position of deputy attorney-general at the Department of Justice (DOJ). DOJ criminal division chief, Brian Benczkowski, is facing questions over whether to recuse himself from the probe into the bank’s work for the Malaysian investment fund. When Mr Filip served in government as deputy attorney-general, Mr Benczkowski was his chief of staff. Goldman is scheduled to meet, later this month, with DOJ prosecutors to argue that it should not face criminal charges in connection to the 1MDB affair. Mr Filip is expected to be part of the Goldman legal team making that presentation.
Financial and reputational costs
It is alleged that between 2009 and 2014 an estimated $4.5 billion was misappropriated from 1MDB by high-level officials of the fund and their associates. Any proceedings by the DOJ or other governmental or regulatory authorities could also result in the imposition of significant fines, penalties and other sanctions against Goldman Sachs. David Solomon, Goldman’s new chief executive, has stated the manner in which two former employees allegedly broke the law in their work with Malaysian fund 1MDB was “very distressing”.