On October 22, 2020, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) announced the coordinated $2.9 billion resolution of a Foreign Corrupt Practices Act (FCPA) enforcement action against The Goldman Sachs Group, Inc. (Goldman Sachs). The settlement is the largest in FCPA history and stems from Goldman Sachs’ involvement in the 1Malaysia Development Berhad (1MDB) massive bribery scandal, first introduced in our January 2019 alert.
According to the DOJ and SEC press releases, Goldman Sachs engaged in a conspiracy to pay more than $1.6 billion in bribes to multiple high-level foreign officials in Malaysia and Abu Dhabi between 2009 and 2014 to secure its role as the underwriter of approximately $6.5 billion in three bond deals for 1MDB, allowing the bank to earn hundreds of millions in fees. Although Goldman Sachs, which employs approximately 38,000 people, had implemented a comprehensive anti-corruption and compliance program, the DOJ and SEC concluded that its internal controls were deficient, in part because both low and high-level employees were able to circumvent the controls and engage in corrupt activities. For example, the DOJ alleges that employees serving in Goldman Sachs’ control functions were able to ignore “significant red flags” with the deals, including the involvement of a Malaysian national known as Jho Low, despite the employees’ knowledge that Low “posed a significant risk.”
Goldman Sachs was ultimately charged with conspiracy to violate the FCPA anti-bribery provisions and violations of the anti-bribery, internal accounting controls, and books and records provisions of federal securities laws. As part of the combined settlement, Goldman Sachs entered into a deferred prosecution agreement and agreed to pay $2.9 billion in criminal and civil penalties and disgorgement and to report on the status of its enhanced anti-corruption compliance policies for three years, and its Malaysian subsidiary agreed to plead guilty to the conspiracy charge. The DOJ and SEC agreed to give partial credit for payments Goldman Sachs made in parallel foreign actions in Malaysia, the U.K., Singapore, and Hong Kong.
The DOJ indicated that the $2.9 billion sanction was based on several relevant considerations, including Goldman Sachs’ failure to voluntarily disclose its conduct; the nature and seriousness of the offense; the amount of the bribes; the duration of the scheme; the pervasiveness of misconduct, including the involvement of high-level Goldman Sachs’ employees; and deficiencies in Goldman Sachs’ compliance program and internal controls. Notably, the DOJ reduced the criminal fine by 10% based on Goldman Sachs’ partial cooperation, but refused to give full cooperation credit because Goldman Sachs significantly delayed in producing relevant evidence during the investigation, including recorded employee phone calls discussing allegations of bribery and misconduct.
The Goldman Sachs’ enforcement action and settlement is remarkable not only because it resulted in a record-setting FCPA sanction, but also because it serves as a reminder that corruption can occur at all levels of a company. An effective compliance program must be appropriately tailored to the unique risks of the company as well as the risks presented by employees at all levels of the company.
Heather Hatfield represents clients in corporate investigations, white-collar crime investigations and defense involving the Foreign Corrupt Practices Act (FCPA), complex contract disputes, oil and gas litigation ...
Blake Runions assists clients with broad range of business disputes and investigatory matters, including partnership disputes, internal investigations, and commercial litigation.
Prior to joining the Firm, Blake worked in the ...
Jamie Godsey represents public and private corporations, partnerships, and small companies on a broad range of complex business and commercial litigation. Her experience includes a wide variety of matters such as contractual ...
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