US prosecutors recommended to senior Justice Department officials that Goldman Sachs be required to plead guilty to a crime to settle a probe of its dealings with Malaysia's 1MDB state investment fund, the Financial Times reported.
The recommendation is still under consideration, the FT said, citing unidentified people familiar with the matter. It would be the toughest penalty the Justice Department could impose, as it potentially could affect the financial giant's license and ability to conduct business.
According to a source close to the investigation, the hard line recommendations by investigators is not surprising, but the final settlement is likely to be less onerous. Experts have said Goldman Sachs could face a fine of $2bn.
We do not believe that such a charge would be warranted by the facts of the case or the law, particularly because senior management was unaware of the criminal activity by Leissner and his associate who took extraordinary efforts to hide their part in the illegal scheme from management, compliance, and legal functions at the firm"
The US Justice Department announced criminal charges against two former Goldman bankers tied to the scandal, Tim Leissner and Roger Ng, last year. Goldman is being investigated by Malaysian authorities and the US Department of Justice for its role. The bank has consistently tried to distance itself from the scandal, saying the criminal activities of Leissner and Ng were hidden from the bank's management.
"We do not believe that such a charge would be warranted by the facts of the case or the law, particularly because senior management was unaware of the criminal activity by Leissner and his associate who took extraordinary efforts to hide their part in the illegal scheme from management, compliance, and legal functions at the firm," a Goldman Sachs spokesman said.
US officials say more than $2.7bn in funds was misappropriated while Goldman garnered $600m in fees and revenues from three bond issues in 2012 and 2013.
Leissner pleaded guilty, while Jho Low and Ng Chong Hwa deny the allegations. Goldman Sachs has tried to distance itself from its two former employees.
Assistant Attorney General Brian Benczkowski, who oversees the Justice Department's criminal division, will be a key decision maker on any settlement with the bank, the FT said. He obtained an ethics waiver to participate in the case after Goldman Sachs hired his former law firm, the paper said.