Quora Answer: Will Goldman Sachs Reach a Settlement with Malaysia Prosecutors Soon?

The following is my answer to a Quora question: “Will Goldman Sachs reach a settlement with Malaysia prosecutors soon?  Are others, such as Singaporean federal investigators, also encouraged to file fraud charges against Goldman Sachs?”

No.  That is not going to happen anytime soon, because Goldman Sachs and the Malaysian government have to negotiate the settlement.  Part of this negotiation also involves the question of admission of liability, and to what extent.  Malaysia can dangle the penalty of non-access to their market, but the limited size and immediate potential of the Malaysian market, compared to similar neighbouring economies such as Indonesia and Vietnam, mean that even playing this card may not be enough to force them to an admission.

Goldman Sachs will not admit any liability of responsibility for the 1MDB fiasco because this will have legal ramifications elsewhere.  It allows the US Treasury and other departments to open an official investigation, which will have severe penalties.  It would also open Goldman Sachs to legal suits in Malaysia, the UAE, and elsewhere.

Whilst Malaysia would like a settlement soon to use that as political capital, and extract a substantial sum of damages, Goldman Sachs would play for time, giving low ball offers, such as RM$1 billion.  This allows them to escape the news cycle, and use that time to build a provision against legal penalties.  They will then look to amortise any potential damages across several quarters.

Singapore has no reason to file any such charges against Goldman Sachs because the offence occurred in Malaysia, not Singapore.  The US is pursuing a case against Goldman Sachs because they are incorporated in the US.  The US must be seen to be upholding compliance standards.  What will really happen is that they will offer up a few sacrificial lambs, the company and management will be absolved, the penalty will be a slap of the wrist, which will either be amortised or suspended based on the settlement negotiated.

Within the Singapore context, it is not Goldman Sachs that laundered the money here, but individuals connected with Mohammed Najib bin Abdul Razak.  As such, money laundering charges will be against them, but only after Malaysia has completed its own legal process.  Singapore has no case against Mohammed Najib bin Abdul Razak, because he was a head of state when all this occurred, granting him sovereign immunity.