## Facts

- The Goldman Sachs Group, Inc. was an SEC-registered issuer whose securities traded on the NYSE.
- Goldman underwrote three bond offerings in 2012–2013 for 1Malaysia Development Berhad (1MDB), a Malaysian state-owned investment fund, raising about $6.5 billion.
- The SEC found that a substantial portion of the offering proceeds was diverted through a bribery and kickback scheme involving certain then-senior Goldman employees and a high-risk intermediary.
- Bribes and kickbacks were paid to foreign officials in Malaysia and Abu Dhabi, and to associates/relatives, to obtain and retain lucrative business for Goldman and personal benefits for the participants.
- Goldman earned roughly $600 million in fees and revenue from the three transactions, which the SEC characterized as unusually large in light of the deals’ structure and speed.
- Goldman maintained formal anti-corruption policies but, in the SEC’s view, did not implement internal accounting controls sufficient to address heightened corruption risks tied to 1MDB, politically exposed persons, and the intermediary.
- Red flags included internal concerns about the intermediary’s role and reputation, atypical fees, and accelerated approvals for complex cross-border transactions.
- The SEC concluded that transaction-related records failed to accurately reflect the nature and purpose of certain payments and dispositions of assets connected to the scheme.
- The matter was resolved through an SEC administrative cease-and-desist proceeding based on Goldman’s offer of settlement, without admissions or denials (other than jurisdiction).

## Issues

1. Whether Goldman violated the FCPA anti-bribery provisions by authorizing or making corrupt payments to foreign officials, directly or indirectly, to obtain or retain business in connection with the 1MDB bond offerings.
2. Whether Goldman violated Exchange Act Section 13(b)(2)(A) by failing to keep books, records, and accounts that, in reasonable detail, accurately and fairly reflected transactions and dispositions of assets connected to the bond deals.
3. Whether Goldman violated Exchange Act Section 13(b)(2)(B) by failing to devise and maintain internal accounting controls sufficient to provide reasonable assurances that high-risk transactions were executed and recorded properly, including in the presence of significant corruption red flags.
4. What remedies were appropriate in an administrative settlement addressing bribery-related misconduct and related accounting-controls failures.

## Decision

- The SEC found that Goldman violated the FCPA’s anti-bribery, books-and-records, and internal-accounting-controls provisions in connection with the 1MDB scheme.
- The SEC ordered Goldman to cease and desist from committing or causing any violations and any future violations of the cited provisions.
- The SEC ordered disgorgement of approximately $606.3 million (including prejudgment interest) and imposed a $400 million civil penalty.
- The SEC treated disgorgement as satisfied by Goldman’s payment commitments under a related settlement benefiting Malaysia and 1MDB.
- The SEC credited remedial measures and cooperation described in the order in determining relief.

## Legal Principles

- An issuer may be held responsible under the FCPA for corrupt conduct carried out by its officers, employees, or agents in obtaining or retaining business, including where the misconduct involves senior personnel acting through the issuer’s business platform and approval processes.
- Exchange Act Section 13(b)(2)(A) is violated when an issuer’s books and records do not, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets, including where payments tied to bribery are mischaracterized as legitimate business expenses or ordinary transaction flows.
- Exchange Act Section 13(b)(2)(B) requires internal accounting controls that are effective in light of the issuer’s specific risk profile; formal policies and committee review are insufficient if controls can be circumvented, overridden, or are not designed to address known high-risk features of a transaction.
- The presence of multiple corruption red flags—such as high-risk intermediaries, unusual fees, accelerated deal timelines, and exposure to politically connected counterparties—requires enhanced due diligence and skeptical, independent review; failure to respond appropriately supports an internal-controls violation.

## Conclusion

The SEC’s administrative order imposed cease-and-desist relief and substantial monetary sanctions on Goldman for FCPA anti-bribery, books-and-records, and internal-controls violations arising from 1MDB bond offerings, emphasizing that high-risk transactions require controls and recordkeeping calibrated to identified corruption risks and red flags.


In re The Goldman Sachs Group, Inc., Exchange Act Release No. 90243 (S.E.C. 2020)