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Goldman Sachs Unit Pleads Guilty Over Fraud Scheme

Goldman Sachs admitted its Malaysian subsidiary “knowingly and willingly” conspired to violate the Foreign Corrupt Practices Act because some former employees paid bribes to officials in connection with the looting of a sovereign wealth fund, a scandal that toppled that country’s leader and triggered criminal cases that spanned the globe.

The subsidiary pleaded guilty to a conspiracy charge on Thursday in Brooklyn federal court, and the bank itself entered into a three-year deferred prosecution agreement to resolve one of the biggest scandals in the Wall Street giant’s long history.

Separate from the penalties the bank will pay, the board of Goldman Sachs said it was taking steps to withhold or recoup $174 million in compensation from current and former executives — including its chief executive, David Solomon, and his predecessor, Lloyd Blankfein — either in lost pay or the return of money already paid.

In a statement, Mr. Solomon said Goldman “fell short” in overseeing its employees.

“While it is abundantly clear that certain former employees broke the law, lied to our colleagues and circumvented firm controls, this fact does not relieve me or anyone else at the firm of our responsibility to recognize two critical realities,” Mr. Solomon said.

Mr. Blankfein, reached by phone, declined to comment.

All told, Goldman will pay billions in penalties and disgorgement in Malaysia, the United States and Hong Kong for its role in the looting of the 1Malaysia Development Berhad fund. The scandal ultimately brought down the government of Malaysia’s prime minister at the time, Najib Razak, and turned a financier with expensive tastes named Jho Low into an international fugitive.

As part of the plea deal, Goldman has agreed to a statement of facts compiled by federal authorities that it will not be able to dispute. That document outlines a number of internal control failings at Goldman that authorities said should have detected the wrongdoing by its former employees, as well as the involvement of Mr. Low in helping to arrange the deals and pay more than $1 billion in bribes to official in Malaysia.

“Other personnel at the bank allowed this scheme to proceed by overlooking or ignoring a number of clear red flags,” said Brian C. Rabbitt, acting assistant attorney general for the Justice Department’s criminal division, said during a news conference.

More than $2.7 billion raised for the fund in bond offerings arranged by Goldman financed lavish lifestyles for powerful Malaysians, including friends and family of Mr. Najib. The money bought paintings by van Gogh and Monet, a mega-yacht docked in Bali, a grand piano made of clear acrylic that was given to a supermodel as a gift, and a king’s ransom in jewelry. Pilfered money also financed a boutique hotel in Beverly Hills, a share of the EMI music publishing portfolio and the Hollywood movie “The Wolf of Wall Street.”

Goldman Sachs earned $600 million in fees to arrange the bond sales.

Federal prosecutors had already brought charges against two Goldman bankers and Mr. Low, who is believed to be living in China. One of the bankers, Tim Leissner, the husband of the fashion designer and model Kimora Lee Simmons, has pleaded guilty and agreed to forfeit up to $43.7 million.

Malaysian prosecutors also brought criminal charges against Goldman and more than a dozen executives, but the bank agreed in July to pay $2.5 billion to resolve that investigation. Goldman also pledged to cover any shortfall from the sale of $1.4 billion in assets that have been seized by prosecutors in the United States and Malaysia.

Much of the property seized belonged to Mr. Low, who has never appeared in court to face charges in the case. He has denied wrongdoing through representatives in the United States, but agreed last year to give up all claims to seized assets worth as much as $900 million.

While the legal saga is essentially over for Goldman, it will continue for some individuals: Mr. Leissner still awaits sentencing, and the other banker charged in the United States, Roger Ng, has pleaded not guilty and awaits trial. Another former Goldman executive, Andrea Vella, has been barred from the financial industry by the Federal Reserve. (Goldman’s board said it was taking steps to recoup tens of millions of dollars in compensation from them as well.)

In Malaysia, Mr. Najib was convicted last July in a corruption case and sentenced to up to 12 years in prison, but the sentence was stayed on appeal.

Mr. Low’s exact whereabouts remain a mystery.

This is a developing story. Check back for updates.

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U.S. Investigates Vaxart’s Claims Related to Covid-19 Vaccine

Vaxart, a California biotech firm that is attempting to develop a Covid-19 vaccine, has come under scrutiny from federal prosecutors and the Securities and Exchange Commission.

The company announced in June that it had been selected to participate in Operation Warp Speed, the U.S. government’s flagship effort to develop cures and treatments for Covid-19. That sent Vaxart’s stock price soaring, allowing a hedge fund that controlled the company to reap an instant $200 million profit by selling shares.

The New York Times reported the following month that Vaxart appeared to have overstated its involvement in Operation Warp Speed.

Vaxart said it had received a subpoena from the Justice Department concerning its role in Operation Warp Speed and the stock sales in July, the company disclosed in a securities filing this week.

In August, the S.E.C.’s enforcement division requested documents from the company about the same matter, Vaxart said in the filing, which was first reported by Fierce Pharma, a trade publication.

“We are cooperating with the U.S. Attorney’s Office regarding these requests and have provided documents and information in response,” Vaxart said in the securities filing. It added that it had “voluntarily provided documents requested by the S.E.C. and is cooperating with this informal inquiry.”

A number of shareholder lawsuits have also been brought against Vaxart, its executives and its board, accusing the company of misleading investors by overstating its role in Operation Warp Speed.

Vaxart is one of dozens of companies pursuing coronavirus vaccines. But the company, which had just 15 employees this summer, is not among the drug makers that have received substantial funding for their research and production efforts through Operation Warp Speed.

Nonetheless, the company in June issued a news release that stated: “Vaxart’s Covid-19 Vaccine Selected for the U.S. Government’s Operation Warp Speed.” That sent shares of the company soaring, and within days, a hedge fund, Armistice Capital, had sold shares worth more than $200 million.

But Vaxart’s involvement in Operation Warp Speed was limited. Its vaccine candidate was one among those being tested in an animal trial sponsored by the federal initiative. Officials at the Department of Health and Human Services, which is coordinating Operation Warp Speed, distanced the department from the company, saying it was involved only in preliminary studies but had not yet won government support.

The value of Vaxart stock has fallen by more than 50 percent since mid-July, when it hit new highs on the heels of its Operation Warp Speed announcement.

This week, the company said it had begun its Phase 1 trial and that initial tests on hamsters yielded promising results.