The U.S. powerhouse is paying billions to settle its 1MDB troubles. Bankers like former CEO Lloyd Blankfein are being forced to pitch in.
The New York-based investment bank is paying $2.9 billion after its Malaysian subsidiary pleaded guilty to bribery in connection with 1MDB, justice officials said in a statement overnight.
Between 2012 and 2013, Goldman Sachs earned more than $606 million in fees on projects dubbed «Maximus,» «Catalyze,» or «Magnolia» for the scandal-tarnished fund.
Costly End
The largest-ever U.S. corruption settlement brings to a costly end a five-year investigation into Goldman Sachs. The U.S. bank admitted «institutional failures» during the tenure of ex-CEO Lloyd Blankfein – a stark reversal from its stance until now blaming rogue bankers like Tim Leissner.
«When government officials and business executives secretly work together behind the scenes for their own illegal benefit, and not that of their citizens and shareholders, their behavior lends credibility to the narrative that businesses don’t succeed based on the quality of their products, but rather their willingness to play dirty,» U.S. investigators said.
Clawing Back, Docking Pay
Blankfein and others, like ex-operating chief-turned-Trump adviser Gary Cohn, will have to pony up, as a result, Goldman Sachs said in a separate statement. It is claiming back money from bankers as well as docking pay of current management under CEO David Solomon.
«These clawbacks, forfeitures and compensation reductions will total approximately $174 million in the aggregate,» Goldman Sachs said. It didn’t detail how much each of the five former executives including Blankfein, Cohn, ex-finance chief David Viniar, and two other former top bankers would pay or relinquish.
«On My Watch»
Blankfein acknowledged the misconduct: «It goes with the responsibility of leadership to accept some consequences for things that go wrong on your watch,» he told «The Wall Street Journal» (behind paywall). Reportedly a billionaire, Blankfein earned $20.5 million in 2018, the last year of his 27-year career at the investment banking giant.
Goldman bankers fell prey to Jho Low, a 38-year-old Malaysian businessman and alleged mastermind of the $4.5 billion fraud alleged at 1MDB. Unlike Swiss banks like BSI, which rolled out the red carpet as wealth managers, Goldman’s business with Low was capital markets-focused. Low is a fugitive and reportedly being harbored by China.
Asia Specialists
The U.S. bank is looking for $76 million from the bankers on the ground in Asia at the time – Leissner, who pleaded guilty to money laundering and corruption charges; Roger Ng, who is due to stand trial on similar charges; and Andrea Vella, who left Goldman early this year, as U.S. officials barred him from banking.
So far, Goldman currently holds $24 million from them, it said. Vella, an Italian banker who is now a private investor in Hong Kong, has not been charged criminally and didn’t appear by name in the DOJ’s statement.
