Goldman Seizing or Withholding $174 Million From Executives for 1MDB Case -- 2nd Update
October 22 2020 - 2:14PM
Dow Jones News
By Liz Hoffman and Dave Michaels
Goldman Sachs Group Inc. is seizing or withholding $174 million
from current and former executives after agreeing to a costly
settlement to resolve multiple government investigations into its
role in a Malaysian bribery scandal.
The Wall Street firm will cut this year's pay to Chief Executive
David Solomon and two top lieutenants, and claw back past bonuses
paid to ex-CEO Lloyd Blankfein and others after it admitted on
Thursday to compliance lapses in its dealings with a corrupt
Malaysian investment fund.
"We must always remain open to improvement, learn from our
mistakes and accept the consequences when we fail," Mr. Solomon
said in a statement.
The bank is reducing Mr. Solomon's pay and that of Goldman
President John Waldron, finance chief Stephen Scherr and Richard
Gnodde, head of Goldman's international division, by a combined $31
million.
It is also recouping bonuses paid to Mr. Blankfein, former CFO
David Viniar and a pair of executives, Michael Sherwood and Michael
Evans, who oversaw some of the 1MDB dealings and have since
retired. It is also in discussions to recoup money from Gary Cohn,
a former executive whose future bonuses were paid out when he
joined the Trump administration in 2017, a person familiar with the
matter said.
Goldman on Thursday agreed to pay more than $2.9 billion to the
U.S. Justice Department and other global regulators to settle
allegations that it enabled the embezzlement of billions of dollars
from the fund, known as 1MDB. That is on top of the $2.5 billion it
agreed in July to pay the government of Malaysia. The penalties
amount to about eight months of profits for the Wall Street
firm.
Goldman executives "allowed the scheme to proceed by overlooking
or ignoring a number of clear red flags," said acting Assistant
Attorney General Brian Rabbitt.
"If you look at the terms of this resolution on paper, there can
be no question it is a serious and significant resolution that
imposes serious and significant consequences," Mr. Rabbitt said
Thursday at a news conference.
In Brooklyn federal court on Thursday, a Goldman subsidiary in
Malaysia pleaded guilty to conspiring to violate U.S. antibribery
laws. A deal cut with authorities allows the parent company itself
to avoid being prosecuted for the same charge, which could have
been crippling to its business.
The clawbacks and pay cuts are a concession to shareholders who
will shoulder the financial cost of the scandal and employees whose
own bonuses this year are likely to shrink because of it.
They also are an admission of sorts that the crux of the
government's case against Goldman, that it failed to properly
oversee its senior bankers and fostered a win-at-all-cost culture,
has some merit.
In 2012 and 2013, Goldman helped raise $6.5 billion for 1MDB by
selling bonds to investors. Prosecutors say much of that money was
stolen by an adviser to the fund named Jho Low, aided by two
Goldman bankers and associates in the Malaysian and Emirati
governments.
Goldman had long portrayed the bankers -- Timothy Leissner, who
has pleaded guilty, and Roger Ng, who has maintained his innocence
-- as rogue employees who hid their activities and Mr. Low's
involvement in the deals from their bosses. Mr. Low has denied the
allegations against him.
Write to Liz Hoffman at liz.hoffman@wsj.com and Dave Michaels at
dave.michaels@wsj.com
(END) Dow Jones Newswires
October 22, 2020 13:59 ET (17:59 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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