The Malaysian subsidiary of Goldman Sachs pleaded guilty to the bribery charge as the bank agreed to a global record $ 2.9 billion settlement with regulators over the 1MDB money laundering scandal.
The settlement on Thursday came as Goldman Sachs said it would repay salaries and bonuses of up to $ 175 million from current and former executives, including David Solomon, the bank’s president, and his predecessor Lloyd Blankfein.
The deal with the regulators is the first criminal settlement in Goldman’s history as a public company. She was sanctioned for ignoring the many red flags on the multi-billion dollar fundraising operations she arranged for the 1Malaysia Development Berhad state fund.
US officials said Goldman had played a “central role” in the looting of WMDB and emphasized that the bank should have detected warning signs that could have prevented at least part of the $ 2.7 billion theft from the fund.
“Bank staff allowed this scheme to go ahead by ignoring or ignoring a number of the obvious red flags,” said Brian Rabbit, Acting Head of Criminal Division at the US Department of Justice.
He added that $ 1.6 billion in bribes had been paid in a scheme to loot 1MDB, the largest amount ever in a US foreign bribery case, and that Goldman’s punishment was likewise a record for such cases.
Goldman Sachs Group, the parent company, entered into a three-year delayed litigation agreement with the Department of Justice and admitted wrongdoing. The Malaysian branch of the bank pleaded guilty to a criminal charge of violating the Foreign Corrupt Practices Act.
In federal court in New York, Goldman Sachs’ general counsel Karen Seymour admitted that the Malaysian subsidiary had paid bribes “in order to obtain and maintain business in favor of Goldman Sachs”.
“Guilty, your honor,” she said at the hearing on behalf of Goldman Sachs Malaysia.
Goldman’s board of directors said that, “in recognition of the company’s corporate failure,” it would return $ 67 million in bonuses awarded or paid to five former senior executives. These executives are not named, but their descriptions match those of Mr. Blankfein, former chief operating officer Gary Cohn, former chief financial officer David Vineyard, and former executives Michael Sherwood and Mike Evans.
About $ 31 million will be cut from the 2020 salaries of Solomon, Chief Operating Officer John Waldron, Chief Financial Officer Stephen Sher, and Richard Gnaudy, Chairman of Goldman Sachs International.
The bank is also seeking $ 76 million in bonuses previously paid to three former bankers, including Tim Lesnar, who pleaded guilty to the charges in the case. Roger Ng, who has pleaded not guilty to the US charges; And Andrea Vella, the former partner whom the Federal Reserve has banned from working in US banks.
“We understand that we have not adequately addressed the red flags and are carefully examining the representations of specific members of the deal team,” said Mr. Solomon.
The settlement includes $ 2.3 billion in fines and a forfeiture of $ 600 million in fees that Goldman obtained from the deal.
It will be divided among authorities including the US Department of Justice, the Securities and Exchange Commission, and the Federal Reserve; New York Department of Financial Services; The Financial Conduct Authority and Prudential Regulatory Authority of the United Kingdom; And the organizers in Singapore and Hong Kong.
Earlier this year, Goldman agreed to A. Settlement of up to $ 3.9 billion With the Malaysian authorities. $ 600 million forfeited will be credited against the Malaysian settlement.
The amounts announced on Thursday are broadly in line with the amount Goldman Sachs has set aside for potential sanctions and represents the final regulatory actions in the case. Goldman helped 1MDB raise $ 6.5 billion in bonds from 2012 to 2013, much of which was eventually plundered.
Shares in Goldman were flat in early New York trading.
Recent settlements revealed new details about Goldman’s role in the scandal, which earned the bank an unusually high fee of $ 600 million to issue 1MDB bonds.
The bank also benefited from investing $ 250 million in bonds in 2013 and selling positions the following year, although the bonds were to be held until maturity.
The New York Financial Services Department said the bonds were sold on the “recommendation” of Goldman’s team that worked with Lesnar.
DFS also claimed that a senior official in the Goldman operation in London was not alarmed upon hearing that someone linked to 1MDB deals was “trying to get something in his pocket”.
“What’s annoying about that? Nothing new, right?” Said the official, according to the DFS settlement.
Earlier on Thursday, the Hong Kong Securities and Futures Commission blamed Goldman Sachs Asia for “serious gaps and deficiencies” in compliance controls.
The panel added that Lesnar, who had pleaded guilty to US money laundering charges, was granted “freedom of action” and was “not adequately contested” by Goldman.
The money laundering scandal involves using money from 1MDB to fund a generous spending spree, including expensive artwork and funding for an Academy Award-nominated film. The Wolf of Wall Street.
Jho Low, the Malaysian financier alleged to have masterminded the blueprint, remains at large. He has denied wrongdoing.
The scandal has already resulted in the former Malaysian prime minister being sentenced to 12 years in prison Naguib Razzaq, Who pleads not guilty on all charges and is appealing against the ruling.
The 1MDB saga held up significantly during Solomon’s first two years as CEO of Goldman, but the bank’s share price offered little reaction when the general conditions for large-scale settlements were Became public Earlier this week.
“This has already been priced,” said Sumit Agarwal, a professor of finance at the National University of Singapore Business School. “The share price really reflects this kind of action.”