[ad_1]
The Goldman Sachs subsidiary in Malaysia pleaded guilty to a bribery charge when the bank settled a record $ 2.9 billion global settlement with regulators over the 1MDB money laundering scandal.
Thursday’s deal came as Goldman said it would recover up to $ 175 million in salaries and bonuses from current and former executives, including David Solomon, the bank’s boss and his predecessor Lloyd Blankfein.
The agreement with regulators is the first criminal agreement in Goldman’s history as a public company. He was punished for ignoring multiple red flags over the multi-million dollar fundraisers he organized for the state fund 1Malaysia Development Berhad.
US officials said Goldman had played a “central role” in looting 1MDB and argued that the bank should have detected red flags that could have prevented at least part of the $ 2.7 billion theft from the fund.
“Bank staff allowed this plan to continue by ignoring or ignoring a number of clear red flags,” said Brian Rabbitt, acting director of the criminal division of the United States Department of Justice.
He added that $ 1.6 billion in bribes had been paid in the plan to loot 1MDB, the largest amount ever in a foreign bribery case in the United States, and that Goldman’s fine was also a record for those cases.
Goldman Sachs Group, the parent company, signed a three-year deferred prosecution agreement with the justice department and admitted wrongdoing. The bank’s Malaysian subsidiary pleaded guilty to a criminal charge for violating the Foreign Corrupt Practices Act.
In federal court in New York, Karen Seymour, Goldman’s general counsel, admitted that the Malaysian subsidiary had paid bribes “to obtain and maintain business for Goldman Sachs.”
“Guilty, Your Honor,” he said at the hearing on behalf of Goldman Sachs Malaysia.
Goldman’s board said that “in recognition of the company’s institutional failures” it would recover $ 67 million in bonuses awarded or paid to five former top executives. Those executives were not named, but their descriptions match those of Blankfein, former COO Gary Cohn, former CFO David Viniar and former executives Michael Sherwood and Mike Evans.
About $ 31 million will be cut from the 2020 salary packages of Solomon, COO John Waldron, CFO Stephen Scherr and Goldman Sachs International chief Richard Gnodde.
The bank is also seeking repayment of $ 76 million in bonds previously paid to three former bankers, including Tim Leissner, who pleaded guilty to the charges in the case; Roger Ng, who has pleaded not guilty to the US charges; and Andrea Vella, a former partner who has been banned by the Federal Reserve from working in US banking.
“We recognize that we do not adequately address red flags and we do not examine representations of certain members of the negotiating team,” Solomon said.
The settlement includes $ 2.3 billion in penalties and the loss of a $ 600 million fee earned by Goldman on the settlement.
It will be divided among authorities, including the United States Department of Justice, the Securities and Exchange Commission and the Federal Reserve; New York Department of Financial Services; the Financial Conduct Authority and the UK Prudential Regulation Authority; and regulators in Singapore and Hong Kong.
Earlier this year, Goldman agreed to a settlement of up to $ 3.9 billion with the Malaysian authorities. The $ 600 million in forfeiture will be credited against the Malaysian settlement.
The amounts announced Thursday are broadly in line with the amount Goldman has set aside for possible penalties and represent final regulatory actions in the case. Goldman helped 1MDB raise $ 6.5 billion in bonds from 2012 to 2013, much of which was ultimately looted.
Goldman’s shares were stable in early trading in New York.
The latest deals revealed new details about Goldman’s role in the scandal, which earned the bank unusually high fees of $ 600 million for issuing 1MDB bonds.
The bank also benefited by investing $ 250 million in bonds in 2013 and selling the positions the following year, despite the fact that it was intended to hold the bonds to maturity.
The bonds were sold on the “recommendation” of a Goldman team that worked with Leissner, the New York Department of Financial Services said.
The DFS also claimed that a senior official in Goldman’s London operation was puzzled to hear that a person connected to the 1MDB deals was “trying to get something in his pocket.”
“What’s so disturbing about that? It’s nothing new, right? the official said, according to the DFS agreement.
Earlier on Thursday, the Hong Kong Securities and Futures Commission reprimanded Goldman Sachs Asia for “serious lapses and deficiencies” in its compliance checks.
Leissner, who has pleaded guilty to the money laundering charges in the United States, was given “free rein” and Goldman did not “adequately contest it,” the SFC added.
The money laundering scandal involves the use of 1MDB money to fund a generous wave of spending, including expensive art and funding for the Oscar-nominated film. The wolf of Wall Street.
Jho Low, the Malaysian financier who allegedly planned the elaborate scheme, is still on the run. He has denied wrongdoing.
The scandal has already resulted in a 12-year jail sentence for Malaysia’s former Prime Minister Najib Razak, who has pleaded not guilty to all charges and is appealing the verdict.
The 1MDB saga has focused heavily on Solomon’s first two years as Goldman’s chief executive, but the bank’s share price gave little reaction when the general terms of its wide-ranging deals were released earlier this week.
“This is already priced. The stock price already reflects this type of action,” said Sumit Agarwal, a finance professor at the National University of Singapore business school.
