Goldman Sachs CEO David M. Solomon will get a $10 million pay cut for the bank’s involvement in the 1MDB corruption scandal.

1MDB was an investment fund set up by the Malaysian government that lost billions due to fraudulent activity.

The global fraud and corruption scheme led to a 12-year jail term for Malaysia’s ex-PM Najib Razak which he is appealing.

Goldman Sachs called its involvement in the scandal an “institutional failure”.

It helped raise $6.5 billion for 1MDB by selling bonds to investors, the proceeds of which were largely stolen.

Prosecutors alleged that senior Goldman Sachs executives ignored warning signs of fraud in their dealings with 1MDB and Jho Low, an adviser to the fund. Two Goldman bankers have been criminally charged in the scandal.

David Solomon’s pay would have been $10 million higher but for the actions its board of directors took in response to the 1MDB saga, Goldman Sachs said on January 26.

While disclosing Solomon’s salary had dropped to $17.5 million for 2020, the bank stressed that its CEO was unaware of the corruption.

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David Solomon was not “involved in or aware of the firm’s participation in any illicit activity at the time… the board views the 1MDB matter as an institutional failure, inconsistent with the high expectations it has for the firm”.

His package consists of $2 million in cash base pay, a $4.65 million cash bonus, and $10.85 million in stock-based compensation.

In October, Goldman Sachs agreed to pay approximately $3 billion to government officials in four countries to end an investigation into work it performed for 1MDB. The bank collected $600 million for arranging the bond sales in 2012 and 2013.

It has spent years being investigated by regulators across the globe including those in the US, UK, Singapore, Malaysia and Hong Kong. In total, Goldman’s dealings with 1MDB cost the bank more than $5 billion.

Despite the costs and fines from the fallout from the 1MDB scandal, 2020 was a bumper year for Goldman’s businesses with annual revenue of $44.6 billion, its highest since 2009.

Goldman Sachs got a huge boost from the recovery in global stock markets from the depths of the coronavirus recession.