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.
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.
Seventeen former and current Goldman Sachs
bankers have been charged in Malaysia over the corruption investigation at its
state development fund 1MDB.
Attorney General Tommy Thomas said custodial sentences and criminal fines
would be sought against those charged.
Goldman Sachs helped raise $6.5 billion through bond offerings for 1MDB.
The bank said it would “vigorously” defend the charges.
Tommy Thomas said in a statement: “Custodial
sentences and criminal fines will be sought against the accused.”
According to the statement, this was because of the “severity of the
scheme to defraud and fraudulent misappropriation of billions in bond proceeds,
the lengthy period over which the offences were planned and executed, the
number of Goldman Sachs subsidiaries, officers and employers involved and the
relative value of the fees and commissions paid to Goldman Sachs for their
multiple roles played in arranging, structuring, underwriting and selling the
three bonds”.
If convicted, those charged could face prison sentences of up to 10 years
and fines of at least one million ringgit ($238,000).
In December 2018, Malaysia filed criminal charges against Goldman Sachs and
two former employees in connection with the corruption and money-laundering
investigation at the fund, which is being investigated in at least six
countries.
Among the other individuals named by Malaysia’s attorney general are Michael
Sherwood, a former co-head of Goldman’s European operations, and Michael Evans,
a former partner who is now president of Chinese e-commerce company Alibaba.
The charges related to what is being seen as one of the world’s biggest
financial scandals.
US and Malaysian prosecutors have previously said that the money raised by
the state fund went to line the pockets of a few powerful individuals and to
buy luxury properties, a private jet, Van Gogh and Monet artworks – and to
finance a Hollywood blockbuster, The Wolf
of Wall Street, starring Leonardo DiCaprio, who has not been accused of any
wrongdoing.
These charges have been brought under the under a section of the Malaysian
Capital Markets and Services Act that holds certain senior executives
responsible for any offences that may have been committed.
Tim Leissner was Goldman’s South East Asia chairman, and left the bank in
2016.
Roger Ng was a managing director at Goldman until his departure in May 2014.
At the time, charges were also filed against local financier Low Taek Jho,
also known as Jho Low who maintains his innocence, and former 1MDB employee
Jasmine Loo Ai Swan.
Tim Leissner has pleaded guilty in the US to conspiring to launder money and
violating anti-bribery laws.
The 1MDB state fund was set up by former PM Najib Razak in 2009. He has been accusing of pocketing $681 million from the sovereign wealth fund and pleaded not guilty in April.
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