A group of nine current and former Goldman Sachs employees will pay a combined $174 million in compensation for their involvement in a bribery scandal in Malaysia that led to the resignation of the country’s prime minister. Among this group is current CEO David Solomon and former CEO Lloyd Blankfein.
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U.S. officials also announced the bank would have to pay a fine of about $2.8 billion in addition to the $2.5 billion cash payout it owes to the Malaysian government. By accepting the penalties and reaching settlements, Sachs avoids criminal charges for its involvement. The actions of Goldman Sachs have been characterized as “central” to the massive corruption operation referred to as 1Malyasia Development Bhd or 1MDB.
1MDB is a fraud and corruption ring spanning three continents. Millions of dollars were raised for public development projects in Malaysia but ultimately ended up in the pockets of government officials, including the country’s prime minister Najib Razak. Authorities in the US, Asia and Europe have worked for years to track down cash and assets paid for by the stolen Malaysian funds including property, fine jewelry and classical art pieces.
Probes of Goldman Sachs show the company raised $6.5 billion for the fund between 2012 and 2013, earning the firm north of $600 million. The bank initially placed the blame on rogue employees and stated they had no clue the funds raised would be diverted from the planned development projects. However after a more in-depth investigation, the bank admitted it’s Malaysian subsidiary “knowingly and willingly” paid bribes to foreign officials and ignored warning signs of misconduct that should have been reported.
“We have to acknowledge where our firm fell short,” chief executive David Solomon said. “While many good people worked on these transactions and tried to do the right thing, we recognize that we did not adequately address red flags and scrutinize the representations of certain members of the deal team… as effectively as we should have.”
Even with record fines for their involvement, the full impact of the 1MDB bribery scandal is yet to be known for Goldman Sachs. Noting the corruption ring ties the company to governments across the globe, including the UK and Asia, these are likely not the last payouts the bank will face as others are sure to seek their own restitution.
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