Goldman Sachs is delaying bonus payouts to three retired executives, including longtime chairman Lloyd Blankfein, until it gathers more details from a bribery case brought against two high-ranking bankers under his watch, according to regulatory filings and a person familiar with the matter.
The New York-based company’s board also delayed a decision on the size of the bonuses, part of an incentive plan set up in 2011 with potential awards of $7 million each, according to a Friday filing with the Securities and Exchange Commission. Goldman warned last fall that it may face significant fines and other sanctions in the case, which centers on claims that money from a Malaysian client’s bond sale was used for bribes to secure overseas business.
The Wall Street firm said in a filing last fall that it “is cooperating with the Department of Justice and all other government and regulatory investigations related to 1 Malaysia Development Berhad,” a sovereign wealth fund known as 1MDB, for which Goldman underwrote about $6.5 billion in debt offerings in 2012 and 2013.
The 64-year-old Blankfein, who stepped down as CEO at the end of September but remained chairman through the end of 2018, still received $20.5 million in total compensation for the year, the firm said its filing. David Solomon, who succeeded him in both roles, was paid $23 million.
“We are cooperating with the Department of Justice and other regulators and are focused on a timely but deliberative process,” Solomon told investors on an earnings call in mid-January. “We have established important facts in our own review of this matter over the last three years, and we, of course, would like to provide more information to you but for now, this is still an open investigation.”
Goldman previously made national headlines and drew congressional scrutiny nine years ago over the sale of securities blamed for the 2008 financial crisis. It paid $550 million to settle SEC claims that it misled investors in one of the instruments.
In the Malaysian case, the Justice Department obtained an indictment in federal court in Brooklyn in October accusing then 51-year-old former Goldman managing director Ng Chong Hwa, also known as Roger Ng, and then 36-year-old Malaysian financier Low Taek Jho, known as Jho Low, with conspiring to launder billions of dollars embezzled from 1MDB as well as to pay bribes in Malaysia and Abu Dhabi.
Tim Leissner, Goldman’s former chairman for Southeast Asia, pleaded guilty to similar charges and was ordered to forfeit $43.7 million.
“There are always important lessons to be learned from difficult situations,” Solomon said. “We look back, and continue to look back, to see if we could have done anything better.”
Prosecutors say the two Goldman employees leveraged Low’s close relationships with high-ranking government officials in both Malaysia and Abu Dhabi, one of whom was authorized to approve 1MDB’s business decisions, to land deals for Goldman from 2009-2014. Those included roles on three bond transactions known inside the bank as Project Magnolia, Project Maximus, and Project Catalyze, prosecutors said.
The work netted about $600 million in fees for Goldman as well as large bonuses for Ng and Leissner, prosecutors claimed. Once the bond offerings were completed, about $2.3 billion of the proceeds were redirected to Low, Ng, Leissner and others. Some went to the relative of a Malaysian official, who invested it in production of the 2013 film “Wolf of Wall Street.”
The movie is based on the memoir of Jordan Belfort, the founder of former Long Island, N.Y., brokerage Stratton-Oakmont. Belfort was released from prison in 2006 after serving three years for using his business to defraud small investors.
While the Goldman deals were reviewed by the firm’s compliance department, its culture, particularly in Southeast Asia, “was highly focused on consummating deals, at times prioritizing this goal ahead of the proper operation of its compliance functions,” the indictment of Ng and Low claimed.
The firm has acknowledged the indictment’s criticism of its compliance procedures, but noted that the charging documents indicate Leissner and Ng circumvented them by “repeatedly lying to control personnel and internal committees that reviewed these offerings.”
