By Elishya Perera
SINGAPORE (CWBN)_ Goldman Sachs entered a deferred prosecution agreement (DPA) yesterday (Oct 23), with the US Department of Justice over the 1MDB scandal. The bank agreed to pay more than $5 billion in new penalties, equivalent to about two-thirds of a year’s earnings, to the regulators in the US, UK, Hong Kong and Singapore.
Goldman Sachs raised US$6.5 billion in three bond sales between 2012 and 2013 in three bond offerings, for the Malaysian government’s sovereign wealth fund. Subsequently, some $2.7 billion of the money raised was stolen by people connected to the country’s former prime minister and diverted for bribes, a luxury yacht, Fine Art and even funding for the Hollywood movie “The Wolf of Wall Street.”
Acting US assistant attorney general Brian C Rabbitt said that the investment fund was looted by corrupt officials and their co-conspirators turning it “into a piggy bank of corrupt public officials and their cronies”.
Goldman’s parent company avoided criminal charges and agreed to cooperate with ongoing US investigations and to submit compliance reports for three-and-a-half years, as part of the deal. The agreement is considered to be a win for the bank, since a criminal conviction would have caused it to lose institutional clients that are restricted from working with financial firms with criminal records.
After settling the uncertainty, the bank’s shares rose 1.2% on Thursday.
According to a statement issued by the bank, it will cut the pay of Chief Executive Officer David Solomon and other current leaders and claw back compensation from his predecessor Lloyd Blankfein and several other former executives. “This has been a long process and we are pleased to be putting these matters behind us. But, we are not putting the lessons learned from this experience behind us,” David Solomon said.
