KUALA LUMPUR, Feb 2 — US investment bank Goldman Sachs said today it was withholding bonuses and could consider taking back part of the salaries of top senior executives pending investigations into its role in the 1MDB fiasco.
Malaysia’s 1MDB scandal has already taken down former prime minister Datuk Seri Najib Razak and caused the downfall of the Barisan Nasional government, and Goldman Sachs is already struggling to contain the fallout from its role in the looting of billions of ringgit in public funds.
According to a Wall Street Journal (WSJ) report which cited a securities filing, the bank will not pay out for now bonuses to its former chief executive Lloyd Blankfein and two other top executives that were earned in prior years.
The board also said it reserved the right to take back 2018 pay from top executives serving as of year-end, which would include new Chief Executive David Solomon and his team, WSJ reported.
According to the financial daily, of the US$6.5 billion Goldman raised for 1MDB, prosecutors allege US$2.7 billion was stolen by a Malaysian financier and two former Goldman bankers.
The storied investment bank is already facing a huge hit to its reputation and potentially large fines.
The newspaper quoted people familiar with the matter as saying the bank also has been laying out its case to regulators to avoid criminal charges.
Goldman Sachs’ filing showed that Blankfein, who retired as CEO on October 1, was paid US$20.5 million in 2018, down from the US$24 million he earned the year before.
His successor, David Solomon, earned US$23 million last year for three months’ work as CEO and nine months as chief operating officer, according to the WSJ.
The filing said Goldman is temporarily withholding a cash bonus that Blankfein would have been owed under a 2011 award, and it has roughly doubled from its original US$7 million value, according to a WSJ review of filings.
Goldman is also withholding similar bonuses owed to two unnamed former executives, the newspaper reported.
Putrajaya announced in December it was seeking up to US$7.5 billion (RM31.25 billion) as the compensation for the scandal from Goldman.
Finance Minister Lim Guan Eng told Financial Times (FT) last month that the government is looking for reparation beyond the sum of its losses in the “excessive” US$600 million fees paid to Goldman Sachs and three bonds arranged by the bank.
Lim’s breakdown of the US$7.5 billion covered US$6.5 billion losses from the sum of two 1MDB bonds in 2012 and another in 2013 that “were not used for national development but was siphoned out.”
The remaining US$1 billion is to cover the US$600 million in fees to Goldman and the three 10-year bonds that carried coupons ranging from 4.4 per cent to 5.99 per cent, which FT reported to be “higher than the market rate.”
FT reported Goldman Sachs telling its investors that it has set aside US$1.8 billion to cover the potential losses related to legal proceedings and past investments involving 1MDB.
In December, Putrajaya also filed criminal charges under local securities laws against Goldman Sachs subsidiaries over the three bonds worth US$6.5 billion (RM27.2 billion) that the US investment bank had handled for 1MDB.
Attorney General (AG) Tommy Thomas also announced that charges were filed against former Goldman Sachs bankers Tim Leissner and Roger Ng Chong Hwa, as well as fugitive businessman Jho Low and former 1MDB general counsel Jasmine Loo Ai Swan.
It has also emerged recently that China had, in 2016, offered to bail out 1MDB in return for lucrative stakes in railway and pipeline project, according to the WSJ.
in its review of the minutes from a series of previously undisclosed meetings, the newspaper had reported that senior Chinese leaders had offered in 2016 to help bail out 1MDB in return for lucrative stakes in railway and pipeline projects under its ‘One Belt, One Road’ programme of building infrastructure abroad.
And, within months, Najib signed US$34 billion (RM139.8 billion) in rail, pipeline and other deals with Chinese state companies, to be funded by Chinese banks and built by Chinese workers.
