Humbled Goldman Sachs still faces questions on 1MDB | The Daily Star
12:00 AM, February 10, 2019 / LAST MODIFIED: 12:47 AM, February 10, 2019

Humbled Goldman Sachs still faces questions on 1MDB

Goldman Sachs's decision to potentially cut bonuses for top executives over the 1MDB scandal reflects an acknowledgement at shareholder and public outrage over the debacle.

The prestigious investment bank announced last week that it could withhold millions of dollars in bonuses to former Chief Executive Lloyd Blankfein and two other retired executives depending on the outcome of ongoing probes into the Malaysian fund.

The bonuses were first approved in 2011 and the annual payouts depend on the firm's performance over the ensuing eight years. In Blankfein's case, the bonus began at $7 million and nearly doubled, according to US securities documents.

Beyond the bonuses, Goldman also said it could claw back compensation from current chief executive David Solomon and two other current senior executives, president John Waldron and chief financial officer Stephen Scherr.

Solomon was paid $23 million last year, including $15.4 million in stock options.

The announcement on bonuses was intended as a message for shareholders who are upset at how the corruption scandal has tarred the bank's image at a time when it is working to build up its consumer banking business through the online platform Marcus, according to two people familiar with the matter.

The board of directors wants shareholders to know it is not blind to the gravity of the situation, said one of the sources, adding that the message was not meant to be an admission of wrongdoing.

Besides Solomon, who also serves as chairman, Goldman's 13-member board includes ArcelorMittal chief executive Lakshmi Mittal.

Experts say Goldman Sachs could face a fine of perhaps $2 billion under a criminal case related to 1MDB.

In January, Solomon apologized to Malaysia over the scandal and the involvement of former Goldman partner Tim Leissner, who had pleaded guilty to violating US anti-bribery and money laundering laws.

Solomon's statement stood out in tone from that of Blankfein, who said during the height of the financial crisis in 2009 that he was "doing God's work" in helping companies raise capital.

US authorities have accused a Malaysian financial intermediary, Low Taek Jho, along with Leissner and another former Goldman banker, Ng Chong Hwa, of conspiring to launder billions of dollars from 1 Malaysia Development Berhad, a sovereign wealth fund set up for development of the country. Goldman garnered $600 million in fees and revenues from 1MDB bond transactions.

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