Goldman Sachs CEO: I feel horrible
US investment bank’s top exec ashamed duo broke law in 1MDB case
SINGAPORE: Goldman Sachs chief executive officer David Solomon felt “horrible” that two former employees “blatantly broke the law” in their dealings with Malaysian state fund 1Malaysia Development Bhd (1MDB).
US prosecutors filed criminal charges against the two former Goldman bankers and a Malaysian financier linked to the alleged theft of billions of dollars from the fund.
An investigation into where 1MDB’s money went became the largest carried out by the Department of Justice under its anti-kleptocracy programme, and the scandal was a major reason why Malaysian voters rejected Datuk Seri Najib Tun Razak, their prime minister for nearly a decade, in an election earlier this year.
“It is obviously very distressing to see two former Goldman Sachs employees went so blatantly around our policies and so blatantly broke the law,” Solomon said in an interview with Bloomberg TV here yesterday.
“I feel horrible about the fact that people who worked at Goldman Sachs, and it doesn’t matter whether it’s a partner or it’s an entry level employee, would go around our policies and break the law,” Solomon said.
US prosecutors announced last week that Tim Leissner, former partner for Goldman Sachs in Asia, had pleaded guilty to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act, and agreed to forfeit US$43.7mil (RM183.5mil).
Roger Ng, the other charged former Goldman banker, was arrested in Malaysia and is expected to be extradited.
Goldman has also placed its former co-head of Asia investment banking, Andrea Vella, on leave over his role in the firm’s involvement with the case, pending a review of allegations, according to a person familiar with the decision.
The Wall Street bank said in a securities filing last Friday that it may also face penalties from dealings with 1MDB.
Asked if he could provide assurances that neither he, former CEO Lloyd Blankfein or any of the senior management team suspected illegality or compliance breaches in dealings with 1MDB, Solomon said: “We take compliance and control in our firm extremely seriously, we always have ... We are going to continue to cooperate with the authorities and there’s a process in place and that process will proceed.”
According to prosecutors, the investment bank generated about US$600mil (RM2.5bil) in fees for its work with 1MDB, which included three bond offerings in 2012 and 2013 that raised US$6.5bil (RM27.3bil).
Leissner, Ng and others received large bonuses in connection with that revenue. Malaysia’s Finance Minister Lim Guan Eng told Reuters in June that the government would be looking at the possibility of seeking claims from Goldman Sachs.
Prime Minister Tun Dr Mahathir Mohamad said Malaysia would look into why Goldman Sachs was paid around US$600mil in fees, an amount that critics say exceeds normal levels.
Goldman Sachs has maintained that the outsized fees relate to the additional risks it took on – it bought the unrated bonds while it sought investors and, in the case of the 2013 deal which raised US$2.7bil (RM11.3bil), 1MDB wanted the funds in a hurry for a planned investment.
The new Malaysian government has barred Najib and his wife Datin Seri Rosmah Mansor from leaving the country, and the former premier faces multiple charges of corruption, money laundering and abuse of power, though he has consistently denied any wrongdoing related to 1MDB.
In another interview with Bloomberg on Tuesday, Malaysia’s prime minister-in-waiting Datuk Seri Anwar Ibrahim said it would be “inexcusable” if Goldman Sachs was complicit in the scandal.