Dive Brief:
- The Securities and Exchange Commission (SEC) last week announced charges against Goldman Sachs for violating the Foreign Corrupt Practices Act (FCPA) in connection with the 1Malaysia Development Berhad (1MDB) bribe scheme.
- As part of resolutions coordinated with the Department of Justice, the company agreed to pay more than $2.9 billion, which includes more than $1 billion to settle the SEC's charges. The penalty is the largest ever levied against a U.S. company for violating FCPA.
- Separately, the bank said it will retrieve $174 million in compensation from current and former executives, including a combined $31 million in pay that CEO David Solomon, President and COO John Waldron, CFO Steven Scherr, and Goldman's international business head, Richard Gnodde, will forfeit this year.
Dive Insight:
Beginning in 2012, former senior employees of Goldman Sachs used a third-party intermediary to bribe high-ranking government officials in Malaysia and the Emirate of Abu Dhabi, the SEC says. These bribes let the company obtain business from 1MDB, a Malaysian government-owned investment fund, including underwriting approximately $6.5 billion in bond offerings.
"Corruption risks can be posed by those at all levels of a company, including in the senior ranks. This case demonstrates how important it is for companies to have controls that are tailored to the risks presented by persons employed at all levels," said Charles Cain, chief of the SEC Enforcement Division's FCPA unit.
The SEC says Goldman Sachs violated the anti-bribery, internal accounting controls, and books and records provisions of federal securities laws. The company agreed to a cease-and-desist order and to pay $606.3 million in disgorgement and a $400 million civil penalty, with the amount of disgorgement satisfied by amounts it paid to the government of Malaysia and 1MDB in a related settlement.
In December 2019, the SEC charged former Goldman Sachs Group participating managing director Tim Leissner for his role in the 1MDB bribery scheme.
Compensation clawbacks
Solomon and other bank officers are not the only ones forfeiting compensation; Goldman is retrieving $67 million in bonuses given to former CEO Lloyd Blankfein, former CFO David Viniar, former COO Gary Cohn and former executives Michael Sherwood and Mike Evans, according to reports.
Cohn's future bonuses were paid out when he joined the Trump administration in 2017, an unnamed source told The Wall Street Journal. Cohn left his role as White House economic adviser in 2018.
"It goes with the responsibility of leadership to accept some consequences for things that go wrong on your watch," Blankfein told the Journal in a statement.
