The board of directors at Goldman Sachs is clawing back executive pay from former and current employees in relation to the 1MDB scandal.
The board announced Thursday that it aims to recover $174 million in full, including clawbacks, forfeitures, and compensation reductions. The announcement came after the Securities and Exchange Commission charged the bank with violating the Foreign Corrupt Practices Act.
In connection with the charges and “coordinated resolutions,” Goldman has agreed to pay more than $2.9 billion, the SEC said on Thursday.
“While it is abundantly clear that certain former employees broke the law, lied to our colleagues, and circumvented firm controls, this fact does not relieve me or anyone else at the firm of our responsibility,” Solomon said in a letter to Goldman employees published on the firm’s site. Solomon called the board’s decision “entirely appropriate.”
Solomon, chief operating officer John Waldron, chief financial officer Stephen Scherr, and CEO of Goldman Sachs International Richard Gnodde will have their overall compensation for the year reduced by $31 million, according to the board’s statement.
In addition, five former senior executives — including the previous CEO Lloyd Blankfein, a former COO, an ex-CFO, and two former vice chairmen — will forfeit all or most of their long-term incentive plan awards, for a total of approximately $67 million. According to the board, one of these former executives has agreed to return most of the money.
The board clarified that none of the past or current members of the executive team were “involved in or aware of” the scheme, but that the magnitude of the settlement required them to act.
The board is also seeking to recover $76 million from Tim Leissner, Ng Chong Hwa (also known as Roger Ng), and Andrea Vella, former employees who were implicated in the criminal scheme. The board said it is currently holding $24 million of that total.
“The board views the 1MDB matter as an institutional failure, inconsistent with the high expectations it has for the firm,” the group said in statement.
According to the SEC’s order, Goldman violated anti-bribery, books and records, and internal accounting controls rules that are part of the Foreign Corrupt Practices Act. The company agreed to a cease-and-desist order, paying $606.3 million in disgorgement and a $400 million civil penalty to the SEC.
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1Malaysia Development Berhad, known as 1MDB, is the Malaysian sovereign wealth fund that was formed in 2009 after the government took over a municipal group called Terengganu Investment Authority (TIA).
According to the SEC’s order, between 1MDB’s founding and 2014, billions raised via Goldman-executed bond offerings were diverted to government officials as bribes. The order said that senior employees at the firm authorized those bribes, which then helped the firm attract lucrative deals.
Leissner, who worked at Goldman as a managing director, received more than $43 million in “illicit payments” for his role in facilitating the alleged scheme, according to December charges filed against him. Leissner has since pleaded guilty and is permanently barred from the securities industry, the board statement said.
The board added that Hwa has been charged with the same crimes for his role in the scheme, while Vella has been banned from the industry.
“Corruption risks can be posed by those at all levels of a company, including in the senior ranks,” Charles Cain, chief of the SEC Enforcement Division’s FCPA unit, said in a statement. “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.”
