Goldman Sachs bankers have pay slashed by $174m over 1MDB scandal

Lucy Burton
·2-min read
David Solomon
David Solomon

Goldman Sachs is slashing the pay of top staff including boss David Solomon and European chief Richard Gnodde by $31m (£24m) after it was fined by regulators around the world following a massive fraud at Malaysian fund 1MDB.

The bank is to pay almost $3bn to US authorities over its role in the scandal, in which billions of dollars of public money were stolen by the Kuala Lumpur elite and spent on a superyacht, a Picasso painting, celebrity parties and luxury fashion.

Goldman also admitted that its Malaysian subsidiary bribed officials with more than $1bn so it could win a lucrative contract to help 1MDB issue more than $6bn in bonds.

The Department of Justice said that over five years Goldman "participated in a sweeping international corruption scheme, conspiring to avail itself of more than $1.6bn in bribes to multiple high-level government officials across several countries so that the company could reap hundreds of millions of dollars in fees, all to the detriment of the people of Malaysia and the reputation of American financial institutions operating abroad". 

The bank has now cut the pay of London-based Mr Gnodde and Mr Solomon - who moonlights as a DJ and who last month sold his holiday home in the US ski resort of Aspen for $26.5m - as well as finance chief Stephen Scherr and chief operating officer John Waldron. 

Goldman added that five former top bankers including ex-chief executive Lloyd Blankfein will forfeit a chunk of their performance-related share awards worth $67m. 

The bank is also seeking $76m from three former employees implicated in the criminal scheme - Tim Leissner, who has plead guilty to criminal charges; Ng Chong Hwa, who has been charged with the same crimes; and Andrea Vella, who has been prohibited by the Federal Reserve from participating in the banking industry. 

Mr Solomon said: "We have to acknowledge where our firm fell short.

"While many good people worked on these transactions and tried to do the right thing, we recognise that we did not adequately address red flags and scrutinize the representations of certain members of the deal team." 

1MDB was set up to fund infrastructure projects in Malaysia and turn Kuala Lumpur into an Asian financial hub, but instead huge sums were looted to buy luxury items. Money was even funnelled into Hollywood film The Wolf of Wall Street, which stars Leonardo DiCaprio as a corrupt trader.

Goldman Sachs International was also fined £96.6m by UK regulators for risk management failures connected to the 1MDB scandal, while its Asian unit was fined $350m by Hong Kong’s financial regulator. It was fined $122m in Singapore.

The Wall Street bank had already agreed to pay $3.9bn to Malaysian authorities in July for its role in the scandal at Malaysia’s 1MDB sovereign wealth fund in 2013. Malaysia dropped criminal charges against the bank and some of its top executives last month.