Nation & World

Goldman CEO defends bank's culture

Financial institution faces charges involving Malaysian fund scandal

Bloomberg

Goldman Sachs chief executive David Solomon defends the Wall Street bank’s culture amid allegations that it was involved in an international bribery scheme in Malaysia.
Bloomberg Goldman Sachs chief executive David Solomon defends the Wall Street bank’s culture amid allegations that it was involved in an international bribery scheme in Malaysia.

Goldman Sachs CEO David Solomon defended the New York bank last week amid intensifying scrutiny of its work with a Malaysian investment fund that was looted of $2.7 billion.

Malaysia filed criminal charges against the bank earlier this week, and one former senior Goldman executive has pleaded guilty to charges in the United States of bribery and misappropriating money from the fund.

Another former executive is under arrest in Malaysia.

“I cannot stress enough how integrity is a cornerstone of our culture,” Solomon said in an end of year video message to employees.

“I am outraged that anyone from our firm could have participated in such blatant misconduct.”

It is the most forceful comments yet from Solomon, who is overseeing a ballooning international controversy during his first few months as chief executive.

Goldman repeatedly has denied the allegations and said it was lied to by 1MDB officials, but banking analysts say the investigations are the biggest challenge to the bank’s reputation since the global financial crisis.

The controversy centers on 1Malaysia Development Berhad, called 1MDB, a government-controlled fund set up to pursue economic-development projects for Malaysia.

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Goldman arranged $6.5 billion in bonds for the fund in 2012 and 2013, much of which U.S. and Malaysian authorities now say was looted.

The stolen billions were spent on condominiums, paintings by Vincent van Gogh and Claude Monet, diamond jewelry and an $250 million yacht, authorities say.

Some of the money even went to funding the production of the movie “The Wolf of Wall Street.”

“While we understand the anger and skepticism, we do not believe that the criticism directed at us accurately reflects who we were then or who we are now,” Solomon said.

“We believe our culture and our processes around our due diligence and compliance was strong at the time, and is even stronger today.”

Government authorities have also accused Goldman of securing the work with the help of bribes arranged by two former employees and others.

Goldman then received higher than average fees, $600 million, for the work and its employees received bonuses, authorities say.

The fees were justified by the nature of the work, Solomon said in his message to employees.

“In fact, it took us almost a year to sell the bonds from the last offering because the market had turned against us,” he said.

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