Goldman Sachs CEO defends bank as 1MDB scandal intensifies
Goldman Sachs’ new boss has a holiday message for employees: Don’t believe everything you’re hearing about this mess in Malaysia.
In a private memo to staff on Friday, Chief Executive David Solomon defended the Wall Street behemoth as it faces mounting criticism, fines and criminal probes over its role in the bribery scandal at a Malaysian development fund.
Solomon was named CEO less than three months ago, but reportedly participated in approving the bank’s involvement with the Malaysia fund, known as 1MDB. On Friday, he claimed Goldman painstakingly vetted the deal before it was approved — even as he tried to blame the scandal on rogue employees, according to the internal memo obtained by The Post.
“There was detailed due diligence conducted by the firm and outside counsel on the bond offerings, including the use of proceeds,” Solomon said in a 1,208-word transcript of a holiday video for Goldman staffers.
“What we did not anticipate was that a group of individuals and foreign officials would orchestrate such a brazen scheme.”
Solomon likewise defended the $600 million in fees that Goldman reaped on the deal — in some cases 190 times the normal rate on transactions — which critics say should have raised red flags.
“We assumed all the market, political and execution risk,” Solomon said. “The P&L we realized reflected those risks.”
Goldman is taking increasing heat over its role in about $6 billion in bond sales for 1MDB that were allegedly pilfered by playboy financier Jho Low to pay for lavish parties, modern art and luxury apartments, and to finance the Martin Scorsese flick “Wolf of Wall Street.”
Low, who has been indicted by the US Justice Department but who is still at large, was allegedly aided by Goldman banker Tim Leissner, who pleaded guilty last month to bribery and embezzlement charges.
The letter came as the scope of the 1MDB scandal continues to widen — and has become an unexpectedly serious threat to the 149-year-old firm and its reputation.
Earlier Friday, Malaysian Finance Minister Lim Guan Eng told the Financial Times that Goldman should pay Malaysia back $7.5 billion — much higher than the $600 million in returned fees it originally demanded.
Last week, the country filed criminal chargesagainst the bank for its role in the scandal.
Singapore has also reportedly expanded its criminal probe into the funneling of 1MDB money to include Goldman.
That’s on top of multiple probes from the US Securities and Exchange Commission, the Justice Department, the Federal Reserve and the New York Department of Financial Services.
Legal experts estimate it could be years before Goldman gets past the legal drama, and it could set the company back billions in penalties and legal fees.
Goldman’s shares tumbled nearly 5 percent Friday, to close at $160.05, their lowest level in more than two years. The bank has lost more than 41 percent of its value since March, when it reached an all-time high of $273.38.