Goldman Sachs announces $174M in clawbacks, forfeitures and compensation cuts due to 1MDB scandal
Further to a series of announcements by authorities on Thursday regarding penalties imposed on Goldman Sachs in connection with the 1Malaysia Development Berhad (1MDB) scandal, the firm has issued a set of statements.
Goldman Sachs’ Board reiterates that it has reserved the right to adjust certain compensation to past and current members of senior management when more information about 1MDB matters became available.
On Thursday, Goldman Sachs announced settlements that resolve the government and regulatory investigations of the 1MDB matter – the total amount exceeds $2.9 billion. As FX News Group has reported more than $1 billion will be paid to the United States Securities and Exchange Commission (SEC). The UK authorities have also imposed a penalty on the bank in connection with 1MDB. Hong Kong’s SFC fined Goldman Sachs Asia record $350 million for 1MDB bond offering failures.
Goldman’s Board said on Thursday that it has determined that it is appropriate in light of the findings of the government and regulatory investigations and the magnitude of the total 1MDB settlement that compensation for certain past and current members of senior management be impacted.
For those former employees implicated in the criminal scheme, Goldman has undertaken clawback actions to the full extent of its contractual entitlements with respect to three individuals:
- 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.
The amounts the firm is seeking to forfeit from these individuals total approximately $76 million, of which the dirm is currently holding approximately $24 million.
Separately, five of the Firm’s former senior executive officers, the former Chief Executive Officer, the former Chief Operating Officer, a former Chief Financial Officer, the former Vice Chairman who was a CEO of Goldman Sachs International and the former Vice Chairman who was the Global Head of Growth Markets, will, to the extent not already paid, forfeit all or the majority of their outstanding Long-Term Performance Incentive Plan Awards that were granted in 2011 and which have a performance period that includes 2012 and 2013 when the 1MDB bond underwritings took place, and forfeit a portion of other previously awarded compensation, if applicable.
Goldman is talking to another of these retired senior executives, who also already received the 2011 award, about returning the majority of it as well. The amounts for these five individuals represent a portion of the pre-tax value of these awards granted or paid, and total approximately $67 million.
In addition, the current executive leadership team, the Chief Executive Officer, the Chief Operating Officer and the Chief Financial Officer, as well as the current CEO of Goldman Sachs International, will have their overall compensation reduced by $31 million for 2020.
These clawbacks, forfeitures and compensation reductions will total approximately $174 million in the aggregate.
A special committee of the Board of Directors, comprised of the Lead Director and the Chairs of each of the Audit, Risk, Public Responsibilities and Compensation Committees of the Board, will oversee and review the remediation efforts arising out of the lessons of 1MDB.