By Liz Hoffman and Dave Michaels 

Goldman Sachs Group Inc. is seizing or withholding $174 million from current and former executives after agreeing to a costly settlement to resolve multiple government investigations into its role in a Malaysian bribery scandal.

The Wall Street firm will cut this year's pay to Chief Executive David Solomon and two top lieutenants, and claw back past bonuses paid to ex-CEO Lloyd Blankfein and others after it admitted on Thursday to compliance lapses in its dealings with a corrupt Malaysian investment fund.

"We must always remain open to improvement, learn from our mistakes and accept the consequences when we fail," Mr. Solomon said in a statement.

The bank is reducing Mr. Solomon's pay and that of Goldman President John Waldron, finance chief Stephen Scherr and Richard Gnodde, head of Goldman's international division, by a combined $31 million.

It is also recouping bonuses paid to Mr. Blankfein, former CFO David Viniar and a pair of executives, Michael Sherwood and Michael Evans, who oversaw some of the 1MDB dealings and have since retired. It is also in discussions to recoup money from Gary Cohn, a former executive whose future bonuses were paid out when he joined the Trump administration in 2017, a person familiar with the matter said.

Goldman on Thursday agreed to pay more than $2.9 billion to the U.S. Justice Department and other global regulators to settle allegations that it enabled the embezzlement of billions of dollars from the fund, known as 1MDB. That is on top of the $2.5 billion it agreed in July to pay the government of Malaysia. The penalties amount to about eight months of profits for the Wall Street firm.

Goldman executives "allowed the scheme to proceed by overlooking or ignoring a number of clear red flags," said acting Assistant Attorney General Brian Rabbitt.

"If you look at the terms of this resolution on paper, there can be no question it is a serious and significant resolution that imposes serious and significant consequences," Mr. Rabbitt said Thursday at a news conference.

In Brooklyn federal court on Thursday, a Goldman subsidiary in Malaysia pleaded guilty to conspiring to violate U.S. antibribery laws. A deal cut with authorities allows the parent company itself to avoid being prosecuted for the same charge, which could have been crippling to its business.

The clawbacks and pay cuts are a concession to shareholders who will shoulder the financial cost of the scandal and employees whose own bonuses this year are likely to shrink because of it.

They also are an admission of sorts that the crux of the government's case against Goldman, that it failed to properly oversee its senior bankers and fostered a win-at-all-cost culture, has some merit.

In 2012 and 2013, Goldman helped raise $6.5 billion for 1MDB by selling bonds to investors. Prosecutors say much of that money was stolen by an adviser to the fund named Jho Low, aided by two Goldman bankers and associates in the Malaysian and Emirati governments.

Goldman had long portrayed the bankers -- Timothy Leissner, who has pleaded guilty, and Roger Ng, who has maintained his innocence -- as rogue employees who hid their activities and Mr. Low's involvement in the deals from their bosses. Mr. Low has denied the allegations against him.

Write to Liz Hoffman at liz.hoffman@wsj.com and Dave Michaels at dave.michaels@wsj.com

 

(END) Dow Jones Newswires

October 22, 2020 13:59 ET (17:59 GMT)

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