The downfall of Goldman Sachs from a Malaysian investment fund scandal could mean lower wages for several senior Wall Street bank employees, including CEO David Solomon and his predecessor, Lloyd Blankfein.
The bank's board of directors, by the end of the year to Salomon and Mr. Blankfein, adopted a clause giving it the opportunity to complain or reduce some of that pay package, depending on the outcome of a federal investigation of the 1Malaysia Development Berhad- fund, known as 1MDB.
The 1MDB survey represents one of the most significant scandals for meeting Goldman this year, which has taken a reputation in Malaysia and elsewhere in Asia. As the US authorities continue to build a case, prosecutors in Malaysia have already accused Goldman, who claimed money for the $ 6 billion fund, and enriched themselves at the expense of the Malaysian population.
The bank is looking at paying billions of dollars in fines and recovery. Towards the end of last year, Goldman began to spend money on the case, which is being pursued by federal prosecutors and bank regulators, as well as Malaysia authorities.
Goldman is eager to avoid a more punishable resolution, as a deferred case. In a postponed trial, the government ultimately declines to pursue charges if a company meets certain requirements, such as overhauling its compliance and paying hefty fines.
A former top Goldman banker has already pleaded guilty to federal charges in connection with the investigation, and a junior bank has also been charged. Federal prosecutors have said at least $ 2.7 billion was looted from the fund by people near Malaysia's former prime minister, Najib Razak. A financier, Jho Low, who was charged with fraud, is a fugitive believed to be in China.
Goldman Sachs was the primary banker for 1MDB, which helped sell nearly $ 6 billion in bonds. The bank has said it regretted the fraud done by its former partner, Tim Leissner, but said it followed appropriate procedures and collaborated with the investigation. The bank has said that the scheme was carried out by rogue employees who cheated on Goldman's management.
The bank said that the clawback provision would give the board the "flexibility to reduce the size of the prize" to senior executives if necessary as a result of the 1MDB case. Mr. Solomon replaced Mr. Blankfein as Goldman's CEO on October 1; Mr. Blankfein remained chairman of the board at the turn of the year.
The board set Solomon's total compensation package for 2018 $ 23 million, an increase of $ 2 million from the previous year. Mr. Blankfin's total compensation for 2018 was $ 20.5 million.
Submission on Friday seemed to be directed, partly on Mr. Blankfein. The board said it would "postpone its decision" at some rates for its long-term retirement plan incentive plan until more information is known about the survey.
In most compensation plans, top managers are awarded a bonus, but then receive it in parts over the next three to five years. The system allows the boards to "pay back" pay before the manager receives it, in cases where failure steps have occurred.
But Compensation Specialists said it was rare for a board to announce that it could recoup a particular case. 19659002] "It's very unusual," said Alan Johnson of Johnson Associates, a compensation consulting firm. "They wanted to send a signal."
The negligence and clawback provision could cover five top executives and former bank executives, a person familiar with the case said, but not authorized to speak publicly on board. The holdback on the long-term compensation plan may apply to up to three retired executives, including Mr. Blankfein, Michael Sherwood and J. Michael Evans, the person said.
The contributions in the long-term compensation plan date back to 2011, around the time Goldman began to sign bond agreements for 1MDB.
A former executive, Gary Cohn, who left Goldman to join the Trump administration, is not affected by the decision to postpone compensation because he received a lump payment when he left the bank, the person familiar with case.
The scandal threatened to plague Mr. Blankfein's missions, which helped navigate Goldman through the financial crisis in 2008. Mr. Blankfein attended at least one meeting with Mr. Low in December 2012. This meeting was held at Goldman's headquarters in Lower Manhattan.
The meeting, which was launched by Leissner, took place even though others at Goldman had expressed wariness about Mr. Low.
Speaking at a conference in November, when the charge against the two former Goldman employees was announced, Mr. Blankfein said, "These are the guys who avoided our warranties and lie."