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But now, both are caught in the past. Goldman's role in the 1MDB Malaysian sovereign fund fraud scandal has been one of the most recent and uncomfortable headlines in recent days. In early November, it was reported that the US Attorney's Office had filed lawsuits against two Goldman Sachs bankers and a dubious Malaysian businessman.
One of them, Tim Leissner, born in Germany, has already pleaded guilty to laundering money and bribing foreign government officials. The other, Roger Ng, was arrested in Malaysia. Solomon must now fight a serious crisis in the image and prepare investors for heavy penalties.
The prosecution accuses the two bankers of stealing almost three billion dollars from SWF with businessman Jho Low. With some of this money, they should have enriched.
The other party allegedly paid bribes to officials in Malaysia and Abu Dhabi, as evidenced by court documents released last week. Low is said to have orchestrated the plan with his relationships with the top decision-makers. He disappeared and is suspected in China.
Malaysia requires a refund
Goldman adjusts to "significant fines and other penalties," as Wall Street House announced in a mandatory notice to the Securities and Exchange Commission a day after the announcement of the lawsuit. Former bank chief Blankfein reportedly met Low at least once in 2009, according to US media reports.
It is not clear if a second meeting took place in 2013 or if Low was then only on the guest list. The bank did not want to comment on this. Goldman issued 1MDB bonds worth $ 6.5 billion in three stages in 2012 and 2013, generating commissions of about $ 600 million.
Malaysian Finance Minister Lim Guan Eng expects the bank to repay this amount in full. He made it clear in an interview. Goldman shares fell 7.5% on Monday, which is significantly higher than other banks in a declining market.
Thus, the price fell in 2018 by almost 20%. Tuesday, the title was at the beginning of the exchange in New York with a good 1% and more.
Malaysian Prime Minister Mahathir Mohamad also resigned on Tuesday. "There is evidence that Goldman did things that were wrong," he told CNBC. The bank's compliance systems "do not work very well".
If Goldman could be excluded from business in his country, he remained open. He was waiting for the results of the inquiries first. The verdict concerning Leissner, the former head of Southeast Asia operations, is expected in December.
Not only in Malaysia and the United States, investigations into corruption and money laundering are under way in 1MDB, but also in Switzerland, Singapore and possibly other countries. According to court documents, another partner of Goldman would be involved in the scandal. According to media reports, he has since been suspended.
Leissner also misinformed Goldman Sachs' corporate culture during his confession. He has repeatedly told the compliance department that Low played a role in the 1MDB deal, he admitted.
But that "fits perfectly with Goldman Sachs' culture of hiding the facts from some compliance officers and legal staff," said Leissner in a Brooklyn court at the end of August. However, the protocol was only published last Friday.
The lawsuit alleges that Goldman's corporate culture, particularly in Southeast Asia, is focused on entering into contracts. "Sometimes this goal has been favored over an appropriate flow of compliance mechanisms."
Jho Low is considered a dazzling financial juggler. In New York, he has been noted for his extravagant nights as "mysterious Malaysian money wasters". For an evening at Fashion Week, he would have paid a few years ago in an exclusive club with $ 160,000.
The 1MDB Sovereign Wealth Fund was created to promote investment in the Malaysian economy. But, through Low and his accomplices, much of the money has finally pbaded through various channels of luxury goods of all kinds: millionaire jewelry, luxury real estate, art.
Of course, it is very painful to see two former Goldman employees so blatantly violating our regulations and laws. David Solomon, CEO of Goldman Sachs
According to the press, the works of Claude Monet and Mark Rothko are part of the art collection. He is also considered the anonymous buyer who bought Picbado's "The Women of Algiers" in 2015 for a record $ 179 million. Low, born in 1981, would have had the best relationship with the most important decision-makers in his country.
He would have orchestrated the biggest scam scandal in recent history. Because he was looking for the proximity of Hollywood stars such as Leonardo DiCaprio, he also funded the film "The Wolf of Wall Street", which ironically deals with scams and excesses of the American financial world.
Annoyance before the birthday
This is certainly not the environment in which the bank wants to see itself. The scandal undermines the reputation of the institute, which will celebrate its 150th birthday next year. Goldman has had close relations with the US government in Washington for years. During the 2008 crisis, Henry Paulson, former chief of Goldman, was Minister of Finance. In the current government of US President Donald Trump, Finance Minister Steven Mnuchin also comes from Goldman. Former Blankfin number two, Gary Cohn, was Trump's economic adviser until March.
The 1MDB scandal "gives the impression that Goldman Sachs is actually two different banks: one that respects the rules and one that earns money," says Chris Whalen, an independent bank badyst. He believes that it is likely that other regulators will also consider the case.
Shareholder complaints could also follow. Until now, only Goldman employees have been indicted, not the bank itself. A New Orleans law firm on Tuesday announced its own investigation and called on Goldman shareholders to contact them. The cost of the scandal could be high, is currently incalculable, warned the badysts of Keefe, Bruyette & Woods. It is possible, however, that Goldman returns the $ 600 million fee.
"Of course, it is very painful to see two former Goldman Sachs employees violate our rules and laws so blatantly," admitted David Solomon during a weekly Bloomberg news service interview. last. "We take the case very seriously and continue to work with the authorities in charge of the investigation."
As a former head of the investment banking division, Solomon began to focus more on long-term personal relationships between bankers and clients. Mr. Blankfein made his career in commerce, a field that became much less lucrative after the financial crisis.
But now, Solomon must deal with the bad image of the bank and find new ways to strengthen compliance. Solomon's predecessor, Blankfein, who will be Chief Executive Officer of Goldman until the end of the year, chose Leissner and Ng as single offenders last week: "They avoided our protections and lied to us. This kind of thing can happen from time to time. "The Justice Department must now decide whether it agrees with this statement or whether it wants to act against the bank.
Even without the scandal, Solomon would have enough to do. Its new Chief Financial Officer, Stephen Scherr, announced in early November a large-scale review of all activities. In the spring, the bank wants to indicate in what areas it wants to invest more and in which areas. Guy Moszkowski of Autonomous Research believes that the institution could, among other things, reduce its operations on fixed-income securities, foreign currencies and commodities.
The sector has not been able to regain its former strength after the financial crisis, partly because of new regulations making some products less attractive. Goldman is sticking to the plan to generate additional revenue of $ 5 billion by 2020. For now, the plan is already over, said Scherr.
But this success is eclipsed by the scandal in Malaysia. Analysts at Keefe, Bruyette & Woods believe the case will continue to weigh on Goldman's stock price "until the bank publishes more information, but it can take a long time" .
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