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Since prosecutors have involved a trio of Goldman Sachs bankers in a multi-billion dollar Malaysian fraud early this month, investors have suffered a nearly daily drop in information about the firm's ties to the scandal. The dam culminated Monday when the country's finance minister demanded a "full repayment", tipping off Goldman's shares in their steepest decline since 2011.
On the other side of Wall Street, analysts have expressed surprise at the plunge, pointing out that the bank – which has not been accused of wrongdoing – can probably support any payment that could be extorted in the case. Instead, some said that the decline seemed to be a combination of concern over persistent floods and uncertainty about the future. It's also a generally bad day in US markets.
"It's not so much the dollar amount," said Gerard Cassidy of RBC Capital Markets. "It's more than we do not know all the facts yet, we do not know all the important points of the story for the moment. It's the fear of the unknown. "
On November 1, at least three high-ranking bankers from Goldman Sachs were publicly implicated by the US Department of Justice in a multi-year criminal enterprise of bribing officials in Malaysia and elsewhere and laundering hundreds of millions of dollars. The company said it cooperated with investigations and incurred "significant" fines.
The bank has spent years improving its image after becoming one of Congress's favorites in 2010 for its behavior in the face of the global credit crisis. In that year, US regulators accused the bank of misleading investors by failing to reveal that a hedge fund company betting against a mortgage-linked derivative had played a role in creating what it was doing. had bought. The bank acknowledged that it had made a "mistake" in the marketing of equipment and that it had settled.
The Malaysian survey focuses on the Malaysian public investment firm 1Malaysia Development Bhd., As well as the $ 6.5 billion it collected in 2012 and 2013. Goldman Sachs managed transactions and harvested nearly 600 millions of dollars in fees.
Tim Leissner, the former president of the bank for Southeast Asia, admitted in a plea that he had bribed officials to obtain bond transactions, and that he and others had organized the collection of bonds. funds as an offer of debt generating higher fees. He also admitted that more than $ 200 million of 1MDB bond products had been paid into accounts controlled by him and a family member.
Prosecutors said the executives involved bypassed the bank's internal compliance operations to avoid detection.
Malaysian Finance Minister Lim Guan Eng said on Monday that the country is seeking reimbursement for all fees paid. A spokesman for the bank declined to comment on the request.
The company's shares fell 7.5%, their biggest one-day drop since November 2011. The volume of shares bought and sold more than tripled the average amount. The bank recorded the worst performance of the Dow Jones Industrial Average a day during which all but four companies declined.
Goldman's litigation risks in the US include lawsuits and investigations whose costs could exceed $ 2 billion, including more than $ 1 billion in 1MDB cases, Bloomberg Intelligence analysts wrote Monday. Elliott Z. Stein and Jennifer Rie.
Goldman Sachs claimed that the proceeds of the subscribed debt were for development projects and that Leissner had concealed information from the company. Leissner said that Goldman's culture of secrecy has led to concealment of wrongdoing by the company's compliance staff.
President and CEO David Solomon, who took office last month, said the charges against former employees were "very painful". His predecessor, Lloyd Blankfein, current president of Goldman, had been questioned earlier this month about the significance of the scandal for the bank's reputation. He's dead: "Well, that's not good." – Bloomberg
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