1MDB Scandal Could Hit Pay for Goldman Execs, Including Lloyd Blankfein
New Chief Executive David Solomon, others also could have compensation withheld
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Lloyd Blankfein, who retired as Goldman’s CEO Oct. 1, was paid $20.5 million in 2018, the company said Friday. PHOTO: ALESSANDRO DELLA VALLE/EPA-EFE/R/EPA/SHUTTERSTOCK
Goldman Sachs Group Inc. GS -0.74% could withhold millions of dollars in pay from former chief Lloyd Blankfein because of the scandal around a corrupt Malaysian investment fund, the bank said Friday.
Goldman’s board of directors won’t—for now—pay out deferred bonuses that Mr. Blankfein and two other former top executives earned in prior years, and will instead await the outcome of an investigation into Goldman’s work for the Malaysian fund, known as 1MDB. The bank said it might also claw back some of the $23 million it paid new Chief Executive David Solomon in 2018.
By hitting executive pay—Wall Street’s most obvious tool to reward and punish—the moves are the clearest sign yet that Goldman sees potentially serious consequences in the 1MDB investigation. The bank faces a large fine and a reputational black eye it can ill afford as it courts retail customers and invests heavily in new businesses.
In recent months, Goldman has been laying out its case to regulators in an effort to avoid criminal charges, according to people familiar with the discussions.
Goldman raised $6.5 billion for 1MDB, of which prosecutors allege $2.7 billion was stolen by a Malaysian financier and two former Goldman bankers. One of those bankers, Tim Leissner, has pleaded guilty to stealing some $200 million and arranging bribes for government officials in Malaysia and Abu Dhabi. He hasn’t commented.
Goldman Sachs Entangled in Global 1MDB Scandal
With the indictment of two former senior Goldman Sachs bankers, accused by U.S. prosecutors of paying bribes, stealing and laundering money from a Malaysian sovereign-wealth fund, the Wall Street giant finds itself at the center of one of the world's largest-ever financial scandals. Photo: Reuters
The federal indictments darkened Mr. Blankfein’s farewell tour and complicated the early tenure of Mr. Solomon, who took over Oct. 1 as chief executive.
Overall Mr. Blankfein earned $20.5 million in 2018, down from $24 million a year earlier, according to Friday’s filing. That figure isn’t affected by the potential clawback, which stems from a deferred cash grant he received in 2011 that was to be paid out this past January.
Goldman is temporarily withholding that award, which was originally granted at $7 million. The size of the ultimate payout was tied to Goldman’s performance over the past eight years. The value has roughly doubled, according to a Wall Street Journal review of filings.
The bank also said it was withholding similar bonuses owed to two unnamed former executives. They are, according to a person familiar with the matter, Michael Evans, who was a senior Goldman executive at the time of the 1MDB bond sales, and Michael Sherwood, a senior executive in London who retired in 2016.
Former executive Gary Cohn also got those bonuses, but was compensated in a lump sum when he joined the Trump administration in 2017.
Mr. Solomon wasn’t senior enough in 2011 to receive that particular bonus. But the bank said Friday it might later claw back some of his 2018 pay and that of other senior executives, a group likely to include President John Waldron and Chief Financial Officer Stephen Scherr. Mr. Solomon was paid $23 million in 2018 for three months as CEO and nine months as chief operating officer. The biggest chunk, $15.4 million, is in stock units that pay out based on Goldman’s performance over the next few years.
Pay for Wall Street executives, which fell sharply after the financial crisis, has crept up as banks’ results have steadily improved. The highest-paid bank CEO is JPMorgan Chase & Co.’s James Dimon, who made $31 million last year, followed by Morgan Stanley’s James Gorman, who earned $29 million. Bank of America Corp. and Citigroup Inc. haven’t yet disclosed their CEOs’ compensation for 2018.
The Justice Department charged two former Goldman bankers in November. The next month, Malaysia lodged criminal charges against Goldman, and its attorney general said he would seek a fine well above the $2.7 billion allegedly stolen.
Write to Liz Hoffman at liz.hoffman@wsj.com
Appeared in the February 2, 2019, print edition as 'Goldman Paydays At Stake.'
