Goldman Sachs Group Inc (GS.N) directors and officers got a $79.5 million settlement to deal with shareholder claims that their poor oversight led to the bank getting caught up in the embezzlement scandal at Malaysia’s 1MDB sovereign wealth fund.
A preliminary settlement of the so-called shareholder derivative lawsuit was filed in Manhattan federal court on May 13 and needs a stamp of approval by U.S. District Judge Vernon Broderick.
The defendants’ insurers would pay the $79.5 million to Goldman, which would then use it toward governance and compliance measures, including developing an anonymous hotline for employee tips and assigning more power to its chief compliance officer.
U.S. prosecutors have said Goldman assisted 1MDB organize $6.5 billion of bond sales, but that $4.5 billion was channeled via kickbacks and bribes to government officials, bankers, and others.
Shareholders led by the Atlanta-based Fulton County Employees’ Retirement System set out to blame Lloyd Blankfein, his successor Goldman Chief Executive David Solomon, and others for “conscious disregard of their oversight obligations” as the bank overlooked “red flags” of the fraud.
None of the defendants accepted liability or wrongdoing in agreeing to settle. Maeve DuVally, Goldman spokeswoman, refused to comment.
The bank previously consented to pay billions of dollars to authorities in the United States and other countries regarding 1MDB, and in 2021 worked out a 3-year deferred prosecution agreement with the U.S. Department of Justice.
The former Goldman banker Roger Ng was declared guilty on April 8 in Brooklyn, New York on money laundering and bribery charges concerning his role in the scandal.
The shareholders’ lawyers led by the firm Saxena White described the $79.5 million payout as the second-largest shareholder derivative settlement in the federal court circuit that includes New York and “an outstanding recovery for the company”.
The lawyers intend to ask for fees of about $19.9 million, approximately 25% of the settlement amount, which Goldman would pay.
The case is Fulton County Employees’ Retirement System v Blankfein et al, U.S. District Court, Southern District of New York, No. 19-01562.
