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Goldman chief feels ‘horrible’ staff broke law in 1MDB case

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He describes former employees' involvement in 1MDB scandal as 'distressing'

SINGAPORE Goldman Sachs chief executive David Solomon said yesterday he felt "horrible" that two former employees "blatantly broke the law" in their dealings with Malaysian state fund 1Malaysia Development Berhad (1MDB).

US prosecutors filed criminal charges against the two former Goldman bankers and a Malaysian financier linked to the alleged theft of billions of dollars from the fund.

An investigation into where 1MDB's money went became the largest carried out by the US Department of Justice, and the scandal was a major reason why Malaysian voters rejected Najib Razak, their prime minister for nearly a decade, in an election earlier this year.

"It is obviously very distressing to see two former Goldman Sachs employees went so blatantly around our policies and so blatantly broke the law," Mr Solomon told Bloomberg TV in Singapore.

"I feel horrible about the fact that people who worked at Goldman Sachs... would go around our policies and break the law."

US prosecutors announced last week that Tim Leissner, former partner for Goldman Sachs in Asia, had pleaded guilty to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act and agreed to forfeit US$43.7 million (S$60 million).

Roger Ng, the other charged former Goldman banker, was arrested in Malaysia and is expected to be extradited.

Goldman has also placed its former co-head of Asia investment banking Andrea Vella on leave over his role in the company's involvement with the case, according to a source.

The Wall Street bank said in a securities filing last Friday that it may also face penalties from dealings with 1MDB.

Asked if he could provide assurances that neither he, former CEO Lloyd Blankfein or any of the senior management team suspected illegality or compliance breaches in dealings with 1MDB, Mr Solomon said: "We take compliance and control in our firm extremely seriously... We are going to continue to cooperate with the authorities and there's a process in place and that process will proceed."

According to prosecutors, the investment bank generated about US$600 million in fees for its work with 1MDB, which included three bond offerings in 2012 and 2013 that raised US$6.5 billion. Leissner, Ng and others received large bonuses in connection with that revenue.

Malaysian Finance Minister Lim Guan Eng told Reuters in June that the government will be looking at the possibility of seeking claims from Goldman Sachs.

Malaysian Prime Minister Mahathir Mohamad said Malaysia will look into why Goldman was paid around US$600 million in fees, an amount critics have said exceeds normal levels.

Goldman has said the outsized fees related to the additional risks it took on - it bought the un-rated bonds while it sought investors and 1MDB wanted the funds in a hurry for a planned investment. - REUTERS