Goldman, 2 former top execs must face shareholder lawsuit over 1MDB scandal

NEW YORK (REUTERS) – Goldman Sachs Group and two former top executives were ordered by a US judge on Monday (June 28) to face a lawsuit accusing them of misleading shareholders about the bank’s work for 1MDB, a Malaysian fund that became embroiled in a corruption scandal.

US District Judge Vernon Broderick said shareholders in the proposed class action adequately alleged that several statements by Goldman, former chief executive Lloyd Blankfein and former chief operating officer Gary Cohn about 1MDB and Goldman’s ethics were false and misleading.

Shareholders led by Swedish pension fund Sjund AP-Fonden claimed that Goldman’s market value fell by billions of dollars as the truth about its 1MDB dealings became public.

Judge Broderick’s decision followed Goldman’s agreement last Oct 22 to pay US$2.9 billion (S$3.89 billion) in penalties and have a Malaysian unit admit criminal wrongdoing to settle 1MDB probes by the US Department of Justice and other authorities.

Goldman helped sell US$6.5 billion of bonds for 1MDB, a sovereign wealth fund that former Malaysian Prime Minister Najib Razak launched to promote economic development, and collected an estimated US$600 million of fees.

Authorities have said that fund officials and accomplices looted bond proceeds for luxuries and to finance Hollywood films, while Goldman bankers bribed officials in Malaysia and Abu Dhabi to win 1MDB business.

Judge Broderick said it “strains credulity” for Goldman to contend it had no indication that funds were being siphoned, and said shareholders could sue over the bank’s claim it was “dedicated to complying fully with the letter and spirit of the laws, rules and ethical principles that govern us.”

He also said shareholders could try to prove Mr Blankfein ignored internal warnings about 1MDB before telling a journalist in November 2018 that he had been “not aware” of red flags.

Judge Broderick also dismissed all claims against Harvey Schwartz, who became Goldman’s co-COO after Cohn left.

More on this topic

Join ST’s Telegram channel here and get the latest breaking news delivered to you.

Source: Read Full Article