Giving a new twist to the controversy surrounding its involvement in the infamous 1Malaysia Development Berhad scandal, Goldman Sachs (GS) this week came up with an unexpected defense. The investment bank claimed it was dragged into the multibillion-dollar misappropriation due to the rogue behavior of a few employees.
It seems Wall Street is not convinced by the explanation and the company’s stock remained in the red on Thursday, unable to recover from the plunge that followed the Malaysian finance minister’s demand for refund of the fees paid for the 1MDB deals.
Expressing “outrage” over the way things unfolded after the scandal came to the fore, Goldman CEO David Solomon in a communiqué to employees said the company and its management were not directly involved in the fraud in any way. “This isn’t us,” he said.
The investment bank claimed it was dragged into the multibillion-dollar misappropriation due to the rogue behavior of a few employees
There has been intense speculation among the investment community about the impact of the allegations on the company’s outlook, with some predicting a major financial burden from the litigation. Meanwhile, allaying investors’ concerns, Solomon claimed that Goldman’s outlook remained intact.
If proven otherwise, the regulators could slap a huge fine on the bank, to the tune of up to $2 billion. Besides suffering significant costs related to the case in the coming quarters, the company will have to take steps to the repair its faltering reputation. Recently, the management had also hinted at the probability of the company incurring a major fine in connection with the case.
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Earlier, the company’s Southeast Asia former head Tim Leissner admitted to having paid kickbacks to Malaysian officials to secure bond deals.
Goldman shares slipped to a two-year low Thursday, extending the losing streak that began earlier this month. The stock lost about 15% over the past twelve months and 21% since the beginning of the year.