Goldman Sachs to pay $79.5M to end putative shareholder class action over 1MDB fraud scheme

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Goldman Sachs fraud scheme settlement overview: 

• Who: A federal judge granted preliminary approval to a $79.5 million settlement made between Goldman Sachs and a Georgia pension fund. 
• Why: The settlement was made to resolve claims a group of current and former Goldman Sachs directors bore responsibility for a billion dollar fraud scheme involving 1Malaysia Development Berhad bond issuances. 
• Where: The class action lawsuit was filed in New York federal court. 

A federal judge in New York gave preliminary approval to a $79.5 million Goldman Sachs settlement agreement made to resolve claims Goldman Sachs directors bore responsibility for a billion dollar fraud scheme. 

Current and former Goldman Sachs directors were accused of allowing the fraud scheme, which involved 1Malaysia Development Berhad bond issuances, to occur by continually failing to abide by their duties to the financial institution. 

U.S. District Judge Vernon S. Broderick, the judge overseeing the complaint, in granting the Goldman Sachs settlement motion, determined that the settlement agreement, which was announced in May, is “fair, reasonable and the result of good faith negotiation.” 

Goldman Sachs directors accused of bribing high-ranking officials to secure bond issuances

A Georgia pension fund accused 11 Goldman Sachs directors, including nine current and two former, of securing $6.5 billion in 1Malaysia Development Berhad bond issuances through bribes. 

It claimed the Goldman Sachs directors secured the bond issuances by making bribes with high-ranking officials from Abu Dhabi, Malaysia and the United Arab Emirates. 

The Goldman Sachs directors initially argued that the complaint had failed to connect them to the fraud scheme while calling the claims “pure hindsight bias,” Law360 reports. 

Additionally, the Goldman Sachs directors argued that the two former directors, who were implicated in allegations brought by the federal prosecutors and the Malaysian government, had taken steps to hide their alleged misconduct. 

Shareholders claimed, however, that Goldman Sachs’ internal controls should have been able to catch the misconduct, which it argued was quickly spotted by journalists, investment banks and other Goldman Sachs employees, Law360 reports. 

A separate class action lawsuit was filed against Goldman Sachs earlier this year by a consumer claiming the bank mismanaged its employees’ 401(k) retirement plan. 

Additionally, earlier this month, Goldman Sachs was among a group of major banks that opposed a judge’s decision to certify a class of investors claiming they colluded to stop competition in the market for stock loans. 

Do you believe Goldman Sachs bears responsibility for the fraud scheme involving 1Malaysia Development Berhad bond issuances? Let us know in the comments! 

The plaintiffs are represented by Maya Saxena, Steven B. Singer, Joseph E. White III and Lester R. Hooker of Saxena White PA.

The Goldman Sachs fraud scheme settlement is Fulton County Employees’ Retirement System v. Blankfein, et al., Case No. 1:19-cv-01562, in the U.S. District Court for the Southern District of New York.

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