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Statement on Goldman DOJ 1MDB Settlement

FOR IMMEDIATE RELEASE
Thursday, October 22, 2020
Contact: Pamela Russell at 202-618-6433 or prussell@bettermarkets.com
 
Washington, D.C.  –  Dennis M. Kelleher, President and Chief Executive Officer of Better Markets, issued the following statement in response to the announced settlement between the Department of Justice (DOJ) and the Goldman Sachs Group Inc. (Goldman) regarding its criminal conduct related to the global crime spree of 1Malaysia Development Berhad or 1MDB:
 
“Don’t let the spin from DOJ or Goldman fool you: this settlement is highly favorable to Goldman, which is why the bank’s stock is up today. First, the only real penalty here is the $2.3 billion fine (which is not $2.9 because $606 million of that is disgorgement of fees that it never should have received). Second, Goldman could have been fined as much as $5.1 billion, but was fined at the lowest end of the sentencing range for Goldman’s 48 total offenses and then got a 10% discount on top of that, as detailed on pages 9-10 of the Deferred Prosecution Agreement (DPA).
 
Third, a fine of $2.3 billion to Goldman is virtually meaningless. Unlike the rest of America, “Goldman’s Pandemic Hot Streak Continued in the Third Quarter” according to the Wall Street Journal when the bank had net revenue of almost $11 billion in just three months and almost $33 billion for the first three quarters of 2020. Moreover, Goldman had already set aside the money to settle this case and gets to pay it with shareholders’ money.
 
Fourth, the three year Deferred Prosecution Agreement (DPA) DOJ entered into with Goldman US is also likely meaningless. DOJ just settled JPMorgan Chase’s third criminal case with, among other things, a DPA, for manipulating two financial markets for years when a prior DPA was in place along with a probation agreement. Yet, DOJ settled JPMorgan’s third criminal proceeding without even mentioning the prior two criminal actions, the prior DPA or prior probation period, both of which appear to have been violated by JPMorgan Chase during the years it was manipulating the two financial markets. A DPA is meaningless unless actually enforced and DOJ does not appear interested in enforcing them against Wall Street banks.
 
“If the DOJ was serious about stopping Wall Street crime or actually punishing Goldman, DOJ’s leadership would not have reportedly rejected the line prosecutors’ recommendations, which included, in addition to a meaningful $5+ billion fine, (1) a criminal guilty plea from Goldman, not a subsidiary in Malaysia, (2) an independent monitor for three years to police Goldman’s total failure of a compliance department, (3) limitations on business activities, (4) disgorgement of all revenue from any 1MDB related activity not just the one bond offering, (5) the claw back of all compensation and bonuses related in any way to 1MDB paid to anyone who worked or works for Goldman, and (6) personal monetary penalties and industry bars on, if not prosecution of, all the materially involved executives, supervisors and officers, not just the three fall guys already identified.
 
“Without such terms, this settlement fails to meaningfully punish past crime and thereby incentivizes more crime on Wall Street. Following DOJ’s late September settlement with JPMorgan Chase for appalling, years-long criminal conduct, this settlement with Goldman is just the latest example of DOJ’s double standard of justice where Wall Street’s rich, powerful and well-connected too-big-to-fail banks and bankers get sweetheart deals for massive frauds, while  Main Street Americans get no mercy for even small infractions.
 
“Goldman’s involvement with 1MDB was no ordinary crime in terms of scale, scope, consequence and egregiousness. It spanned five years and included more than 30 Goldman Sachs executives, including two of its CEOs and its President. They were involved with 1MDB while it engaged in a shocking global crime spree that undermined democracy in Malaysia. The scheme allegedly provided a corrupt prime minister with the funds to bribe enough voters to get reelected for five more years, when he crushed his opposition and a prosecutor investigating him was brutally murdered.    
 
“That would be bad enough by itself, but Goldman also has a lengthy RAP Sheet with 37 major legal actions over the last 20 years that resulted in almost $14 billion in fines and settlements. Put differently, Goldman is a recidivist lawbreaker. Additionally, it is aggressively unrepentant. Goldman has laughably blamed everything on a “rogue” partner or two, claiming that everyone else at Goldman was totally clueless (which, even if true, warrants severe sanctions). Supposedly this “rogue” fooled all of the smartest, highest paid bankers in the world as well as all of Goldman’s risk, compliance, legal and audit systems and controls, and all of Goldman’s management. That’s not a rogue; that’s a criminal genius the likes of which the world has never seen.
 
“Yet, for all that, DOJ is basically treating Goldman like a first-time offender with a relatively painless fine, which is why the crime spree by Wall Street’s too-big-to-fail banks continues. That will not stop until DOJ starts treating Wall Street banks and bankers like the recidivists that they are and throwing the book at them.  Anything less sends the message that crime pays and that the double standard of justice is alive and well, which is the message of this settlement.”
 
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.

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