NEW YORK: Goldman Sachs Group Inc’s shares plummeted the most in seven years on Monday, dropping twice as much as any other major US lender.
The decline came after Finance Minister Lim Guan Eng said the nation would seek a “full refund” over bond deals for its sovereign-wealth fund that have landed Goldman Sachs in the midst of globe-spanning corruption probes.
“Plenty of negative headlines” are weighing on investors’ minds when it comes to the bank, said KBW analyst Brian Kleinhanzl.
Last week, at least three senior Goldman Sachs bankers were implicated by the US Department of Justice in a multiyear criminal enterprise that included bribing officials in Malaysia and elsewhere and laundering hundreds of millions of dollars.
The firm has said it is cooperating with the investigations and may face “significant” fines.
Yesterday, Lim said the country is seeking a refund of all the fees it paid to Goldman for arranging as much as US$6.5 billion in debt in 2012 and 2013, as Goldman has “admitted culpability” after former banker Tim Leissner entered a guilty plea for his role in the scandal.
Goldman Sachs hasn’t publicly admitted any wrongdoing. A spokesman for the bank declined to comment Monday on Lim’s remarks.
Lim is banking on the firm’s “indirect” admission of wrongdoing and US law against kleptocracy to help Malaysia recoup fees that include almost US$600 million that it paid Goldman Sachs for three bond deals.
Goldman’s litigation risks in the US include lawsuits and probes with estimated costs that could top US$2 billion, including more than US$1 billion from 1MDB matters, Bloomberg Intelligence analysts Elliott Z Stein and Jennifer Rie wrote in a report.
The firm’s shares declined 7.5% yesterday, their biggest one-day drop since November 2011. While all but one of the 67 companies in the S&P 500 Financials Index slipped amid a wider market decline, Morgan Stanley’s 3.5% drop was the closest to Goldman’s plunge.
Goldman Sachs has said it believed proceeds of the debt it underwrote were for development projects and that Leissner, its former Southeast Asia chairman, withheld information from the firm.
Leissner has said Goldman’s culture of secrecy led him to conceal wrongdoing from the company’s compliance staff.
CEO David Solomon, who took over last month, said he’s found the allegations against the former employees “very distressing”.
His predecessor Lloyd Blankfein, Goldman’s current chairman, was asked earlier this month what the scandal meant for the bank’s reputation. He deadpanned: “Well, it’s not good.” - FMT
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