Goldman Sachs: Part 3 – Fines and Penalty

Thomas Fox
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Compliance Evangelist

We continue our exploration of The Goldman Sachs Group, Inc. (Goldman Sachs) Foreign Corrupt Practices Act (FCPA) settlements and related enforcement action, literally across the globe, from the state of New York to Singapore, Hong Kong, Malaysia and United Kingdom. Harry Cassin, writing in the FCPA Blog, said, “Goldman Sachs Group Inc. shattered our top ten list with a $3.3 billion FCPA settlement with the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC), sending it straight to number one. In last week’s settlement, the DOJ imposed a $2.3 billion criminal penalty, and the SEC imposed a civil penalty of $400 million and disgorgement of $606.3 million.” Today, I want to focus on the fines and penalties.

One of the conundrums from this enforcement action is what is the total amount of the fines and penalties. In his Press Conference,  Acting Assistant Attorney General Brian C. Rabbitt announced the following fines:

  • Total – $2.921 billion
  • Department of Justice (DOJ) – $1.263 million
  • Securities and Exchange Commission (SEC) – $400 million, with $606 million in disgorgement credited to monies previously paid to the country of Malaysia
  • The Federal Reserve System – $154 million

Neither of these amounts were spelled out in the DOJ Press Release or the release of written remarks of Acting Assistant Attorney General Brian C. Rabbitt.

Rabbitt went on to say that these amounts added up to $2.2 billion and the difference between the total amount of $2.921 billion and this $2.2 billion was made up of other fines and penalties which Goldman Sachs paid and they received a credit for. However, as Harry Cassin noted, “The FCPA Blog found no apparent basis for that value.” All this means it is not entirely clear what the total amount paid to the US or credited by US is for Goldman Sachs. We can all agree that it was a very large amount.

The penalty was based on the following under the FCPA Corporate Enforcement Policy. Goldman Sachs did not self-disclose the conduct at issues; hence it did not receive any credit for self-disclosure. The Deferred Prosecution Agreement (DPA) revealed the following. Goldman Sachs  received partial credit for its cooperation with the DOJ investigation of the underlying conduct, including: collecting and producing voluminous evidence located in other countries; making regular factual presentations and investigative updates to the Offices; and voluntarily making foreign-based employees available for interviews in the US.

Yet, even with this partial cooperation credit, the DPA noted that Goldman Sachs “did not receive full credit for its cooperation because the Company was significantly delayed in producing relevant evidence, including recorded phone calls in which the Company’s bankers, executives, and control functions personnel discussed allegations of bribery and misconduct relating to the conduct set forth in the Statement of Facts”. Eventually Goldman Sachs got the message to quit fighting the government (probably impressed on them by their outside counsel), as “the Company ultimately provided to the Offices all relevant facts known to it, including information about the individuals involved in the misconduct”.

Goldman Sachs also eventually got the message that it had to move past the paper compliance program it had in place which allowed the illegal conduct. (I will take a deep dive into the remediation tomorrow) The DPA noted that ultimately Goldman Sachs “engaged in remedial measures, including (i) implementing heightened controls and additional procedures and policies relating to electronic surveillance and investigation, due diligence on proposed transactions or clients and the use of third-party intermediaries across business units; and (ii) enhancing anti-corruption training for all management and relevant employees”.

Moreover, Goldman Sachs committed to the DOJ (and probably the other government regulators) that it is “committed to continuing to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth in Attachment C to this Agreement (Corporate Compliance Program)”. Goldman Sachs did receive a huge benefit from finally getting that message as “based on the Company’s remediation and the state of its compliance program, and the Company’s agreement to report to the Offices as set forth in Attachment D, the Offices determined that an independent compliance monitor is unnecessary”.

All of this led the DOJ to conclude “the appropriate resolution in this case is a deferred prosecution agreement with the Company; a criminal monetary penalty of $2,315,088,000, which reflects an aggregate discount of ten (10) percent off of the bottom of the otherwise-applicable Sentencing Guidelines fine range for the FCPA conduct; disgorgement of $606 million; and a guilty plea by Goldman Malaysia.”

So, where does the DOJ penalty of $1,263,088,000 come from? According to the DPA, the DOJ credited “the remaining amount of the Total Criminal Penalty against the amount the Company pays to the SEC, Fed, DFS, UK FCA and PRA, Singapore AGC, Singapore CAD and Hong Kong SFC. The Offices will credit the entire penalty amount that the Company pays to the SEC, Fed, DFS, UK FCA and PRA, Singapore AGC and Singapore CAD, as well as $100 million of the penalty the Company pays to Hong Kong SFC, in connection with parallel resolutions entered into between the Company and those authorities.” These amounts were:

Country Agency Amount
US Securities and Exchange Commission (SEC) $400mm (credit for $606mm in disgorgement)
US Federal Reserve System (Fed) $154mm
UK Financial Conduct Authority (FCA) $63mm
UK Bank of England Prudential Regulation Authority (PRA) $63mm
Hong Kong Securities and Futures Commission (SFC) $350mm
Singapore Monetary Authority of Singapore (AGC) $122mm
Singapore Commercial Affairs Department (CAD) $61mm in disgorgement
US – State of New York Department of Financial Services (DFS) $150mm
Total   $1.363bn

Since I still cannot make all the DOJ numbers work, I will simply have to leave it at that.

Please join me tomorrow where I look at the Goldman Sachs remediation.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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