Goldman Sachs Group Inc. faces a class-action lawsuit that accuses the company of failing to disclose in regulatory filings about its involvement in the 1Malaysia Development Bhd. scandal.
The plaintiffs are those who bought Goldman Sachs' shares between Feb. 28, 2014, and Dec. 17, 2018. Current Chairman and former CEO Lloyd Blankfein and former CFOs Harvey Schwartz and Martin Chavez were also named in the lawsuit as defendants.
The complaint said Goldman Sachs' Forms 10-K from 2013 to 2015 only contained "merely generic, boilerplate representations with respect to the company's risk of regulatory enforcement 'relating to corrupt and illegal payments and money laundering.'" With omissions of their specific activities in the scandal, the plaintiffs argue that the bank's public statements were materially false and misleading.
Multiple news articles detailing the bank's role in the scandal caused share prices to fall, which allegedly caused damages to plaintiffs. When former Goldman Sachs executive Tim Leissner was subpoenaed by the U.S. Justice Department over the 1MDB case, Goldman Sachs' stock price fell 2.41% to close at $151.60 on March 8, 2016. The company's share price fell nearly 4% to close at $222.65 on Nov. 9, 2018, when it was alleged that Blankfein was the unidentified company executive at a 2009 meeting with former Malaysian prime minister Najib Razak.
Goldman Sachs' shares also dropped nearly 7.5% to close at $206.05 on Nov. 12 on the news of the Malaysian government's criticism of the bank's role in the scandal. The share price dropped 2.76% to close at $168.01 on Dec. 17 when the government filed criminal charges against three Goldman units.
The plaintiffs concluded that they suffered significant losses and damages due to Goldman Sachs' misleading statements and its failure to disclose key facts and due to the declines in share prices in relation to the scandal.
Goldman Sachs spokesperson Michael DuVally said the bond offerings were meant to benefit Malaysia but "a huge portion of those funds were stolen for the benefit of members of the Malaysian government and their associates." He said the lawsuit is "without merit," and the company "[intends] to vigorously contest it."