The Goldman Sachs Group, Inc. (GS)
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China Fintech Firm Lufax Seeks Up to $2.36 Billion in IPO
(Bloomberg) -- Chinese financial technology firm Lufax Holding Ltd., backed by Ping An Insurance Group Co., is looking to raise as much as $2.36 billion in an initial public offering that would be one of the biggest by a Chinese company this year on a U.S. exchange.Lufax is marketing 175 million American depositary shares for $11.50 to $13.50 each, according to a filing Thursday with the U.S. Securities and Exchange Commission. Two ADS represent one ordinary share.Lufax is going public in the U.S. as relations between Washington and Beijing are at a low ebb, with the world’s two biggest economies clashing over trade, access to capital markets and data privacy. In August, U.S. regulators threatened to ban Chinese companies from listing on American exchanges, citing Beijing’s refusal to allow inspections of the firms’ audits. Nevertheless, firms based in China and Hong Kong have raised $10.9 billion through U.S. IPOs this year, the most since 2014, according to data compiled by Bloomberg.Lufax, which was once among China’s largest peer-to-peer lenders, has morphed into a financial giant offering wealth management and retail lending services. At the top of its price range, it would be valued at almost $33 billion based on the outstanding shares listed in its prospectus.The company, which has explored an IPO for several years, transformed its business after Chinese authorities launched a sweeping crackdown on the once-unruly P2P lending sector. Lufax is now an arm of Ping An, China’s largest insurer by market value. Its assets under management dropped by 6.1% in 2019 after “asset portfolio adjustment and restrictions on consumer finance products” slashed transaction volumes by 30%.For the six months ended June 30, Lufax had a net profit of more than $1 billion on total income of $3.64 billion, according to its filing.Lufax plans to use the funds from the IPO for purposes which may include investment in product development, sales and marketing activities, technology infrastructure, capital expenditures, global expansions and other general and administrative matters. It may also use them for acquisitions or investments.The company expects price the offering on Oct. 29 and for the shares to begin trading the following day on the New York Stock Exchange under the symbol LU, according to terms of the deal. Goldman Sachs Group Inc., Bank of America Corp., UBS Group AG, HSBC Holdings Plc and China PA Securities Co. are leading the offering.(Updates with IPO timing in eighth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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Goldman’s Image Stained Again With Damning 1MDB Settlements
(Bloomberg) -- Goldman Sachs Group Inc., pilloried after the 2008 financial crisis, just saw a decade of image repair tarnished as prosecutors and regulators around the world unleashed accusations and punishments against the bank after a yearslong probe into the plundering of Malaysia’s 1MDB investment fund.Goldman’s costs from the scandal hurtled beyond $5 billion Thursday while a subsidiary pleaded guilty to a U.S. criminal charge for the first time in the firm’s history. The parent company entered a deal to spare itself a conviction that could cripple business, by promising to behave.In a rare rebuke, Goldman will also force Chief Executive Officer David Solomon and predecessor Lloyd Blankfein to give up pay, attaching personal accountability to two of the industry’s most visible leaders for a scandal spanning the globe.But, on top of all that, the settlements provide another gritty look at the mechanics of a costly financial scheme involving the Wall Street giant -- with court documents quoting from internal emails and conversations. In its deal with the U.S. Justice Department, the bank admitted executives and other staff conspired to pay more than $1.6 billion in bribes to win business in Malaysia. That settlement includes the highest penalty ever under the Foreign Corrupt Practices Act.Not since 2010 has Goldman been in the spotlight over such damning behavior -- in that case claims it misleadingly sold mortgage-linked investments that fueled investor losses in the 2008 credit crisis. The new 1MDB settlements with authorities on three continents threaten to concentrate critics’ attention on the firm in an era of mounting frustration with Wall Street’s success during an economic slump and widening income disparity.“I wouldn’t underestimate the impact of that backdrop,” said Peter Atwater, an adjunct lecturer at William & Mary. “Goldman is very fortunate to settle this today. If the social mood were to deteriorate, the financial cost and the legal ramifications would be much more dire.”The case focuses on the firm’s fundraising work in 2012 and 2013 for the state-owned fund formally known as 1Malaysia Development Bhd. Goldman’s investment-banking group, led at the time by Solomon, collected $600 million from the bond sales. The bank reached an initial accord with Malaysia in July that included a payment of $2.5 billion.In a 36-page deferred-prosecution agreement and accompanying statement of facts, U.S. prosecutors go further in describing what transpired than was previously known, including behind-the-scenes exchanges that may become fodder for critics, from progressive activists to lawmakers.Prosecutors highlighted, for example, a call in which a “participating managing director,” or partner, discussed with a senior executive problems the bank was having in securing an investment from an Abu Dhabi investment fund related to 1MDB. The partner said it was clear a government official in Abu Dhabi was “trying to get something on the side in his pocket” from the deal. “I think it’s quite disturbing to have come across this piece of information,” he added.“What’s disturbing about that?” the senior executive replied, according to the filing, which didn’t identify the individuals. “It’s nothing new, is it?”From Wall Street’s perspective, the latest raft of settlements was long-anticipated and the magnitude of the penalties in line with expectations. The bank said it would book an additional $250 million in the third quarter to cover the cost beyond previous reserves. Investors nudged the stock up 1.2% in New York.“It’s an enormous price,” Glenn Schorr, an analyst at Evercore ISI, said of the settlement payments. But “it’s the price they had to pay to, I would say, have the flexibility to fully run their company and focus on growing and moving the company forward.”Lifting CloudThe accords lift a legal cloud that formed during Blankfein’s tenure and remained through the handoff to Solomon two years ago. Solomon has since faced public heat over his decision to order two Gulfstream private jets to carry executives, his acceptance of a raise at the onset of the pandemic and his appearance as a DJ at a Hamptons concert where some attendees eschewed social distancing guidelines. Those faux pas seem quaint compared to DOJ documents describing Goldman executives dismissing signs of corruption.“This has been a long process and we are pleased to be putting these matters behind us. But, we are not putting the lessons learned from this experience behind us,” he wrote in a memo to staff on Thursday. “We have to acknowledge where our firm fell short.”The misconduct described in the settlements is landing at a moment when polls suggest Democrats might take control of both chambers of Congress and the White House in November’s election. That may make it a smart time for a company to settle with an administration whose players and priorities it knows.But it’s an awkward time to be known as the bank at the center of an international conspiracy that poured ill-gotten public funds into high-end art, a super yacht and even the Hollywood movie “The Wolf of Wall Street.”(Updates with description of employees’ conversation from eighth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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Goldman Admits Role in Record $1.6 Billion 1MDB Bribe Spree
(Bloomberg) -- Goldman Sachs Group Inc. admitted its role in the biggest foreign bribery case in U.S. enforcement history, reaching multiple international settlements to end probes into its fundraising for the scandal-plagued Malaysian fund known as 1MDB.Goldman officials helped spread $1.6 billion in illicit payments across Malaysia and the Middle East as part of a scheme that diverted money raised for development projects into an international spending spree on mansions and lavish parties, the bank said.The bank agreed to billions of dollars in new penalties to the Justice Department and other U.S. authorities, as well as to regulators in the U.K., Hong Kong and Singapore. The payments brought its overall tab to more than $5 billion to resolve probes into bond deals it arranged for 1MDB.The Wall Street giant will cut the pay of Chief Executive Officer David Solomon and other current leaders and claw back compensation from his predecessor Lloyd Blankfein and several other former executives, the bank said Thursday.A small Malaysian unit of the U.S. bank pleaded guilty to a single conspiracy charge on Thursday. But Goldman’s parent company avoided a criminal conviction to resolve the investigations, as part a deal that allows the bank to put off any prosecution as long as it cooperates with ongoing U.S. investigations and submits compliance reports.The deferred-prosecution agreement is a win for Goldman Sachs, because a conviction might have risked losing some institutional clients that are restricted from working with financial firms with criminal records. The bank’s shares rose 1.2% on Thursday.Goldman Recast as Villain of Wall Street With Damning 1MDB PactThe global resolutions announced Thursday conclude more than a half decade of investigations into Goldman’s role in raising $6.5 billion for 1MDB in three bond offerings. To smooth the way for those bond deals, Goldman officials conspired with a 1MDB official to bribe Malaysian officials and officials of a sovereign wealth vehicle in Abu Dhabi, the U.S. Justice Department said.U.S. authorities said that Goldman’s misconduct rose to the bank’s highest ranks, despite its insistence for years that rogue employees were responsible. “The scheme was principally carried out by senior officials in Goldman,” Acting U.S. Attorney Seth DuCharme said.In all, some $2.7 billion of the money raised for 1MDB was stolen by people connected to the country’s former prime minister and diverted for bribes, a luxury yacht, fine art and even funding for the Hollywood movie “The Wolf of Wall Street.”The Justice Department settlement concludes one of the biggest bank probes inherited by the Trump administration. The bank will pay more than $2.3 billion in the plea deal, U.S. prosecutor Alixandra Smith said, the largest penalty in U.S. history for a violation of the Foreign Corrupt Practices Act. Airbus SE paid $2.09 billion earlier this year to settle global bribery probes.The case against the Wall Street firm focused on its fundraising work in 2012 and 2013 for the state-owned 1MDB, formally known as 1Malaysia Development Bhd. From about 2009 to 2014, the bank’s Malaysia unit “knowingly and willfully agreed to violate the Foreign Corrupt Practices Act by corruptly promising, and paying bribes to foreign officials in order to obtain and retain business for Goldman Sachs,” the bank’s general counsel, Karen Seymour, told U.S. District Judge Margo Brodie in Brooklyn in a video hearing on Thursday.Goldman’s investment-banking group, led at the time by Solomon, collected $600 million from the bond sales.Prosecutors in court filings described a corporate culture at Goldman that displayed a casual indifference to bribery, at least among a few senior executives.In a statement of facts accepted by Goldman, prosecutors highlighted a call in which a managing director discussed with a senior executive problems the bank was having in securing an investment from an Abu Dhabi investment fund related to 1MDB.The managing director said it was clear that a government official in Abu Dhabi was “trying to get something on the side in his pocket” from the deal. “I think it’s quite disturbing to have come across this piece of information,” he added.“What’s disturbing about that?” the senior executive replied, according to the filing, which didn’t identify the individuals. “It’s nothing new, is it?”The suspected mastermind of the 1MDB fraud, a Malaysian financier known as Jho Low, conspired with bankers Tim Leissner, Roger Ng and others to bribe high-ranking officials in Abu Dhabi’s state-owned and state-controlled sovereign wealth fund, International Petroleum Investment Company, and a unit, Aabar Investments PJS, the bank admitted. IPIC agreed to be a guarantor of a 2012 1MDB debt deal, a role that helped the bond offering move ahead.Bribes also went to the Malaysian government and 1MDB officials, prosecutors said.At a February 2012 meeting, Low explained to Leissner, Ng and others that “government officials from Abu Dhabi and Malaysia needed to be bribed to both obtain the guarantee from IPIC and get the necessary approvals from Malaysia and 1MDB,” they said.Goldman’s compliance employees were on notice to keep an eye out for any transactions that might involve Low, who was considered a significant risk. Yet in the 1MDB bond deals, they didn’t take “reasonable steps” to keep him out of it, according to the statement of facts.For example, Goldman failed to review electronic communications of members of the deal team for evidence of Low’s involvement, which by 2012 would’ve shown Low’s role in the matter, the statement says.Low, who has professed his innocence, remains at large. Leissner, who was the bank’s southeast Asia chairman, pleaded guilty in the U.S. to conspiring to launder money. He’ll be sentenced in January. Ng was charged with conspiring with Low to launder money. He has denied wrongdoing.“The board views the 1MDB matter as an institutional failure, inconsistent with the high expectations it has for the firm,” Goldman’s board said in a statement Thursday announcing the executive pay cuts.The Justice Department penalty against Goldman credits more than $1 billion in fines paid to other U.S. agencies and foreign authorities. That includes $400 million to the Securities and Exchange Commission, $150 million to New York’s Department of Financial Services and $154 million to the Federal Reserve. After disgorgements of Malaysia profits, the Justice Department places the total U.S. penalty at roughly $2.9 billion.Goldman Sachs units will also pay $350 million to Hong Kong’s financial regulator, $122 million to Singapore’s government and 96.6 million pounds ($126 million) to the U.K.’s Financial Conduct Authority, those bodies announced Thursday.Goldman reached a settlement in July with Malaysia, which included a payment of $2.5 billion and an unusual provision that the bank would guarantee that the Asian nation would recoup an additional $1.4 billion from 1MDB assets seized around the world. Malaysia dropped criminal charges against the bank as part of that deal.Goldman will seek U.S. Labor Department permission before the Malaysia unit’s December sentencing to continue handling retirement funds for Americans, its lawyers said. Banks must secure a waiver from the department to continue handling such funds after an admission of criminal conduct.The 1MDB saga devolved into a plot to pressure the U.S. to go easy on some of the alleged looters, casting a wider web that has embroiled a prominent Republican fundraiser, an official in the Justice Department and even a former Fugees rap star.MORE:Inside Goldman’s Five-Day Race to Seal a 1MDB Deal With MalaysiaGoldman’s 1MDB Charges Dropped by Malaysia After SettlementHow Malaysia’s 1MDB Scandal Shook the Financial World: QuickTakeEx-Trump Fundraiser Broidy Pleads Guilty to Illegal LobbyingNajib Sentenced to 12 Years in Jail in Former 1MDB Unit Case(Adds statement by board of Goldman Sachs)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
