Goldman, Blankfein, Cohn face shareholder lawsuit over 1MDB scandal


NEW YORK, June 28 (Reuters) – Goldman Sachs Group Inc (GS.N) and two former senior executives were sentenced Monday by a U.S. judge to face a lawsuit accusing them of misleading shareholders about the job from the bank for 1MDB, a Malaysian fund that got embroiled in a corruption scandal.

U.S. District Judge Vernon Broderick in Manhattan said the shareholders of the proposed class action suit correctly alleged that several statements from Goldman, former CEO Lloyd Blankfein and former COO Gary Cohn about 1MDB and Goldman’s ethics were false and misleading.

Shareholders led by Swedish pension fund Sjunde AP-Fonden claimed Goldman’s market value fell by billions of dollars as the truth of his 1MDB deals became public.

Goldman spokeswoman Maeve DuVally declined to comment. Lawyers for the other defendants did not immediately respond to requests for comment. Shareholder lawyers did not immediately respond to similar requests.

Broderick’s move follows Goldman’s October 22 deal to pay $ 2.9 billion in penalties and admit wrongdoing to a Malaysian unit to deal with 1MDB investigations by the US Department of Justice and other authorities.

Goldman helped sell $ 6.5 billion in bonds for 1MDB, a sovereign wealth fund former Malaysian Prime Minister Najib Razak launched to promote economic development, and raised around $ 600 million in fees.

Authorities said fund officials and accomplices looted the proceeds from luxury bonds and to finance Hollywood films, while Goldman bankers bribed officials in Malaysia and Abu Dhabi to win the 1MDB contract.

Broderick said he “compels gullibility” for Goldman to claim there was no indication that funds were being siphoned off, and that shareholders could sue the bank’s claim that it was “staunchly” to fully comply with the letter and spirit of the laws, rules and ethical principles which govern us. “

He also said shareholders could try to prove that Blankfein ignored internal warnings about 1MDB before telling a reporter in November 2018 that he was “unaware” of the red flags.

Broderick also dismissed all claims against Harvey Schwartz, who became Goldman’s co-COO after Cohn left.

The case is Sjunde AP-Fonden v. Goldman Sachs Group Inc et al, US District Court, Southern District of New York, No. 18-12084.

Report by Jonathan Stempel in New York; Editing by Himani Sarkar

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