April 17, 2024

DealBook: Goldman to Pay $12 Million to Settle S.E.C. ‘Pay to Play’ Case

Goldman Sachs settled federal allegations on Thursday that one of its investment bankers curried favor with a public official to win lucrative government contracts in Massachusetts.

The Wall Street bank struck a roughly $12 million settlement with the Securities and Exchange Commission to resolve the “pay to play” accusations without admitting or denying guilt.

The banker, Neil M.M. Morrison, who was a vice president at the firm, did not settle. His lawyer did not return a call for comment.

The Securities and Exchange Commission said Mr. Morrison won government business for Goldman after touting his strong ties to the State treasurer at the time, Timothy P. Cahill, who in April was indicted on public corruption charges. Mr. Morrison, the S.E.C. said, in essence ran a campaign office for Mr. Cahill out of Goldman, acting as a fund-raiser and speechwriter. He also made cash donations to Mr. Cahill’s campaign.

During the same period, the S.E.C. says, Mr. Morrison began soliciting public contracts for Goldman, a violation of securities laws. His lobbying was done during work hours and using the firm’s e-mail system and phones.

“The pay-to-play rules are clear: municipal finance professionals that use their firm’s resources to campaign on behalf of political candidates compromise themselves and the firms that employ them,” said Robert Khuzami, director of enforcement at the commission.

The S.E.C. faulted Goldman for failing to keep an eye on Mr. Morrison, who was portrayed by the regulator as a major public finance banker. Had Mr. Morrison’s activities been disclosed, it would have prohibited Goldman from getting business from the state for two years.

In a statement, Goldman said it detected Mr. Morrison’s activities, flagged regulators and then terminated him. “We accept responsibility for the consequences of his unauthorized actions under the terms of the settlements announced today and are pleased to resolve these investigations.”

Goldman’s penalty includes disgorgement of $7.5 million that it earned in fees from underwriting Massachusetts bonds. The firm also settled with the Massachusetts attorney general, which in a related action received more than $4 million from Goldman.

“We are pleased that this settlement brings back more than $4 million to the Commonwealth and serves to protect the integrity of the Commonwealth’s bidding process,” Massachusetts Attorney General Martha Coakley said in a statement. Ms. Coakley cited “serious violations of state law that involved millions of taxpayer dollars.”

For Mr. Morrison, the S.E.C. said, winning the contracts was personal. “We have discussed the Build American Bond transaction and how important it is to me,” he wrote in an e-mail to one of Mr. Cahill’s employees in reference to a deal that Goldman wanted to underwrite. “Having Goldman as the lead and getting 50% of the economics would be such a home run for me.”

Mr. Morrison, the S.E.C. said, highlighted his political ties when pushing Mr. Cahill’s office for business. In one e-mail to a deputy treasurer, he wrote, “From my standpoint as an advisor/consultant/friend I am saying, PLEASE don’t give these slots away willy-nilly,” referring to the underwriting business. “This has to be a political decision.”

At one point, according to the S.E.C. complaint, Mr. Morrison acknowledged the problem his lobbying posed, telling a campaign official in an e-mail that “I am staying in banking and don’t want a story that says that I am helping Cahill, who is giving me banking business. If that came out, I’m sure I wouldn’t get any more business.”

Article source: http://dealbook.nytimes.com/2012/09/27/goldman-to-pay-12-million-to-settle-s-e-c-pay-to-play-case/?partner=rss&emc=rss

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