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Apple’s Web of Tax Shelters Saved It Billions, Panel Finds

May 20, 2013 by Leave a Comment

The investigation is expected to set up a potentially explosive confrontation between a bipartisan group of lawmakers and Timothy D. Cook, Apple’s chief executive, at a public hearing on Tuesday.

Congressional investigators found that some of Apple’s subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless — exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.

“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” said Senator Carl Levin, a Michigan Democrat who is chairman of the Senate Permanent Subcommittee on Investigations that is holding the public hearing Tuesday into Apple’s use of tax havens. “Apple successfully sought the holy grail of tax avoidance. It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere.”

Thanks to what lawmakers called “gimmicks” and “schemes,” Apple was able to largely sidestep taxes on tens of billions of dollars it earned outside the United States in recent years. Last year, international operations accounted for 61 percent of Apple’s total revenue.

Investigators have not accused Apple of breaking any laws and the company is hardly the only American multinational to face scrutiny for using complex corporate structures and tax havens to sidestep taxes. In recent months, revelations from European authorities about the tax avoidance strategies used by Google, Starbucks and Amazon have all stirred public anger and spurred several European governments, as well as the Organization for Economic Cooperation and Development, a Paris-based research organization for the world’s richest countries, to discuss measures to close the loopholes.

Still, the findings about Apple were remarkable both for the enormous amount of money involved and the audaciousness of the company’s assertion that its subsidiaries are beyond the reach of any taxing authority.

“There is a technical term economists like to use for behavior like this,” said Edward Kleinbard, a law professor at the University of Southern California in Los Angeles and a former staff director at the Congressional Joint Committee on Taxation. “Unbelievable chutzpah.”

While Apple’s strategy is unusual in its scope and effectiveness, it underscores how riddled with loopholes the American corporate tax code has become, critics say. At the same time, it shows how difficult it will be for Washington to overhaul the tax system.

Over all, Apple’s tax avoidance efforts shifted at least $74 billion from the reach of the Internal Revenue Service between 2009 and 2012, the investigators said. That cash remains offshore, but Apple, which paid more than $6 billion in taxes in the United States last year on its American operations, could still have to pay federal taxes on it if the company were to return the money to its coffers in the United States.

John McCain of Arizona, who is the panel’s senior Republican, said: “Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders.”

In prepared testimony expected to be delivered to the Senate committee by Mr. Cook and other Apple executives on Tuesday, the company said it “welcomes an objective examination of the U.S. corporate tax system, which has not kept pace with the advent of the digital age and the rapidly changing global economy.”

The executives plan to tell the lawmakers that Apple does not use tax gimmicks, according to the prepared testimony.

Nelson D. Schwartz reported from Washington and Charles Duhigg from New York. David Kocieniewski contributed reporting from New York.

Article source: http://www.nytimes.com/2013/05/21/business/apple-avoided-billions-in-taxes-congressional-panel-says.html?partner=rss&emc=rss

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Web of Tax Shelters Saved Apple Billions, Inquiry Finds

May 20, 2013 by Leave a Comment

Some of these subsidiaries had no employees and were largely run by top officials from the company’s headquarters in Cupertino, Calif., according to Congressional investigators. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless – exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.

In 2011, for example, one subsidiary paid Ireland just one-twentieth of 1 percent in taxes on $22 billion on pretax earnings from various operations; another did not file a corporate tax return anywhere and has paid almost nothing on $30 billion in profits since 2009.

“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” said Senator Carl Levin, a Michigan Democrat who is chairman of the Senate Permanent Subcommittee on Investigations. “Apple sought the holy grail of tax avoidance. It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere.”

John McCain, the Arizona Republican who is the panel’s ranking member, added: “Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders.”

Over all, Apple’s tax avoidance efforts shifted at least $74 billion from the reach of the Internal Revenue Service between 2009 and 2012, the investigators said. That cash remains offshore, but Apple could still have to pay taxes on it to American authorities if the company were to return the money to its coffers in the United States.

Investigators have not accused Apple of breaking any laws, and the company is hardly the only American multinational to face scrutiny for using complex corporate structures and tax havens to sidestep taxes. In recent months, revelations from European authorities about the tax avoidance strategies used by Google, Starbucks and Amazon have all stirred public anger and spurred several European governments, as well as the Organization for Economic Cooperation and Development, a Paris-based research organization for the world’s richest countries, to discuss measures to close the loopholes.

Still, the findings about Apple were remarkable both for the enormous amount of money involved – tens of billions of dollars – and the audaciousness of the company’s assertion that its subsidiaries are beyond the reach of any taxing authority because they are stateless.

“There is a technical term economists like to use for behavior like this,” said Edward Kleinbard, a law professor at the University of Southern California in Los Angeles and a former staff director at the Congressional Joint Committee on Taxation. “Unbelievable chutzpah.”

And while Apple’s strategy was unusual in its scope and effectiveness, it underscores how riddled with loopholes the American corporate tax code has become, critics say. At the same time, it shows how difficult it will be for Washington to overhaul the tax system and shut these loopholes down.

“It’s like playing Whac-A-Mole,” said one Congressional staff member. “We’re still puzzling our way through this.”

Although the Senate examination of Apple was started by the Senate subcommittee more than 18 months ago, investigators discovered one major subsidiary in Ireland only Sunday night. A Senate hearing on the issue is scheduled for Tuesday, and will include testimony by Apple’s chief executive, Timothy D. Cook.

Apple declined to comment, except to make available a text of the testimony Mr. Cook is expected to provide at the hearing.

Charles Duhigg provided additional reporting from New York.

Article source: http://www.nytimes.com/2013/05/21/business/apple-avoided-billions-in-taxes-congressional-panel-says.html?partner=rss&emc=rss

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Senate Panel Is Expected to Castigate Apple on Tax Tactics

May 20, 2013 by Leave a Comment

Apple, one of the most profitable companies in American history, has shielded billions of dollars from tax collectors around the globe by moving revenue to offshore subsidiaries and taking advantage of tax loopholes, according to company documents and tax experts.

Apple has more than $100 billion in cash assigned to foreign subsidiaries, where it is not taxed by the United States. Some of those subsidiaries, though technically lodged in Europe, are fully controlled by Apple’s executives in Cupertino, Calif.

When Mr. Cook and other top-ranking Apple executives appear tomorrow before the Senate Permanent Subcommittee on Investigations, lawmakers are expected to question them on Apple’s use of tax loopholes and shell companies to escape paying corporate income taxes on much of its profit.

Mr. Cook is expected to tell lawmakers that Apple is the largest corporate income taxpayer in the United States, according to a copy of his testimony posted online by the company. Apple, according to that testimony, paid nearly $6 billion in federal taxes last year, and “does not use tax gimmicks.” Moreover, Mr. Cook is expected to call for a sweeping reform of the federal corporate tax code. In particular, he will call for lowering rates on companies moving overseas earnings back to the United States.

“What he’s asking for is a reward for having gamed the system,” said Edward D. Kleinbard, the former chief of staff at the Congressional Joint Committee on Taxation, and now a law professor at the University of Southern California.

Apple referred all questions to its posted testimony.

The Senate Permanent Subcommittee on Investigations, led by Senators Carl Levin, a Michigan Democrat and John McCain, an Arizona Republican, has been investigating technology companies, including Hewlett-Packard and Microsoft, for years over complaints that such firms are taking advantage of an outdated tax code.

Apple provides a window on how technology giants have taken advantage of tax codes written for an industrial age and ill suited to today’s digital economy. Some profit at companies like Apple, Google, Amazon, H.P. and Microsoft derive not from physical goods but from royalties on intellectual property, like the patents on software that makes devices work.

Other times, the products themselves are digital, like downloaded songs. It is much easier for businesses with royalties and digital products to move profit to low-tax countries than it is, say, for grocery stores or automakers. A downloaded application, unlike a car, can be sold from anywhere.

The growing digital economy presents a conundrum for lawmakers overseeing corporate taxation: although technology is now one of the nation’s largest and most valued industries, many tech companies are among the least taxed, according to government and corporate data. As of last year, the 71 technology companies in the Standard Poor’s 500-stock index — including Apple, Google, Yahoo and Dell — reported paying worldwide cash taxes at a rate that, on average, was a third less than other S. P. companies’.

Article source: http://www.nytimes.com/2013/05/21/business/senate-panel-is-expected-to-castigate-apple-on-tax-tactics.html?partner=rss&emc=rss

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High & Low Finance: Masked by Gibberish, the Risks Run Amok

March 22, 2013 by Leave a Comment

Or should we simply conclude that playing in the modern world of derivatives is best left to those whose survival is not critical to the nation’s economy, and who do not benefit from government-backed deposit insurance?

That question is brought to mind by a reading of the fascinating — well, to me, anyway — story of how JPMorgan Chase got into the mess of the London whale trades that dominated the financial news last year, as told in a report by the Senate Permanent Subcommittee on Investigations that was released last week.

Much of the attention has focused on what Jamie Dimon, the chief executive, knew and when he knew it, and the extent to which the bank intentionally deceived regulators and investors as the investment strategy was blowing up.

I, on the other hand, was struck by the sheer incompetence and stupidity documented in the report.

Consider the following presentation written by Bruno Iksil, the whale himself, on Jan. 26, 2012, as the losses were growing. He called for executing “the trades that make sense.”

He proposed to “sell the forward spread and buy protection on the tightening move,” “use indices and add to existing position,” “go long risk on some belly tranches especially where defaults may realize” and “buy protection on HY and Xover in rallies and turn the position over to monetize volatility.”

That presentation was made to a JPMorgan group called the International Senior Management Group of the Chief Investment Office, which seems to have approved it.

If the proposal does not make sense to you, don’t despair. It is largely gibberish.

“This proposal,” the Senate report states, “encompassed multiple, complex credit trading strategies, using jargon that even the relevant actors and regulators could not understand.” The subcommittee asked officials of both JPMorgan’s Chief Investment Office, or C.I.O., and its regulator, the Office of the Comptroller of the Currency, just what that meant. Nobody seemed to know. (Mr. Iksil, safely overseas, chose not to talk to the subcommittee staff.)

Ina Drew, the bank’s chief investment officer at the time, who supervised the group, said she did not know. One risk officer at the bank said he thought Mr. Iksil was simply proposing a strategy of buying low and selling high. Of course, that is a fine strategy if markets cooperate. But anyone who simply proposed that would have been seen to be blowing smoke. Use all that jargon, and some people will assume you are actually saying something.

The comptroller’s office was able to explain some of what was said, but no one seemed to be sure just what a “belly tranch” might be. The subcommittee speculated it might refer to a security with more credit risk than the safest ones, but less risk than the riskiest ones.

In any case, after the meeting Mr. Iksil embarked on a disastrous strategy that led to larger and larger losses. The portfolio he was running — which the bank initially said was a hedge to reduce its exposure to a general deterioration of credit conditions — became one that would benefit from credit conditions improving.

Over the next two months, as the losses grew, neither senior bank officials nor regulators seem to have had a good understanding of what was happening.

The bank officials were preoccupied with making the mess seem less messy. That involved what they called defensive trading — buying what they already owned to keep market values from falling further — and, when that did not work, fudging the valuations. It involved changing risk models to make what was going on seem to be less risky than it was, and coming up with creative ways to calculate how much capital was really needed.

The regulators seem to have been in their own “see no evil, hear no evil” world. When they eventually had to pay attention, the comptroller’s officials were not bothered by the bank’s withholding of information from them. Instead, one top official dismissed the entire problem as little more than “an embarrassing incident.” Comptroller’s officials immediately said the trades were perfectly proper hedges, something that turned out to be untrue.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

This article has been revised to reflect the following correction:

Correction: March 21, 2013

An earlier version of this column mischaracterized the subcommittee’s speculation on what a “belly tranch” might be. The thought was that it might refer to a security with more risk than the safest securities and less risk than the riskiest ones, not with less risk than the safest securities and more risk than the riskiest ones.

Article source: http://www.nytimes.com/2013/03/22/business/behind-the-derivatives-gibberish-risks-run-amok.html?partner=rss&emc=rss

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S.E.C. Finds Problems at Credit-Rating Agencies

September 30, 2011 by Leave a Comment

The examinations were mandated in the Dodd-Frank regulatory law passed last year after numerous investigations into the causes of the financial crisis. Several of those inquiries found that the agencies issued inaccurate reports, failed to report or manage conflicts of interest and put generating revenue ahead of rigorous financial analysis.

For the investing public, however, the S.E.C.’s report is likely to be of limited value because the commission declined to name the credit ratings agencies at which it found deficiencies. Instead, it refers to its findings as occurring either at one or more of the three large agencies — Moody’s Investors Service, Standard Poor’s and Fitch — or at one or more of the seven smaller ratings firms.

The report also found that all three of the large agencies and four of the small ones had weak controls or inadequate policies for ownership of securities by employees.

The findings have not resulted in any enforcement actions by the agency, but staff members could refer some or all of its findings to the enforcement division for further investigation.

Inflated credit ratings were the subject of several investigations into the causes of the financial crisis. A report by the Senate permanent subcommittee on investigations issued in April noted that more than 90 percent of the highest, or AAA, ratings given to mortgage-backed securities in 2006 and 2007 “were later downgraded to junk status, defaulted or withdrawn,” causing huge investor losses.

In a conference call with reporters, commission staff members said it was not forbidden by the Dodd-Frank statute or the commission’s own regulations from disclosing the names of the companies whose procedures it found deficient. Carlo Y. di Florio, director of the office of compliance inspections and examinations, said, “We made a decision internally that it was most effective” not to name the companies.

“We didn’t name names because we are separately following up” with each ratings agency about the findings, Mr. di Florio said, a path he said was “more efficient.”

The commission’s report said that each of the three larger ratings agencies “has made changes to improve its operations” since the last periodic examination in 2007-8. But the report also noted that all of the 10 agencies “failed to follow their ratings procedures in some instances.”

The report specifically said that the failure of one of the largest ratings firms to follow its own procedures resulted in ratings of asset-backed securities that were inconsistent with its publicly disclosed standards. “The staff is concerned about the extent to which market share and business considerations may have contributed” to the failure, the report said.

Mr. di Florio declined to disclose the company’s name. A footnote in the report said that the agency itself reported its analysis error as the S.E.C. staff was conducting its examination, which covered the period Dec. 1, 2009, through Aug. 1, 2010.

In August 2010, the S.E.C. released a separate report on its investigation of Moody’s, which found that the company made false statements in its registration as a ratings agency with the S.E.C. and failed to follow its procedures and methodologies for determining credit ratings.

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Fair Game: New Rule Gives Commodities Speculators a Break

September 24, 2011 by Leave a Comment

But these hardships for consumers provide another reason to check in on Dodd-Frank, that package of financial reforms that Congress passed in 2010. Here’s why:

Congress told federal regulators to write rules that would ensure that Dodd-Frank does what it’s supposed to do, which includes protecting consumers. But the Commodity Futures Trading Commission has proposed rules that critics say might actually encourage speculation in the commodities markets, rather than reduce it.

Senator Bill Nelson, a Florida Democrat, says that as things stand, the C.F.T.C.’s plan could cost ordinary Americans.

“Despite a clear directive from Congress to rein in excessive speculation, regulators still are listening too much to Wall Street and not acting quickly enough to protect American consumers,” Mr. Nelson said last week.

Granted, prices of various commodities, including heating oil and gasoline, fell last week amid all the economic gloom. But that’s no reason to give speculators a pass.

There are those who reject the notion that financial speculation has made commodity prices more volatile and even driven up prices in recent years. Some of them work for the C.F.T.C.

But Michael Greenberger, a professor at the University of Maryland Law School, says that a majority of academic studies on this issue — from Texas AM, Rice and Stanford — demonstrate the ill effects of speculation on energy and food prices.

Indeed, a bipartisan report by the Senate Permanent Subcommittee on Investigations in 2009 concluded that there was “significant and persuasive evidence” that skyrocketing wheat prices reflected high levels of speculation in that market.

That report highlighted trading linked to commodities indexes and other financial instruments, a field that’s exploded with the growth of commodity index investment funds.

“Dodd-Frank was intended to include these commodity index swaps with strict limitations on the participation of speculators in the commodities staples futures markets,” Mr. Greenberger says. But the response from the C.F.T.C. “is a horrifically weak rule.”

At the center of the debate are rules that would place a cap on how many financial contracts traders can accumulate for any given commodity. The idea is to prevent a small group from dominating an entire market.

The C.F.T.C. has proposed a limit of 25 percent of the deliverable supply of the underlying commodity. Mr. Nelson last week proposed a bill that would put that position limit at 5 percent of the deliverable supply. He says the C.F.T.C.’s limit is so high that it would encourage speculation and make markets more volatile.

The C.F.T.C. declined to comment, as the rule is still being considered.

Commodity index funds are big business. Such funds have attracted as much as $350 billion from investors in recent years. As such players have grown, the influence of commercial traders, like food producers and airlines that use the commodities markets to hedge against price swings, has declined. Hedging has gotten more expensive, and those higher costs have been passed on to consumers. Dodd-Frank determined that position limits were a solution to excessive speculation.

Mr. Nelson’s bill, the Anti-Excessive Speculation Act of 2011, sets limits in energy contracts that would apply to speculators as a class of traders, aiming to cap the overall level of speculation in the market at its historic 25-year average. In the oil markets, speculative trading accounts for about half of all trading. He says his plan would reduce that figure to about 20 percent. He cited research showing that speculators may add $21 to $27 — or about 25 percent at current prices — to the price of a barrel of oil.

“This legislation aims to ensure that prices at the pump better reflect the true supply and demand for oil — and not the activities of speculators,” he says.

The C.F.T.C. proposal has drawn other criticism as well. It also would allow for greater position limits for commodities contracts that are settled for cash, rather than by physical delivery of the underlying goods. Most of these financial contracts trade on unregulated exchanges.

The proposal would let traders in cash-settled contracts hold five times the amount of contracts allowed for traders of physically settled versions in the final days of trading, or the so-called spot month. Traders employing this higher limit cannot participate in the market for the physically settled contracts.

That’s a bad idea, according to the Commodity Markets Oversight Coalition, a group of commodities end-users including smallish heating oil companies in Vermont, New Mexico and Maine. In a comment letter to the C.F.T.C., the group said that because the spot month is when futures prices converge with the spot price of an underlying commodity, allowing five times the leverage in cash contracts at that time would probably increase volatility and costs for end users who are hedging.

“The adoption of the current proposed rulemaking will increase the threat of price manipulation, especially in the final days of trading,” the group wrote, adding that Congress didn’t intend to allow position limits to give favorable treatment to unregulated exchanges at the expense of regulated markets.

Interestingly, a recent enforcement action filed by the C.F.T.C. against several crude oil speculators seems to confirm the possibility for manipulation using outsize amounts of cash-settled contracts. Outlining the case filed last May against Parnon Energy, based in California, and its affiliate Arcadia Petroleum, which is based in London, the C.F.T.C. accused the companies of manipulating the market for crude oil in early 2008 using a combination of physically settled and financially settled contracts.

At the time the C.F.T.C. contended that the manipulation took place, there were market-imposed limits on the number of physically settled contracts a trader could hold but no caps on the cash-settled version. The scheme generated $35 million in improper profits, the C.F.T.C. said.

Parnon denied the C.F.T.C.’s accusations and is contesting them in federal court.

According to the Federal Energy Regulatory Commission, the collapse of the $10 billion Amaranth Advisors hedge fund in 2006 also involved manipulation conducted through a combination of cash-settled and physically delivered contracts, in that case, for natural gas. Once again, there were limits on the physical contracts but none on those settled for cash. The Energy Regulatory Commission settled with Amaranth Advisors in 2009 for $7.5 million.

The C.F.T.C. might still change its proposal. The commission is expected to vote by mid-October. Stay tuned.

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DealBook: Goldman’s Shares Tumble as Firm Hires Top Lawyer

August 23, 2011 by Leave a Comment

Goldman Sachs hired Reid Weingarten, a prominent criminal defense lawyer, as it expects its executives, including Lloyd C. Blankfein, below, the firm's chief, to be interviewed by the Justice Department.Michael Stravato for The New York TimesGoldman Sachs hired Reid Weingarten, a prominent criminal defense lawyer, as it expects its executives, including Lloyd C. Blankfein, below, to be interviewed by the Justice Department.Andrew Harrer/Bloomberg News

8:57 p.m. | Updated

Goldman Sachs’s actions during the financial crisis returned to haunt it with a fury on Monday afternoon.

In late trading, shares of Goldman tumbled nearly 5 percent, knocking $2.7 billion off the firm’s market value, after a report that the firm’s chief executive, Lloyd C. Blankfein, had hired a prominent criminal defense lawyer, Reid H. Weingarten.

Goldman, when confirming the hiring, portrayed it as routine, given the several government investigations faced by the firm. But the sharp reaction in the stock price showed the fragile nerves of investors, who are worried that potential legal liability could damage the firm and its earnings power.

A spokesman for Goldman said executives at the firm were expected to be interviewed by the Justice Department. The agency is conducting an inquiry that stems from a 650-page report produced earlier this year by the Senate Permanent Subcommittee on Investigations. That report said that Goldman had misled clients about its practices related to mortgage-linked securities.

“As is common in such situations, Mr. Blankfein and other individuals who were expected to be interviewed in connection with the Justice Department’s inquiry into certain matters raised in the P.S.I. report hired counsel at the outset,” Goldman Sachs said in a statement.

While investors apparently feared the worst on Monday, a person close to the matter said that Mr. Blankfein had not been subpoenaed and that no Goldman executive had received an individual subpoena. Goldman is cooperating with the Justice Department investigation.

Still, Monday’s stock fall underscored just how vulnerable Goldman’s stock would continue to be until the Justice Department and other authorities finished their investigations.

“Until Goldman resolves its legal issues, the company and the stock are vulnerable to all sorts of perceptions, real or perceived,” said Michael Mayo, an analyst with Crédit Agricole Securities.

With about 20 minutes left in the trading day, Reuters, citing an unidentified government source, reported that Mr. Blankfein had hired Mr. Weingarten. Mr. Weingarten has defended Bernard J. Ebbers, the former chief executive of WorldCom, and Mike Espy, a former agriculture secretary. Goldman’s stock price quickly tumbled, falling to its lowest level since March 2009. Its shares closed at $106.51.

The stock move also reflected the support Goldman shareholders had for Mr. Blankfein despite the problems the firm’s problems under his stewardship. At Goldman’s stakeholder meeting in May, shareholders voted 97 percent in favor of his leadership. Any suggestion that Mr. Blankfein’s legal woes were mounting, or that he might leave the firm, would be seen as a negative for the stock.

Goldman investors have been on a roller-coaster ride since April 2010, when the Securities and Exchange Commission accused Goldman of duping clients by selling mortgage securities that were secretly created by a hedge fund firm to cash in on the housing market’s collapse.

Since then, it has been dogged by investigations and speculation about investigations, all of which have taken its toll on stock. Goldman shares were trading near $180 a share before the S.E.C. filed its lawsuit. Goldman settled that suit a few months later, but its troubles were far from over.

This year came the Senate report, which led to a Justice Department inquiry. And in June, Goldman received a subpoena from the office of the Manhattan district attorney, which is also investigating Goldman’s role in the financial crisis.

Mr. Blankfein’s decision to hire his own lawyer is not unusual. Legal experts say that it is now common for a company’s chief executive to retain separate counsel from the corporation. It has become rare for a lawyer or law firm to represent both a company and its executives in a government investigation.

Mr. Weingarten, 61, is considered a skilled trial lawyer, having won acquittals for Mr. Espy, the former agriculture secretary, and Mark A. Belnick, the former general counsel at Tyco. He has also suffered his share of courtroom defeats. Mr. Ebbers, the head of WorldCom, was found guilty and was sentenced to 25 years in prison.

On Monday, Mr. Weingarten was in the Federal District Court in Manhattan with his client Anthony Cuti, the former chief executive of Duane Reade, the drugstore chain. A judge sentenced Mr. Cuti to three years in prison for a scheme to falsely inflate the income and reduce the expense that the company reported. A jury convicted Mr. Cuti in June 2010.

Mr. Weingarten did not respond to request for comment on Monday. A spokeswoman for his law firm, Steptoe Johnson, declined to comment.

Steptoe is not the firm most closely associated with Goldman. The bank’s primary outside law firm is Sullivan Cromwell, a prominent and old-line New York law firm. Sullivan represented the firm in its $550 million settlement with the S.E.C. Also, when Mr. Blankfein testified as a witness earlier this year in the insider trading trial of Raj Rajaratnam, the former hedge fund manager, lawyers from Sullivan coached him on his testimony and accompanied him to court.

A native of Newark, Mr. Weingarten is a graduate of Cornell and the Dickinson School of Law at Penn State. Before becoming a criminal defense lawyer, he spent several years as a deputy district attorney in Pennsylvania and then joined the Justice Department’s Public Integrity Section.

While at the Justice Department, he spent years bringing cases against corrupt politicians and worked with another young prosecutor, Eric H. Holder. Mr. Holder, now the attorney general of the United States, remains one of Mr. Weingarten’s closest friends.

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