September 28th 2012 9:15am
Goldman Sachs settled allegations from the Securities and Exchange Commission (“SEC”) that the investment bank engaged in a “pay to play” scheme. According to the SEC allegations, one of Goldman Sachs’ bankers, Neil M.M. Morrison, made cash donations to the polical campaign of former Massachusetts Treasurer Timothy P. Cahill. Recently, Cahill was indicted on corruption charges stemming from allegations that he used State lottery advertising money to fund his gubernatorial campaign in 2010.
According to emails recovered by the SEC, Cahil stated that assigning a consultant for underwriting business “has to be a political decision” and urged his office “PLEASE don’t give these slots away willy-nilly.” For his part in the “pay to play” scheme, the SEC said that Morrison essentially ran a campaign office, wrote speeches and fundraised for Cahill during his work hours at Goldman, using the company’s email and phone systems. In exchange, the SEC said Goldman received lucrative government business, which included at least thirty (30) deals to help arrange Massachusetts bond offerings.
Goldman’s $12 Million settlement includes the disgorgement of $7.5 million that it earned in fees from underwriting Massachusetts bonds. The company also settled with the Massachusetts attorney general, paying more than $4 million back to the state.
“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,” the Massachusetts attorney general, Martha Coakley, said in a statement.
In response to the news of this recent settlement, Christopher Paulos, an attorney with the Levin Papantonio law firm’s business litigation department stated, “although it’s nice to see that Massachusetts was able to obtain some sort of recovery in this effort, one has to wonder if such a settlements will actually have any punitive or chilling effect… the fact is, corporate fraud still remains a substantial driving force in both the political and financial spheres, and until corporate wrong-doers face the reality of criminal punishment, corporate fraud will continue to be committed in the United States at an ever increasing rate”.
The SEC has made “pay to play” schemes a priority. To combat this corporate fraud, the SEC added a specialized unit that examines corruption in government bond offerings. “Fighting efforts to improperly influence the underwriting selection process is one of the unit’s top priorities,” Elaine C. Greenberg, the group’s chief, said in an SEC statement.
James L. Kauffman is a member of the Business Torts Department at Levin Papantonio Thomas Mitchell Rafferty & Proctor, P.A. and focuses primarily on representing individuals and entities seeking financial recovery for losses suffered because of securities fraud. Mr. Kauffman is a regular speaker at business tort seminars and also on nationally syndicated radio shows, including the Ed Schulz Show, Thom Hartmann and Ring of Fire, covering topics such as Dodd-Frank, Auction Rate Securities, Wall Street Fraud, and Whistleblower Protection.