Goldman Sachs, the American multinational investment bank and financial services company, known world over, had its dark underside exposed in a book written by one of its ex-employees who taped conversation of executives and had it published in an expose.
The book written by Carmen Segarra entitled “Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street,” reveals conversations by the likes of David Solomon who took over last week from Lloyd Blankfein, once dismissed criticism of Goldman’s double dealing only as a matter of perception which turned out to be a light hearted comment which failed to go to the heart of Goldman’s problems one that ended up costing the company $20 million in fees.
This 340-page book was taken from recorded meetings by the author unbeknownst to the higher ups and mangers she was dealing with.
Segarra worked as an ex-bank examiner who looked who looked into Goldman Sachs for the Federal Reserve Bank of New York and declares she was let go after bringing too much attention about the companies alleged conflicts.
The New York Fed has many times been criticized for its loose approach overseeing banks leading up to the 2008 financial crisis. For example, its last president William Dudley was appointed in 2009 after spending 21 years at Goldman. However, Segarra’s book claims that the issue kept going on for year even after the crisis, with regulators happy to act without fear of retribution.
In the book she quotes a pseudonym Connor O’Sullivan saying “we want [Goldman] to feel pain, but not too much.”
In preparation for her book, Segarra took careful notes and recorded 46 hours of conversation with unknowing colleagues and bankers during her seven months at the New York Fed.
At the core of the book takes place a battle pitting Segarra on the one hand going against Goldman Sachs and weak-kneed and careless regulators over a deal that would have energy giant Kinder Morgan’s 2012 acquisition of rival El Paso Corporation for $21.1 billion. Not only did Goldman illegally advise each side of the deal, Steve Daniel, it’s lead banker advising El Paso, owned $340,000 in Kinder Morgan stock.
According to Segarra, none of this seemed to bother Solomon, who at the time was co-head of investment banking, then.
Segarra says she recorded Solomon declaring at a meeting with the New York Fed and other regulators, “a conflict is a perception, OK, of something that could affect the advice you’re giving, the judgment.”
Solomon added that their “job . .. is to discuss those things and to work collectively with [clients] to decide whether not those perceptions inhibit us.
Despite doubts about the transaction, Delaware Judge Leo Strine called Goldman’s double-dealing “disturbing” and “tainted by disloyalty.” Not only that, El Paso shareholders filling a class-action suit against the deal, alleging the tie-up was arranged to help Goldman Sachs.
Rather than help the two companies merge and see Goldman Sachs benefit from it, the attempt at a deal backfired as Goldman lost out on $20 million in fees from the El Paso deal after the shareholders won $110 million judgment.
Segarra began writing the book in 2015 and she conveys the New York Fe as have conflicts of interests. She kept witnessing economic malfeasance with insider trading with bankers they were supposed to be regulating.
According to her memoir, when Segarra told an unnamed colleague that insider trading was illegal, the man responded “Not if you don’t get caught.”
Segarra was also told to look passed the fact that Goldman didn’t have a written conflict-of-interest policy by another boss Michael Silva. Another figure, Jake Sieward, a spokesman for Goldman, didn’t respond to a question asking for Solomon to comment on his words that were caught on tape.
For Solomon it is the second time within a month that he has been accused of trying to bypass and skirt ethic’s rules. Back in September, the New York Times reported that Solomon encouraged former Goldman employee James Katzman to drop complaints he lodged in 2014 when the company traders tried to squeeze insider information, allaying any concerns he might have had by telling him that what he would do is “simply the way Wall Street worked.” Goldman denied any such action and released a statement saying that “we continually reject Ms. Segarra’s allegations from her seven-month tenure as a junior examiner almost seven years ago.
Despite this quote, however, this would not be Goldman Sachs first time in trouble with insider trading. Back in 2015, Goldman paid $50 million to settle accusations that ex-banker Rohit Bansal treated New York Fed analyst Jason Gross at Peter Luger’s steak house and received secret examination document in return. Bansal and Gross were fines and were put on probation for their actions.
By: Andrew Schiff