Goldman Sachs will pay $12 million in SEC pay-to-play case

Goldman Sachs Group Inc. will pay about $12 million to resolve U.S. regulatory claims that a former banker made improper campaign contributions to the state treasurer of Massachusetts while seeking underwriting business from his office.

Neil Morrison, who was a vice president in Goldman Sachs’s Boston office, was substantially engaged in working for Timothy P. Cahill’s gubernatorial campaign from November 2008 to October 2010, sometimes during work hours from his office, the Securities and Exchange Commission said in a statement today. The work and use of company resources constituted “in-kind” contributions in violation of pay-to-play rules, the SEC said.

The settlement, the SEC’s first involving non-cash campaign contributions, is the latest in a string of cases since the agency began bolstering oversight of the $2.93 trillion municipal-bond market in 2010. At that time, SEC Enforcement Director Robert Khuzami set up a task force to investigate bid- rigging for municipal-investment contracts by banks, local governments that don’t disclose their true financial condition, and public officials who hire advisers based on political contributions.

“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,” Khuzami said in the SEC’s statement.

Prohibited Underwritings

The campaign work by Morrison, 38, disqualified Goldman Sachs from engaging in municipal underwriting business with certain Massachusetts issuers for two years after the contributions, the SEC said. Nevertheless, the New York-based firm participated in 30 prohibited underwritings, earning more than $7.5 million in improper fees, according to the agency.

“We detected Morrison’s activities, promptly alerted regulators, terminated his employment, and fully cooperated with the investigations,” Michael DuVally, a Goldman Sachs spokesman, said in a statement. “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.”

In settling the SEC’s claims, Goldman Sachs didn’t admit or deny wrongdoing. A phone call to Thomas Kiley, Morrison’s attorney, wasn’t immediately returned.

Page 1 of 2 >>

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome