(September 27, 2012) – Goldman Sachs has agreed to shell out nearly $12 million to settle the US Securities and Exchange Commission’s (SEC) charges of “pay-to-play” violations.
The SEC’s orders against Goldman and its former Boston-based vice president, Neil Morrison, claim that Morrison, who was in charge of drumming up municipal underwriting business, supported former Massachusetts Treasurer and Chairman of the state pension board Timothy Cahill’s run for governor while receiving securities contracts.
“Morrison made a secret, undisclosed cash campaign contribution to Cahill in willful violation” of Municipal Securities Rulemaking Board (MSRB) policy, the SEC order against Morrison alleges. He reportedly provided a friend with $400 in cash, and asked the friend to write a $500 check for the campaign in his/her own name. “Moreover,” the order continues, “Morrison solicited campaign contributions for Cahill when Goldman Sachs was engaged in or seeking to engage in municipal underwriting business with the Treasurer’s Office.”
The SEC alleges that some of Morrison’s campaign activities occurred “during his Goldman Sachs work hours and use of Goldman Sachs resources constituted valuable undisclosed ‘in-kind’ campaign contributions to Cahill attributable to Goldman Sachs.” These “in-kind” campaign contributions reportedly included fundraising, legal advice, drafting campaign strategy and speeches, and reviewing salaries and hiring decisions.
After a securities dealer makes a political contribution worth more than $250, MSRB rules prohibit them from doing business with the recipient for two years. But according to the SEC, “Goldman Sachs, with Morrison’s knowledge, participated as senior manager, cosenior manager, or co-manager for a total of thirty negotiated underwritings by the Issuers totaling approximately $9 billion.” Goldman Sachs reportedly received more than $7.5 million for its services.
E-mails appear to have been a major source of evidence for the SEC. During a thirteen-month period in 2009 and 2010, Morrison sent at least 364 campaign-related e-mails using his Goldman Sachs account, according to the order. This, the order says, is one of them: “Very regretfully, I have to reach out to you again regarding the Treasurer’s event…If you could do anything by way of tickets it would be very helpful and would probably be a good idea for you. The tickets have a face value of…$100 but you can sell them for $50 each. I really dislike relaying this type of information and I know its [sic] not easy for anyone.”
The $12 million paid by Goldman settles matters between investment bank and the SEC. The payout includes a $3.75 million penalty—the largest ever imposed for MSRB pay-to-play violations.
The SEC’s case against Morrison continues.