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The sweetheart deals just keep coming. Lawbreakers at one bank after another are let off the hook as their shareholders write a check. And then they go out and repeat the illegal behavior they promised not to do in the last settlement.

It shouldn't be surprising that this keeps happening over at the SEC - especially as long as Robert Khuzami continues to serve as Director of the Commission's Division of Enforcement.

But while each of these deals has been shameful, destructive, and outrageous, the $22 million agreement with Goldman Sachs which the SEC announced today - another one in which the guilty party "neither confirms nor denies wrongdoing" - looks like the worst one yet.

The SEC has the power to shut Goldman Sachs down for what it did, and the offenses it describes are felonies. But they just gave out another slap on the wrist - no, make that a pat on the wrist - with today's announcement.

The Worst Thing

It's not just the fact that the SEC continues to ignore the public's outrage by letting bankers off scott-free. And it's not just that this kind of irresponsible behavior ensures that the lawbreaking will continue. Its not just that crooked bank executives are allowed to "neither admit nor deny wrongdoing."

It's not even the fact that this time around the SEC has worded its announcement in a clumsy attempt to obscure the criminal behavior of Goldman's employees - although that's one of this agreement's worst features.

No, what makes this deal the worst we've seen in a long while is the timing. Most of the other recent sweetheart deals dealt with crimes that led up to - and created - the 2008 financial crisis. But this time Goldman Sachs is walking away from crimes its bankers committed as recently as last year.

That's been the SEC's pattern under both the last President and the current one. The number of repeat offenses compiled by the New York Times for these SEC deals is mind-blowing.

No wonder the SEC didn't appear before reporters to announce this latest settlement, choosing instead to announce in an an email. Cowardly - but then, would you want to show your face in public after signing a deal like this?

The Crime

What crimes did Goldman Sachs employees commit this time around? They pressured their top analysts to share confidential information in meetings called "huddles," exchanging "high conviction" rating changes the analysts planned to make but hadn't announced yet. These changes were then shared with what the SEC called "a select group of Goldman's top clients" under a program called the "Asymmetric Service Initiative," or "ASI."

Goldman Sachs had "means, motive, and opportunity":

Means. From the SEC: "Between January 2007 and August 2009, there were hundreds of instances when a ratings change occurred within five business days after the stock was discussed at a huddle, referenced in a huddle script ..."

They leaned on their guys to get it done. The SEC's report says that "Analysts' contributions to huddles and ASI, such as increased commissions generated from ASI clients, were discussed in analysts' written performance reviews and in other documents used in connection with analyst evaluations."

Anybody who's worked on Wall Street knows what that means: Come up with information and get results with it - or else.

Motive. From the SEC again: "The huddle and ASI program was part of a concerted effort ... to improve or maintain the broker votes of Goldman's highest priority clients, including ASI clients, and accordingly, generate greater trading commissions."

Opportunity. How useful could it be to know in advance what Goldman Sachs analysts think? Consider this headline from Bloomberg News: "Staples Falls after Goldman Sachs downgrades stock." Then read the first sentence of the article: "Staples Inc., the world's largest office-supply retailer, fell the most in more than two months after Goldman Sachs Group Inc. downgraded the shares to 'sell' from 'neutral."

Then look up some similar articles about stock prices for Whole Foods. Or Patriot Coal. Or Intel. Or Meritage Homes. Or Colruyt.

Patriot Coal stocks fell by six percent the day after Goldman's announcement, and Staples fell by nearly as much that morning. An "asymmetrical" client could execute a quick $1,000,000 trade and walk away with sixty grand before lunchtime. That kind of information is very lucrative ...

The Punishment

... and very illegal. It's a violation of Section 15(b) of the Securities and Exchange Act and is punishable as a felony. It's so illegal, in fact, that Goldman Sachs could be closed down entirely, either temporarily or permanently, "in the public interest."

That sounds right. But everybody on Wall Street knows that's not going to happen.

And as long as there's no real downside - no prosecutions, no big fines coming out of a banker's personal pockets - there' s no reason to stop.

The Perp

But then, that's Goldman's way of doing business - sleazy, preferential, and highly illegal. These charges resemble "spinning," the practice of letting preferred clients by into an IPO at inside-the-deal prices so they could immediately sell them off - usually at a big profit.

(It was that corrupt practice that eventually ended Meg Whitman's membership on Goldman's board and led to a lawsuit from shareholders of eBay. That's the company whose CEO chair made Whitman a desirable client at the time. The suit was settled for $3 million.)

The Cover-Up

In the SEC's words, the "huddle" and "ASi" processes "created a serious and substantial risk that analysts would share material, nonpublic information...Goldman did not establish, maintain, and enforce adequate policies and procedures to prevent such misuse."

But those are weasel words. If you read the SEC brief in detail, it's clear that Goldman didn't just "create a serious and substantial risk" that insider information would be illegally shared. The SEC's records make it pretty clear that information was illegally shared.

And they tried to cover it up. Ideas from the huddles were tracked on spreadsheets called "Records of Ideas," but the were later withheld from Goldman's own surveillance analysts. The SEC report then notes that "Even when alerts regarding trading ahead of research changes were triggered by Goldman's surveillance system, all but one were closed with no further action after only a limited review."

And even when the surveillance system showed evidence of insider trading, despite the coverups - activity like a big buy or sell right before a major announcement - Goldman did nothing to follow up. Senior Goldman officials knew what was going on and did nothing, as you can tell from sentences in the SEC's report like this one: "During 2007, members of Goldman's Compliance Division drafted a proposed insert concerning huddles for the ... Global Policies and Procedures Manual, but no such policy was ever implemented."

The "Enforcer"

And yet the strongest words we heard from Director of Investigations Khuzami was that "Higher-risk trading and business strategies require higher-order controls."

He added (in writing, of course; he didn't face reporters) that "despite being on notice from the SEC about the importance of such controls, Goldman failed to implement policies and procedures that adequately controlled the risk that research analysts could preview upcoming ratings changes with select traders and clients."

In other words, they promised not to commit this crime anymore so we let them off with a warning. Now they've done it again - and we're letting them off with a warning.

But don't worry. "Respondent (Goldman) has agreed that "it shall cease and desist from committing or causing any violations and any future violations of Section 15(g) of the Exchange Act."

Well, alrighty then!

Asymmetrical Warfare

You know who got screwed in this deal? Pension funds and other groups of "ordinary" investors who have placed their assets with Goldman Sachs, but weren't considered part of that "select group of top clients" that were given access to this "asymmetrical" information - even though in many cases they were investing far more through Goldman than most individual clients.

That was probably prudent on Goldman's part, since institutional investors might have blown the whistle on their illegal activity.

The net effect of Goldman's "asymmetrical" illegality is to further enrich the already-wealthy while playing the rest of us for suckers. Our money - whether it's our pension, our IRA, or any other institutional funds the most fortunate among us are clinging to - loses value in this game, while others profit from insider trading.

The Evidence

Fortunately there are some promising leads. Those "Record of Ideas" spreadsheets look like a goldmine. It shouldn't be difficult for diligent criminal investigators to tie these spreadsheets to subsequent Goldman-managed trades. And those internal surveillance reports - the ones that were ignored by Goldman's senior management - could be extremely useful in identifying potentially criminal acts by individual Goldman Sachs employees.

A thorough review of the email traffic among Goldman's executives, starting at the very top, should tell investigators who in senior management might also be a candidate for prosecution. While they're doing that they can contrast the public and private communications conducted by Goldman's CEO and CFO while they were affirming under Sarbanes-Oxley that they've personally reviewed the company's procedures for identifying and preventing fraud.

But we haven't heard word one from the Justice Department about any pending criminal investigation. But then they're not answering our media inquiries down there nowadays, so citizens will have to ask them - or the White House - themselves: Where are the indictments?

(See also "Another SEC Sweetheart Deal: Five Reasons to be Outraged.")

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