Goldman Sachs settles SEC charges for almost $12M

AP News
Posted: Sep 27, 2012 8:52 PM
Goldman Sachs settles SEC charges for almost $12M

WASHINGTON (AP) — Goldman Sachs has agreed to pay nearly $12 million to settle civil charges accusing one of its executives of providing campaign services to a Massachusetts official in return for bond business.

The Securities and Exchange Commission also charged former Goldman Sachs vice president Neil M.M. Morrison with trying to influence the awarding of state contracts through campaign work for former Massachusetts Treasurer Timothy Cahill.

Morrison campaigned for Cahill from his Goldman Sachs office using company phones and email between November 2008 and October 2010, the SEC said. Cahill unsuccessfully ran for governor. The services weren't reported by Goldman Sachs, the SEC said. The company earned more than $7.5 million in fees from underwriting Massachusetts bond sales after Morrison's activities, the agency noted.

Goldman Sachs fired Morrison in December 2010.

By law, firms are banned from underwriting municipal bond sales within two years of making any contribution to an official of the government issuing the bonds.

Goldman also settled a related case brought by Massachusetts Attorney General Martha Coakley, agreeing to pay about $4.5 million.

Coakley said in a statement that the allegations made by her office "include serious violations of state law that involved millions of taxpayer dollars."

Regulators have issued warnings for years over so-called "pay-to-play" arrangements between investment firms and state and local government officials in the awarding of contracts for business in the $2.7 trillion municipal bond market. The market is tapped by governments around the country to finance schools, roads, hospitals and public works projects.

The SEC has brought a number of such cases against Wall Street banks and other investment firms, often involving campaign contributions or other payments. However, the new Goldman Sachs case marked the first time the agency accused a company of violating "pay-to-play" rules when non-cash contributions were involved.

Morrison's attorney, Thomas Kiley, declined to comment.

"Municipal finance professionals who use their firm's resources to campaign on behalf of political candidates compromise themselves and the firms that employ them," SEC Enforcement Director Robert Khuzami said in a statement.

Goldman Sachs agreed to pay a $3.75 million fine and about $8.2 million in restitution plus interest. The SEC said the $11.95 million Goldman is paying was the largest settlement amount it had ever won in a case involving "pay-to-play" violations.

Goldman neither admitted nor denied the allegations but it did agree to refrain from future such violations. The company also was censured by the SEC. Censure brings the possibility that Goldman could face a stiffer sanction if the alleged violation is repeated.

"We detected Morrison's activities, promptly alerted regulators, terminated his employment and fully cooperated with the investigations," Goldman 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."

Before working for financial institutions, Morrison was a deputy state treasurer under then-treasurer Cahill, according to the authorities.

Cahill served two terms as treasurer as a Democrat before running for governor as an independent in 2010. He finished a distant third behind current Democratic Gov. Deval Patrick, who won re-election, and Republican Charles Baker.

Cahill was charged in April in a separate criminal case in Massachusetts with procurement fraud and violating state ethics laws. Cahill has said he did nothing wrong and has pleaded not guilty.

His attorney, Jeffrey Denner, noted that Cahill isn't a party to the actions against Goldman and Morrison announced Thursday.


Associated Press writer Denise Lavoie in Boston contributed to this report.