What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences by Steven G. Mandis Page A
Authors: Steven G. Mandis
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charged, is not included in the settlement and categorically denies the charges against him, seeking dismissal of the case. Tourre and Goldman acknowledge that the marketing for the Abacus deal contained incomplete information and that it was a mistake not to inform investors that a prominent hedge fund manager had helped design the deal. Tourre says that he and Goldman did not have a duty to give investors details that the SEC says they should have disclosed and that the SEC did not show that he acted with the intention of defrauding investors. Goldman starts to shut down several proprietary trading groups, and many proprietary traders begin to leave as the SEC fines Goldman $225,000 for violating a rule aimed at regulating short selling (R). The Financial Industry Regulatory Authority (FINRA) says it is fining Goldman $650,000 for failing to disclose that the government was investigating two of its brokers. One of the brokers was Goldman vice president Fabrice Tourre. FINRA says Goldman did not have the proper procedures in place to make sure that this disclosure was made (R).
2011: In March, former Goldman board member Rajat Gupta is charged by the SEC with insider trading for passing information to the hedge fund Galleon Group that he learned in his capacity as a board member. Six months later he is arrested on criminal charges, soon after the SEC charges another Goldman employee with insider trading. In April, Senator Carl Levin (D.-Mich.) releases the 650-page report of the Senate investigation into the credit crisis (R). It concludes that Goldman misled clients and Congress about the collateralized debt obligations that helped cause the financial crisis. The report urges regulators to identify any violations of law in the activities of Goldman leading up to the financial crisis. The report asserts that conflicts of interest led Goldman to place its financial interests before those of its clients. The report is the result of a two-year probe by the Permanent Subcommittee on Investigations. In May, the report is referred to the Department of Justice and the SEC. In early June, Goldman begins fighting back against the Senate report, emphasizing inconsistencies in it. Blankfein hires a high-profile Washington defense attorney to represent him personally as the Department of Justice continues to investigate the bank (O). Goldman is the top-ranked M&A adviser worldwide based on total value of deals announced, according to Thomson Reuters. 5 KKR, a private equity firm, starts to get into the capital markets and lending businesses, competing with the investment banks (C). The SEC charges a Goldman employee and his father with insider trading based on information the employee gained in his position at Goldman (R). Goldman pays state regulators in Massachusetts a $10 million fine to resolve the allegations of “research huddles” (R).
2012: The SEC notifies Goldman that it may face charges related to mortgage-backed securities. In February, the board agrees to appoint an independent board member as lead director to avoid a shareholder vote on splitting Blankfein’s chairman and CEO roles. As a reaction, the American Federation of State, County & Municipal Employees Pension Fund withdraws its shareholder resolution for investors to vote on at the annual shareholder meeting. Greg Smith, a London-based Goldman employee, delivers his resignation in a New York Times op-ed piece. 6 He attributes his resignation to the negative changes in Goldman’s culture in the past decade or so, decrying the lack of focus on client interests. The op-ed sparks a flurry of responses in the media (O). The Volcker Rule, a section of the Dodd–Frank Wall Street Reform and Consumer Protection Act, is slated to go into effect in August (R). It mandates proprietary trading restrictions, with the goal of preventing US banks from exposing customers to excessive risk through speculative investments. The rule would bar banks from trading for their own
2011: In March, former Goldman board member Rajat Gupta is charged by the SEC with insider trading for passing information to the hedge fund Galleon Group that he learned in his capacity as a board member. Six months later he is arrested on criminal charges, soon after the SEC charges another Goldman employee with insider trading. In April, Senator Carl Levin (D.-Mich.) releases the 650-page report of the Senate investigation into the credit crisis (R). It concludes that Goldman misled clients and Congress about the collateralized debt obligations that helped cause the financial crisis. The report urges regulators to identify any violations of law in the activities of Goldman leading up to the financial crisis. The report asserts that conflicts of interest led Goldman to place its financial interests before those of its clients. The report is the result of a two-year probe by the Permanent Subcommittee on Investigations. In May, the report is referred to the Department of Justice and the SEC. In early June, Goldman begins fighting back against the Senate report, emphasizing inconsistencies in it. Blankfein hires a high-profile Washington defense attorney to represent him personally as the Department of Justice continues to investigate the bank (O). Goldman is the top-ranked M&A adviser worldwide based on total value of deals announced, according to Thomson Reuters. 5 KKR, a private equity firm, starts to get into the capital markets and lending businesses, competing with the investment banks (C). The SEC charges a Goldman employee and his father with insider trading based on information the employee gained in his position at Goldman (R). Goldman pays state regulators in Massachusetts a $10 million fine to resolve the allegations of “research huddles” (R).
2012: The SEC notifies Goldman that it may face charges related to mortgage-backed securities. In February, the board agrees to appoint an independent board member as lead director to avoid a shareholder vote on splitting Blankfein’s chairman and CEO roles. As a reaction, the American Federation of State, County & Municipal Employees Pension Fund withdraws its shareholder resolution for investors to vote on at the annual shareholder meeting. Greg Smith, a London-based Goldman employee, delivers his resignation in a New York Times op-ed piece. 6 He attributes his resignation to the negative changes in Goldman’s culture in the past decade or so, decrying the lack of focus on client interests. The op-ed sparks a flurry of responses in the media (O). The Volcker Rule, a section of the Dodd–Frank Wall Street Reform and Consumer Protection Act, is slated to go into effect in August (R). It mandates proprietary trading restrictions, with the goal of preventing US banks from exposing customers to excessive risk through speculative investments. The rule would bar banks from trading for their own
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