A former investment banker at Goldman Sachs Group Inc. (GS) has agreed to pay a civil penalty of $100,000 and also submit to a five-year ban from the securities industry to settle charges by the Securities and Exchange Commission about his role in a "pay-to-play" scheme involving a Massachusetts gubernatorial campaign in November 2010.
The Securities and Exchange Commission or SEC noted that the industry ban is the first ever against an individual and the largest ever imposed for this type of pay-to-play violation.
"Pay-to-play" schemes involve campaign contributions to influence the award of lucrative public contracts for securities underwriting business. In September 2012, the SEC had charged Goldman Sachs and one of its former bankers, Neil Morrison, with "pay-to-play" violations involving undisclosed campaign contributions to then-Massachusetts state treasurer Timothy Cahill while he was a candidate for the governor's office.
According to the SEC, the proceedings involve Morrison, a former vice president in the investment banking division of Goldman Sachs. The agency noted that the pay to play scheme that lasted from November 2008 to October 2010 resulted in violations of the Municipal Securities Rulemaking Board or MSRB Rules by both Morrison and Goldman Sachs.
Starting in July 2008, Morrison was employed by Goldman Sachs to solicit municipal underwriting business from the Massachusetts Treasurer's Office, among others.
However, during the period from November 2008 to October 2010, Morrison was also substantially engaged in the political campaigns. This includes the November 2010 Massachusetts gubernatorial campaign, for Timothy Cahill, the then-Treasurer of Massachusetts.
Morrison's campaign work gave him complete access to Cahill and his staff, who often provided him with information about the office's internal deliberations involving underwriter selection.
The SEC noted that Morrison circumvented the pay-to-play rules by making an indirect contribution to the Cahill campaign through another person in violation of rules. Morrison also solicited campaign contributions for Cahill when Goldman Sachs was seeking to engage in municipal underwriting business with the Treasurer's Office.
Within two years of these campaign contributions, Goldman Sachs engaged in municipal securities business with issuers associated with Cahill as Treasurer of Massachusetts and as a candidate for Governor of Massachusetts. For its roles in the thirty underwritings, Goldman Sachs received fees in the amount of $7.56 million.
In September 2012, the SEC said that Goldman Sachs agreed to pay $12 million to settle charges of "pay-to-play" violations raised by the agency. Goldman Sachs agreed to settle the charges by paying $7.56 million in disgorgement, $670,033 in prejudgment interest and a $3.75 million penalty. This was the largest ever penalty imposed by the SEC for MSRB pay-to-play violations.
GS closed Thursday's trading at $157.41, down $1.93 or 1.21 percent on a volume of 5.62 million shares.
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