Updates to our Terms of Use

We are updating our Terms of Use. Please carefully review the updated Terms before proceeding to our website.

Monday, June 24, 2024 | Back issues
Courthouse News Service Courthouse News Service

Pay-to-Play Scheme Costs Goldman Sachs $16M

(CN) - Goldman Sachs agreed to pay $16.5 million after a former employee traded his help on a gubernatorial campaign for the politician's banking business.

The investment bank drew fire from Massachusetts after Neil Morrison illegally assisted the gubernatorial campaign of former Massachusetts State Treasurer Timothy Cahill between November 2008 and October 2010.

Before joining Goldman Sachs, Morrison served as Deputy Treasurer in Cahill's department.

After he began working for the investment bank, Morrison actively sought municipal underwriting business on behalf of Goldman Sachs in instances where Cahill or one of the treasurer's employees controlled the choice of underwriter - while secretly fundraising for Cahill's campaign, often during work hours.

Goldman Sachs made millions on underwriting 11 municipal transactions during Morrison's tenure, including landing a $445.9 million bond deal, according to the Boston Globe.

Morrison apparently knew his behavior was illegal, Massachusetts says, pointing to an email in which Morrison told a senior campaign official: "I am staying in banking and don't want a story that says that I am helping Cahill, who is giving me banking business. If that came out, I'm sure I wouldn't get any more banking business."

Although it is illegal for Massachusetts state employees to solicit political donations, Morrision also encouraged Massachusetts State Lottery employees to raise funds for Cahill, telling them it would be good for their careers.

A grand jury indicted Cahill in April 2012 on charges that he used $1.65 million in Massachusetts State Lottery advertising funds in his 2010 campaign for governor.

When Morrison's unauthorized political activities were revealed in 2010, Goldman Sachs suspended its underwriting for Massachusetts.

Last week, it filed an Assurance of Discontinuance with Massachusetts, requiring Goldman to pay the state more than $4.5 million. In exchange the state agreed not to bring a civil lawsuit against Goldman Sachs relating to Morrison's illegal activities.

The bank also agreed to pay $12 million to settle federal claims with the Securities and Exchange Commission.

This fine is the largest ever imposed by the SEC for a pay-to-play scheme, and the first involving non-cash political contributions, the Boston Globe reported.

Categories / Uncategorized

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.