Goldman Sachs Settles Pay-to-Play Charges Over Massachusetts Gubernatorial Campaign

Former Massachusetts treasurer Timothy P. Cahill

Putting a new spin on an old sobriquet, the Securities and Exchange Commission announced charges against Goldman Sachs and a former vice president at the firm for making undisclosed contributions to the gubernatorial campaign of a former Massachusetts state treasurer.

Goldman—sometimes referred to as “Government Sachs” because former executives (Bob Rubin, Josh Bolten, Hank Paulson … it goes back to Sidney Weinberg, doesn’t it?) have a habit of going to work in Washington—found itself in the SEC’s sights after a former Goldman vice president named Neil M.M. Morrison lent a hand to then Massachusetts Treasurer Timothy P. Cahill, who was running for governor.

According to the agency, Mr. Morrison was “substantially involved” in Mr. Cahill’s campaign from November 2008 to October 2010, during which period Goldman was involved in underwriting 30 debt offerings for the state:

Morrison at times conducted campaign activities from the Goldman Sachs office during work hours and using the firm’s phones and e-mail. Morrison’s use of Goldman Sachs work time and resources for campaign activities constituted valuable in-kind campaign contributions to Cahill that were attributable to Goldman Sachs and disqualified the firm from engaging in municipal underwriting business with certain Massachusetts municipal issuers for two years after the contributions. Nevertheless, Goldman Sachs subsequently participated in 30 prohibited underwritings with Massachusetts issuers and earned more than $7.5 million in underwriting fees.

Which would all seem a little more innocuous—it would have to be pretty good campaign advice to be worth rewarding with underwriting business, wouldn’t it?— if not for emails like this, from Mr. Morrison to a deputy treasurer in Mr. Cahill’s office:

“From my standpoint as an advisor/consultant/friend I am saying, PLEASE don’t give these [underwriter] slots away willy-nilly. You are in the fight of your lives and need to reward loyalty and encourage friendship. If people aren’t willing to be creative with their support then they shouldn’t expect business. This has to be a political decision.”

And this one, from Mr. Morrison to a 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 business.”

Goldman agreed to pay more than $11 million in fines and disgorgement of fees earned from Massachusetts without admitting to or denying the SEC’s finding. The government’s case against Mr. Morrison is ongoing, according to the statement. Goldman Sachs Settles Pay-to-Play Charges Over Massachusetts Gubernatorial Campaign