New Goldman Sachs CEO Admits Culture Of Corruption Dominates Wall Street
Yesterday, I wrote how Andrew Ross Sorkin had totally ignored Keynesian economics as a response to financial crises, a response that might mitigate the rise of populism that normally follows those crises. In his article, Sorkin says, “When I wrote ‘Too Big to Fail’ nearly a decade ago, I knew that the crisis would redefine Wall Street and the economy.” Sorkin is right about the economy but he is totally wrong about the crisis changing Wall Street. Today, the big banks are stronger and more dominant than ever. And, while Dodd-Frank may have limited leverage and restricted some of their riskiest investment strategies, the culture on Wall Street hasn’t changed one bit.
The best example of that lack of change in culture is the continuing crimes committed by Wells Fargo, some of which started before the crisis and continued unabated after, while others began long after the crisis had ended. And today’s story in the NY Times shows just how pervasive that culture of corruption is and how it permeates the top levels of the banking industry.
Jerome Katzman was a partner at Goldman Sachs and head of its West Coast mergers and acquisitions (M&A) group. In 2014, he complained on the company’s whistleblower hotline about certain unethical behavior at the firm including attempts to hire the unqualified children of customers and demands by other senior executives for confidential information about ongoing mergers from him which they wished to pass on to their own Goldman customers, an especially egregious attempted breach of the firewall around the M&A group.
Although this was a senior member of the executive team, Katzman’s complaint was sent to the general counsel and the board was not notified except in passing and without noting the senior level of the source of the complaint. According to a Goldman spokesman, “The legal department conducted an exhaustive investigation of the matters Mr. Katzman raised in accordance with our whistle-blower policy. We did not find that confidential client information was shared with other clients. ” Of course no client information was shared with other clients, but only because Katzman refused to play ball and provide that information.
David Solomon is the heir apparent to chief executive Lloyd Blankfein, set to succeed him on October 1st. According to the Times, “Mr. Solomon repeatedly recommended that Mr. Katzman let go of his grievances and focus instead on his job, said the people close to Mr. Katzman. Mr. Solomon told Mr. Katzman that the concerns he had raised simply reflected the way Wall Street worked.” No truer words have been spoken.
Passing confidential M&A information on so that it can be shared with other clients is unethical and a clear violation of the confidentiality agreements that are required in M&A activities. But according to the incoming chief executive at Goldman Sachs, it’s just business as usual on Wall Street.
