Goldman Sachs Group Inc. will pay $14.4 million to resolve regulatory claims that a former banker made improper campaign contributions to the treasurer of Massachusetts while seeking underwriting business.
Neil Morrison, who was a vice president in Goldman Sachs's Boston office, worked for Treasurer Timothy P. Cahill's unsuccessful gubernatorial campaign from November 2008 to October 2010, sometimes during his office hours, the U.S. Securities and Exchange Commission said in a statement today. That constituted in-kind contributions and broke pay-to-play rules, the U.S. Securities and Exchange Commission said.
The settlement, which includes $4.6 million paid to Massachusetts, is the SEC's first involving noncash contributions and is the latest since the agency began bolstering oversight of the $3.7 trillion municipal-bond market in 2010. At that time, SEC Enforcement Director Robert Khuzami set up a task force to investigate bid-rigging for municipal- investment contracts. The agency is looking into banks, local governments that don't disclose their true financial condition, and public officials who hire advisers based on political contributions.
"The pay-to-play rules are clear: Municipal finance professionals that use their firm's resources to campaign on behalf of political candidates compromise themselves and the firms that employ them," Khuzami said in the SEC's statement.
The campaign work by Morrison, 38, disqualified Goldman Sachs from underwriting bonds for Massachusetts and its agencies for two years after the contributions, the SEC said. Nevertheless, the New York-based firm participated in 30 prohibited underwritings, earning more than $7.5 million in improper fees, according to the agency.
"We detected Morrison's activities, promptly alerted regulators, terminated his employment, and fully cooperated with the investigations," Michael DuVally, a Goldman Sachs spokesman, said in a statement. "We accept responsibility for the consequences."
Goldman Sachs didn't admit or deny wrongdoing. A telephone call to Thomas Kiley, Morrison's lawyer, wasn't immediately returned.
Morrison raised money for Cahill, a Democrat who ran for governor as an independent, according to the agency. He drafted speeches, communicated with reporters, approved personnel decisions, and interviewed at least one possible running mate, the SEC said.
At the same time, Morrison referred to his campaign work while soliciting business in an attempt to curry favor, according to the SEC's order.
In one e-mail disclosed by the SEC, Morrison urged a deputy treasurer in Cahill's office not to give away underwriting business "willy-nilly."
"If people aren't willing to be creative with their support then they shouldn't expect business," Morrison said in the e-mail. "This has to be a political decision."
Morrison also made an indirect cash contribution by giving money to a friend who then wrote a check to the campaign, the SEC said. His contributions created a conflict of interest that Goldman Sachs didn't disclose, the agency said.
In another e-mail disclosed by the SEC, Morrison said "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 Sachs agreed to pay $12 million to the SEC. The firm separately agreed to pay $1.5 million to Massachusetts, $607,645 to the Massachusetts Water Pollution Abatement Trust, and $2.4 million to the state attorney general, according to a copy of the settlement.
The bank generated $905 million in revenue from debt underwriting in the first six months of this year, down 2 percent from a year earlier, the firm reported in July. That business, which includes fees for managing sales of municipal bonds as well as corporate, government and agency debt, accounted for 5.5 percent of the firm's first-half revenue.