Goldman Sachs settles 'pay-to-play' probes

To pay $14 mn to settle federal, state charges in a case involving campaign contributions to former Massachusetts gubernatorial candidate Timothy Cahill

Goldman Sachs Group Inc will pay more than $14 million to settle federal and state charges after it violated "pay-to-play" rules, in a case involving campaign contributions to former Massachusetts gubernatorial candidate Timothy Cahill.

Neil Morrison, a former vice president in Goldman's Boston office, worked extensively on Cahill's 2010 campaign while also soliciting underwriting business from the Massachusetts treasurer's office, the Securities and Exchange Commission said.

Cahill at the time was Massachusetts state treasurer.

In what the SEC described as its first "pay-to-play" case involving contributions other than cash, Goldman settled without admitting or denying the charges.

The SEC also charged Morrison, and the case against him continues.

Pay-to-play refers to cash or other contributions made to officials to influence the award of lucrative public contracts.

The SEC announced that Goldman will pay about $12 million to settle the SEC's case. Later Thursday, the Massachusetts attorney general's office revealed details on its related case, which brings the total settlement to $14.4 million.

The SEC's complaint describes how Morrison conducted campaign activities for Cahill, including fundraising, drafting speeches, and speaking to reporters, and how some of this work was done from Goldman's offices during business hours.

During the 13 months through October 2010, Morrison sent at least 364 campaign-related emails using his Goldman Sachs email account.

The campaign work gave Morrison access to Cahill and his staff, who provided him internal information about the underwriter selection process, the SEC said.

Morrison also directly discussed his campaign work in relation to securing business for Goldman Sachs in emails, according to SEC documents.

"From my standpoint as an advisor/consultant/friend, I am saying, PLEASE don't give these (underwriter) slots away willy-nilly," Morrison wrote in one email to an official in Cahill's office. "You are in the fight of your lives and need to reward loyalty and encourage friendship."

Morrison's use of Goldman work time and resources for the campaign activities also disqualified Goldman from bidding for municipal underwriting business with certain issuers in the state. But Goldman went on to participate in 30 prohibited underwritings, earning it more than $7.5 million in fees, the SEC said.

A Goldman spokesman, Michael DuVally, said in a statement that the firm had detected Morrison's activities, fired him, and cooperated with regulators.

"We accept responsibility for the consequences of his unauthorized actions under the terms of the settlements announced today and are pleased to resolve these investigations," DuVally said.

A lawyer for Morrison did not respond to a request for comment.

The case has drawn Goldman into the legal morass that has surrounded Cahill since he lost his gubernatorial bid to incumbent Deval Patrick.

In April, Cahill was indicted on criminal public corruption charges for allegedly using the state's taxpayer-funded lottery advertising budget to boost his sagging campaign.

An attorney for Cahill, Jeffrey Denner, said he had not reviewed the SEC documents, and would have no comment since the order did not directly name Cahill as a defendant.

Robert Khuzami, who heads the SEC's enforcement division, said in a statement: "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."

The SEC has undertaken a broader crackdown of "pay-to-play" practices in recent years. In 2010, it adopted new measures that target activities of investment advisers who seek out contracts to manage public pension plans and other types of investment accounts.