FOOLS' GOLDMAN: How does GS get away with this?

Discussion in 'Commodity Futures' started by CPTrader, Oct 25, 2005.

  1. How does GS get away with this?


    Goldman Sachs' bankers were stunned at their firm's ability to get away with playing different and often conflicting roles in the planned merger between the historic New York Stock Exchange and Archipelago, a series of confidential e-mails obtained by The Post shows.

    As the controversial deal moves ever closer to being finalized, Goldman's role in facilitating the merger is becoming more of an issue among exchange members and in a lawsuit by NYSE seatholders trying to halt it.

    An e-mail between Goldman investment banking associates Brian Musto and Elena McKee pulled no punches over just how shocked young bankers were that Goldman's compliance unit approved the deal.

    McKee wrote of getting approval, "How did that get through conflicts??"

    A Goldman spokesman was dismissive of the suggestion that firm executives might have had reservations about its role in advising both sides of the historic merger.

    "This is ill-informed chatter among a handful of junior people. Our role in this transaction was thoroughly reviewed and approved by senior management," the spokesman said.

    The e-mails suggest Goldman's role in the deal it termed "Army-Navy" — its internal security code using the first letters of Archipelago and the NYSE — was much more complex than the official statements of both the NYSE and Goldman have indicated.

    Officially, Goldman has repeatedly insisted that it acted as nothing more than "a facilitator," merely putting a client in which it had an investment — Archipelago — together with a possible acquirer.

    A Jan. 24 e-mail exchange, however, showed Goldman's bankers understood that if the deal was to get done — and millions in fees and profits realized — they would have to sell the merger to NYSE and Archipelago hard.

    "We have to help both sides think about pro formas, synergies and ultimately value," wrote Goldman banker David Schwimmer, after attending a meeting with an unnamed senior NYSE official.

    An April 28 letter to NYSE seatholders from CEO John Thain and Chairman Marshall Carter mentions that Goldman did not assume "fiduciary responsibilities" nor did it negotiate "the financial aspects of the merger" between the Big Board and Archipelago.

    As proof of Goldman's facilitation role in the transaction, firm executives and spokesmen have repeatedly emphasized the role of advisers Lazard Inc. and Greenhill & Co. Inc. in providing the valuation and fairness opinions necessary for the deal's completion.

    But the e-mails indicate Goldman's bankers focused on the tiniest details to get the deal done, especially if former Goldman partner Thain was doing the asking. "I'd like to connect Navy's [NYSE's] human resources person with her counterpart at GS, so that person can share wisdom on creating an equity plan for Navy," wrote Goldman's Schwimmer to his colleague Peter Kraus on April 15.

    As proof of the one-upsmanship constant among investment bankers, and that millions in fees isn't satisfaction enough, Goldman's bankers wanted to get full credit for the deal in the much-watched league tables.

    Banker Christoph Hansmeyer made clear to a colleague on April 21 that "It really is a merger AND we advised both sides. We should get credit for both sides."

    The Goldman spokesman acknowledged that the league table thread sounded like "A case of [bankers] having their cake and eating it too."



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