Let me start by saying that everyone guns for the top dog. It's just one of those things. But, wow are a lot of people gunning for Goldman Sachs these days. It seems like everyone has a complaint, and judging by the past few months, those complaints are rather diverse, to say the least. Perusing the myriad suits that follow GS around teaches one some odd lessons about the firm:
- Women who worked for GS in the late 90s (and likely the entire time prior) did not seem to have a good experience. I can't speak to how it is currently, but for the ladies currently there, it's probably best to walk yourself home (or take a cab) after spending time at the strip club.
- For all of the trouble Detroit is in these days, GS owns a substantial amount of property over there. Sadly, they were allegedly used to artificially inflate the price of aluminum.
- Apparently, anyone who knows anything about structured products works for GS. However, the Goldman employee who sells one to you probably isn't one of them.
I like to see companies with well diversified litigation portfolios. So, what exactly is going on here? Short answer, a lot of people are upset with the firm. Long answer...
We all remember the story posted here a short time ago detailing an amusing court case where a businessman was suing GS over, at best, a poorly explained trade. Goldman, according to Bloomberg, has recently been able to enter into arbitration pending appeals:
A Goldman Sachs Group Inc. (GS) unit won a bid to halt Singaporean wealth-management client Oei Hong Leong’s lawsuit over trading losses on the Brazilian real in favor of private arbitration.The ruling was made in a closed hearing today at Singapore’s High Court. Oei’s lawyer Siraj Omar said he planned to appeal the decision.
You don't have to look far for another example of similar shenanigans by Goldman. Today, Bloomberg noted that they are also being sued by the Libyan Investment Authority (LIA), the country's sovereign wealth fund.
The Libyan Investment Authority, the north African nation’s sovereign wealth fund, sued Goldman Sachs Group Inc. (GS) in the U.K. over investments worth more than $1 billion.Libya’s sovereign wealth fund built up assets of about $60 billion under Muammar Qaddafi, who was deposed and killed in a 2011 coup. The LIA lost about $1.75 billion betting on structured products in 2007 and 2008, about $900 million of which was with Goldman Sachs, its former chairman said in June 2012.
We have all heard about the aluminum racket that JPM and GS were running, but just in case you need a refresher, here's Bloomberg's explanation:
Delays of as long as 16 months in filling orders raised prices for makers of outdoor porch screens, flashlights and other products that contain aluminum, according to the complaints.
What I find particularly interesting about this case is that its epicenter was Detroit. Not to suggest that Detroit is a Mad Max style wasteland devoid of anything productive, but it is having some pretty serious problems. To find out its place in the world of aluminum was rather interesting:
Detroit is the world’s second-biggest repository for aluminum stockpiles monitored by LME, the world’s largest industrial metals marketplace. Goldman Sachs’s Metro International Trade Services LLC has the most LME-approved warehouses in the city.“The monopoly allegedly occurred in Detroit,” Christopher Lovell, an attorney who filed the first of the lawsuits on Aug. 1 on behalf of Gwinn, Michigan-based aluminum fabricator Superior Extrusion Inc., told the panel in Las Vegas.
The restraint of trade “emanated” from Detroit, where 75 percent of the warehoused aluminum in the U.S. is stored, he said.
Goldman's big problem, as far as I can tell, comes from recent litigation regarding some discriminatory practices the firm engaged in during the late 90s. Bloomberg notes:
Goldman Sachs Group Inc. (GS) must turn over internal gender-bias complaints by female workers to lawyers representing women in a lawsuit alleging the firm discriminated against them in pay and promotions.U.S. Magistrate Judge James Francis in Manhattan ruled yesterday that all complaints “conceivably related” to discrimination against women in the investment banking, securities, investment management and merchant banking divisions at Goldman Sachs must be shared with the attorneys, including the names of those who complained.
The issue at hand is awfully serious. The plaintiff's story is reminiscent to what you'd see on a particularly dark episode of Mad Men as opposed to the pages of Bloomberg:
The plaintiffs are H. Cristina Chen-Oster, a former vice president; Lisa Parisi, a former managing director; and Shanna Orlich, a former associate. They said in their complaint that Goldman Sachs gives its managers, most of whom are men, “unchecked discretion” over assigning responsibilities to their subordinates.Chen-Oster claimed she told her supervisor in 1999 about an incident that took place in 1997 at a firm-sponsored dinner for a male employee who had been promoted to managing director. After the outing, which included a stop at a Manhattan topless bar, a male colleague pinned Chen-Oster against a wall outside her apartment, kissing and groping her.
Chen-Oster, after reporting the incident, was subjected to increased hostility and found herself marginalized at the firm, according to the complaint.
“While Chen-Oster’s career growth stagnated, the male colleague involved in the 1997 incident was promoted to managing director and finally partner,” according to the complaint. “Over the same period, he saw his compensation increase by more than 400 percent.”
Granted, the problems described occurred nearly two decades ago, so I have to imagine they've cleaned it up since then. Nevertheless, wow, that's ridiculous. I'd be awfully pissed, too.
I know many of you monkeys have strong feelings about Goldman Sachs, what do you think about all of this? Is this just a series of unfortunate events for an otherwise well behaved firm? The predictable conclusion of very bad behavior? Or, is Goldman Sachs going gangster?
