Goldman Sachs Group Inc. (GS) Chief Executive Officer Lloyd C. Blankfein and other employees hired attorneys this year when the U.S. began a probe of matters raised by the Senate’s Permanent Subcommittee on Investigations.
Attorney General Eric H. Holder said on May 3 that the Justice Department was reviewing an April report on the financial crisis by the Permanent Subcommittee, led by Carl M. Levin, a Michigan Democrat, and Thomas A. Coburn, Republican of Oklahoma. The report accused Goldman Sachs of misleading clients about complex mortgage-related investments in 2007, and Levin alleged that Blankfein misled Congress.
“As is common in such situations, Mr. Blankfein and other individuals who were expected to be interviewed in connection with the Justice Department’s inquiry into certain matters raised in the PSI report hired counsel at the outset,” the company said yesterday in an e-mailed statement.
Goldman Sachs fell 4.7 percent in New York trading on concern that Blankfein’s hiring of a criminal defense attorney could mean the firm will face more legal woes. He has been represented by Reid H. Weingarten, a partner at Steptoe & Johnson LLP in Washington, since the Justice Department inquiry began, according to a person familiar with the matter.
Weingarten is a friend of Holder’s, with whom he helped found the nonprofit See Forever Foundation, according to Weingarten’s biography on Steptoe & Johnson’s website.
Wall Street’s Role
Blankfein, 56, hasn’t been charged with wrongdoing amid federal probes of Wall Street’s role in the housing boom and credit crisis. Goldman Sachs is paying Blankfein’s legal costs, according to the bank.
Goldman Sachs has said the testimony its employees gave to the Permanent Subcommittee “was truthful and accurate and this is confirmed by the subcommittee’s own report.”
Reuters reported yesterday that Blankfein had hired Weingarten, citing an unidentified government source. The report contributed to the decline in Goldman Sachs’s stock, which closed at $106.51 on the New York Stock Exchange and has dropped 37 percent this year.
“The fact that the attorney was hired months ago rather than recently moderates the impact and implications of the story,” William Tanona, an analyst at UBS AG who has a “buy” rating on the stock, wrote in a note yesterday. Still “these continued distractions increase the probability of a management reshuffle over the next few years, which will undoubtedly cause some investor angst.”
Built a Reputation
Weingarten won the acquittal in May of Lauren Stevens, a former GlaxoSmithKline Plc (GSK) attorney accused of impeding a U.S. Food and Drug Administration investigation. He also represented Elizabeth Monrad, the former chief financial officer at General Reinsurance Corp. who was convicted in an accounting fraud scandal. She won a retrial earlier this month.
Weingarten previously represented former WorldCom CEO Bernard Ebbers, who was sentenced to 25 years in prison after he was convicted of an $11 billion fraud. He defended former Enron Chief Accounting Officer Richard Causey, who was sentenced to 5 1/2 years in prison.
Alisa Finelli, a Justice Department spokeswoman, declined to comment. Weingarten didn’t respond to e-mail and phone messages requesting comment.
Goldman Sachs, the fifth-biggest U.S. bank by assets, was subpoenaed earlier this year by the Manhattan District Attorney’s office for information related to the Permanent Subcommittee’s report, a person familiar with the matter said in early June.