Goldman Sachs Op-Ed Wasn’t a ‘Betrayal,’ Smith Tells 60 Minutes

Oct. 19 (Bloomberg) -- Goldman Sachs Global Head of Human Capital Management Edith Cooper talks about Goldman Sachs's internal investigation of former employee Greg Smith. She speaks on Bloomberg Television's "Market Makers."(Source: Bloomberg)

Greg Smith, who resigned from Goldman Sachs Group Inc. (GS) with a March 14 opinion piece criticizing the firm’s treatment of clients, told “60 Minutes” that he doesn’t think he betrayed the bank.

“I don’t view it as a betrayal,” Smith said in a portion of the interview released by CBS Corp. (CBS) before the program airs Oct. 21. “I actually think the leaders of Goldman Sachs today don’t have the long-run interests of the institution at heart. The idea of the op-ed was not to do any destruction.”

About $2.15 billion was wiped from Goldman Sachs’s market value the day the New York Times published Smith’s article, which threatened to reignite political and popular distrust of Wall Street in general and Goldman Sachs in particular. Goldman Sachs responded by saying that surveys found most employees believed the firm treated clients well. The stock price, which recovered within a week as the company promised to investigate Smith’s assertions, is up 38 percent this year to $124.42.

“As we looked into his claims I was very pleased to see there wasn’t merit,” Edith Cooper, 51, Goldman Sachs’s global head of human capital management, said today on Bloomberg Television’s “Market Makers” with Erik Schatzker and Stephanie Ruhle. “My biggest disappointment in this is that Greg Smith didn’t come forward and speak to us.”

Greg Smith is scheduled to appear on "60 Minutes" this Sunday. Photograph: 60MINUTES/CBS News Close

Greg Smith is scheduled to appear on "60 Minutes" this Sunday. Photograph: 60MINUTES/CBS News

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Greg Smith is scheduled to appear on "60 Minutes" this Sunday. Photograph: 60MINUTES/CBS News

Smith, a 33-year-old South African graduate of Stanford University, has now written a book about his 12-year career at the company, called “Why I Left Goldman Sachs: A Wall Street Story,” that’s due in stores on Oct. 22.

Changing System

He’s the first former employee to write a critical account of New York-based Goldman Sachs, the fifth-biggest U.S. bank by assets. The 143-year-old firm was once the most profitable on Wall Street and counts among its alumni two former U.S. Treasury secretaries and the European Central Bank president.

“There are a lot of people who acknowledge these things internally, but no one is willing to say it publicly,” Smith, who was a vice president when he left Goldman Sachs, said in the “60 Minutes” interview. “And my view was the only way you force people to change the system is by saying it publicly.”

Seven former Goldman Sachs partners and managing directors, positions that are more senior than vice president, said in March interviews that Smith shouldn’t be taken seriously because he was a junior employee and may have been disgruntled about his pay or career. All asked not to be identified because they didn’t want to risk ruining their relationship with the firm.

‘Muppet’ Clients

Six of the seven said they agreed with Smith’s criticism of how the firm has treated clients under Chief Executive Officer Lloyd C. Blankfein, 58, and President Gary D. Cohn, 52, and that current members of the management committee would, too. Even so, they said they don’t expect the board of directors to take action or that anything will change because the bank has made money and outperformed most rivals.

Goldman Sachs has denied that the firm’s culture or client service have been degraded. The company said Smith’s request for a pay increase and promotion to managing director was rejected in the months before he left.

In the “60 Minutes” interview, Smith said he “loved” Goldman Sachs and had hoped his article would be a wake-up call to the board of directors.

In the article, Smith said Goldman Sachs no longer honors its No. 1 business principle: “Our clients’ interests always come first.” In the book, as in the article, he describes being surprised to hear employees disparaging clients as “muppets” when he transferred to the London office last year.

“Being a muppet meant being an idiot, a fool, manipulated by someone else,” Smith writes in the book from Grand Central Publishing, portions of which were made public earlier this week by Politico. “Within days of arriving in London, I was shocked at how many times I heard people -- both very senior and very junior -- refer to their clients as muppets.”

Cooper disputed that account today.

“Nothing that Greg suggested rang true,” she said. “Our interests are 100 percent aligned with our clients.”

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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