March 11 (Bloomberg) -- Neil Morrison, a Goldman Sachs Group Inc. banker fired in December, began advising former Massachusetts Treasurer Tim Cahill’s gubernatorial campaign in 2009 even as he was seeking to underwrite state bonds, according to e-mails obtained through a public records request.
Morrison, 36, a top aide to Cahill before he left for Wall Street in 2007, helped the treasurer review consultants for his independent run for governor last year, analyzed polls and discussed strategy at the same time he lobbied for bond business, correspondence from his Goldman Sachs e-mail address shows. The New York-based bank underwrote at least $5.6 billion of Massachusetts bonds at the same time Morrison was helping Cahill’s campaign, according to state data.
The U.S. Securities and Exchange Commission asked for documents from Cahill and his aides on Jan. 21. Bloomberg News reported Dec. 16 that the bank stopped underwriting state-level bonds in October when the Cahill campaign revealed that Morrison was acting as an adviser. So-called pay-to-play rules restrict bankers from contributing to politicians who control bond sales, including limiting volunteer work. Breaking the rules can trigger a two-year underwriting ban.
If the SEC determines Morrison’s volunteer work represented in-kind contributions to the campaign, Goldman is “going to have a problem,” said Christopher “Kit” Taylor, a former head of the Municipal Securities Rulemaking Board. The Alexandria, Virginia-based group writes industry regulations. Goldman Sachs would have to return underwriting fees, and possibly face a fine, if it managed sales when it shouldn’t have, he said.
Morrison began offering political advice as early as February 2009 when Cahill was still plotting a campaign for governor. In one e-mail that month, Morrison offered to deny a rumor that Cahill would leave the Democratic Party to run as a Republican. He ran as an independent against incumbent Deval Patrick, a Democrat, and Republican Charlie Baker. Patrick won.
“I like that they think he’s running but the Republican part is not helpful to him,” Morrison wrote in a message to Scott Campbell, his successor as Cahill’s chief of staff, on Feb. 24, 2009. “He has raised too much as a D to be an R. Now independent -- that would be different.”
The SEC has been bolstering its oversight of the $2.93 trillion municipal-bond market. The agency appointed Elaine Greenberg to head a municipal-securities and public-pensions unit last year, one of five task forces created after the global credit crisis. Greenberg has focused on bid-rigging for municipal-investment contracts by banks, public officials who hire advisers based on political contributions and local governments that don’t disclose their true financial condition.
“My personal and political relationship with Tim Cahill was just that -- personal and political,” Morrison said yesterday in an e-mailed response to a request for comment.
“From my perspective, it will stay that way,” Morrison said. “It had absolutely nothing to do with Goldman Sachs.”
John Nester, an SEC spokesman in Washington, declined to comment. Michael DuVally, a spokesman for Goldman Sachs in New York, also declined to comment.
On Jan. 21, the SEC subpoenaed e-mails from the Massachusetts Treasurer’s office that were sent or received since June 1, 2008, that relate to Cahill, Morrison, Goldman Sachs and the selection of underwriters, according to a copy of the document. It also requested the daily calendars showing the schedules for the treasurer and some of his aides.
Cahill ‘Not Responsible’
“In Tim Cahill’s eight years of service to the commonwealth, he received political advice and encouragement from many people,” Joseph DeMeo, the former treasurer’s lawyer, said by e-mail. “In any event, he is not responsible for what other people write, nor did he respond to Morrison’s e-mails.”
“It is far from clear that Morrison violated any rule by forwarding advice from his work e-mail rather than his home e-mail,” DeMeo said.
Barry Nolan, a spokesman for Steven Grossman, a Democrat who was elected in November to succeed Cahill as treasurer, said the office is cooperating “fully and completely with the SEC’s request for documents.”
The e-mails show Morrison sharing information from Patrick’s campaign with Cahill, analyzing polls and reviewing candidates the treasurer considered to be his campaign consultants before he announced his candidacy in September 2009. Morrison mixed comments on the campaign with bond business, intervening in a debate between aides to Cahill and the state’s Administration and Finance Department about whether Massachusetts should sell long-term debt or short-maturity securities called bond-anticipation notes.
“I have been working with the treasurer on some non-Treasury items over the past couple of days, but during that time he has also mentioned a couple of times his angst regarding the correspondence with A&F and the BAN versus long-term debt issue,” Morrison wrote in a message to Colin MacNaught, the treasury debt manager, on July 6, 2009.
A graduate of Boston College and Suffolk University’s law school, Morrison helped Cahill in his first campaign for the treasurer’s office in 2002. At the time, Morrison was a city councilor in Taunton, a municipality with 56,000 residents about 40 miles (64 kilometers) southwest of Boston, and worked for Boston Title Co. in nearby Stoughton, according to information filed with the Financial Industry Regulatory Authority.
Morrison joined the state treasury in 2003, rising to first deputy treasurer before leaving in 2007 to join UBS AG. Goldman Sachs hired him and three other public-finance bankers, including his boss, Jeff Scruggs, from UBS the following year. Zurich-based UBS shuttered its municipal-bond origination operations in 2008.
Goldman Sachs terminated Morrison on Dec. 19, citing “allegations involving outside activities without preapproval,” according to a Finra filing.
The company shared in at least $26 million of fees for underwriting state bonds between September 2008 and July 2010, according to treasury data.
The e-mails show Morrison pushing state treasury officials for bond underwriting business in 2008, using his relationships with former colleagues to arrange a meeting between Scruggs and Cahill in January 2009 at a Ruth’s Chris restaurant in Boston.
Between October and December 2008, the state paid Goldman Sachs $502,414 to sell $725 million of notes, according to the treasurer’s office. In February 2009, the state paid a group of underwriters led by Goldman Sachs $2.6 million to sell $525 million of general obligation bonds, according to state records.
‘This Is Great’
“Thank you very much for the business, this is great,” Morrison wrote to Campbell on Oct. 7, 2008, the day after the first note sale. “I really appreciate your help -- no joking around.”
In January 2009, Morrison pitched a proposal to have Goldman Sachs privatize the state lottery, which is run out of the treasurer’s office, the e-mails indicate. He also suggested ways that lottery revenue could be used to buy Massachusetts debt in the wake of the credit crisis.
Morrison, who was based in the bank’s Boston office at 125 High St., also argued against proposals to seek competitive offers for oversight of the state’s interest-rate swaps, the correspondence show. He wrote to oppose a plan to invite open bids from investors for Build America Bonds as an alternative to hiring investment banks to negotiate sales of the debt.
Offering Goldman ‘Insights’
“If you have a competitive bid, the environment for price discovery is ruined because the investors do not know who to talk to and who can give them real information,” he wrote to MacNaught, the debt manager, in an Aug. 19, 2009, e-mail. The note cited “insights” Morrison said were from Scruggs.
In November 2009, the treasurer’s office paid a group of bankers led by Goldman Sachs $6.45 million to underwrite $956.5 million of the federally subsidized Build America Bonds, according to state documents.
Morrison continued to mention Cahill’s campaign in messages sent to the treasurer and his aides before last year’s election, making suggestions on public appearances, advertising and positions on immigration and health care. At the same time he pushed for more business, the e-mails show.
The Massachusetts Water Pollution Abatement Trust, which is controlled by the treasury, paid banks led by Goldman Sachs $2.62 million to underwrite $486.5 million in June 2010, according to offering documents.
“Goldman hired me to direct our activities here in Massachusetts and my feelings are that we remained committed to the success of the Cahill administration,” Morrison said in a message to MacNaught on July 6, 2009.
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