Corzine, Paulson Clashed at Goldman Over Mellon Deal, Book Says

MF Global Holdings Inc. CEO Jon Corzine
Jon Corzine, chairman and chief executive officer of MF Global Holdings Inc. Photographer: Chris Ratcliffe/Bloomberg

Henry M. Paulson won joint control of Goldman Sachs Group Inc. in 1998 after exposing that Jon S. Corzine had held private talks about merging the firm with Mellon Bank, according to a book excerpt in Vanity Fair.

The magazine’s May issue includes part of William D. Cohan’s “Money and Power: How Goldman Sachs Came to Rule the World,” which is being published next month by Doubleday. The article says that in early 1998, while Corzine was still Goldman Sachs’s sole chief executive officer, he met to discuss a potential deal with Frank V. Cahouet, Mellon Bank’s then-CEO.

Corzine told Paulson, who was then serving as a senior partner and chief operating officer, that talks were preliminary, the article says. Paulson later learned from J. Christopher Flowers, a Goldman Sachs partner who was advising Corzine in the negotiations, that Corzine had presented Cahouet with specifics on how the deal’s economics would work and named people who would run business units, the story says.

Paulson asked Corzine to describe the talks at a management committee meeting the next day and, after Corzine provided little information, Paulson called in Flowers, who gave a fuller description, according to the excerpt. Most members of the committee were upset with Corzine for discussing a deal without telling them, although some were upset at Paulson for how he handled it, the article says. It quotes Corzine as saying that the extent of the merger talks were “deeply exaggerated” to undermine his leadership.

Talks Abandoned

The talks were abandoned and, in June 1998, Paulson became co-chairman and CEO of Goldman Sachs after threatening to leave if Corzine remained sole CEO and winning the backing of most of the firm’s management committee, the excerpt says.

Corzine, 64, who is now chairman and CEO of New York-based MF Global Holdings Ltd., left Goldman Sachs in 1999 and later became a U.S. Senator from New Jersey and then the state’s governor. Paulson, 65, ran Goldman Sachs until June 2006, when he became U.S. Treasury Secretary until January 2009.

The magazine was on sale at newsstands in New York yesterday. Tiffany Galvin, a spokeswoman at MF Global, said Corzine was travelling and couldn’t be immediately reached for comment. Michele Davis, a spokeswoman for Paulson, said she couldn’t immediately comment.

Cohan, a contributing editor to Bloomberg News, wrote “The Last Tycoons” in 2007 about the history of Lazard Ltd. and “House of Cards” in 2009 about the 2008 collapse and sale of Bear Stearns Cos.

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