Barroso Role as Goldman Brexit Adviser Probed by EU Ethics Watchdog

  • European Ombudsman questions Jose Barroso’s hire at Goldman
  • Questions follow Hollande’s ‘morally unacceptable’ criticism

Jose Barroso.

Photographer: Everyday Projects via Getty Images

The Goldman Sachs Group Inc. revolving door is getting hung up on Brexit.

Ethics officials in Brussels are questioning whether former European Commission President Jose Barroso’s new role advising Goldman Sachs on the U.K.’s exit from the European Union would give the New York-based firm and its clients undue influence.

Barroso’s appointment, less than two years after he left the commission, raises concern “given the importance of his former role and the global power, influence and history of the bank with which he is now connected,” EU Ombudsman Emily O’Reilly said in a letter dated Sept. 5 to Barroso’s successor, Jean-Claude Juncker. The EU’s ethics watchdog is seeking clarification from the commission on the circumstances surrounding the hire.

Jose Barroso

Photographer: Victor J. Blue/Bloomberg

“This public unease will be exacerbated by the fact that Mr. Barroso has publicly stated that he will be advising on the U.K.’s decision to leave the EU,” O’Reilly wrote. She asked whether the Commission’s Brexit negotiator Michel Barnier and other officials would be advised on how or whether to engage with Barroso. “Such advice is important given the need to ensure that their work is not affected by a possible failure on Mr. Barroso’s part to comply with his duty to act with integrity,” she said.

The New York-based bank said on July 8 that Barroso, who headed the Commission from 2004 to 2014 and is a former Portuguese prime minister, will serve as non-executive chairman of its international unit and help advise on global issues. The ability of London-based lenders to operate freely throughout the EU will be up for negotiation over the next few years, with other cities in Europe, including Paris, likely to vie for some of the thousands of banking jobs now in London.

The ombudsman asked the commission whether it would consider tightening its rules by scrapping the 18-month restriction period before former employees entered the private sector in favor of ruling on possible hiring conflicts on a case-by-case basis. This could allow the EU to look into wider issues of integrity and the extent to which a particular appointment eroded public trust, she said.

‘Morally Unacceptable’

A spokeswoman for Goldman Sachs in London declined to comment on the ombudsman’s letter, but added that Barroso’s hire “had nothing to do with the outcome of the Brexit vote. Indeed, we began our discussions at a time when the prevailing view was that the ‘Remain’ campaign would succeed, an outcome we would have preferred and publicly supported.”

“No one has a greater interest in protecting the legitimate interests of the commission than the commission itself,” Alexander Winterstein, a spokesman for the commission, told reporters in Brussels on Tuesday. “It’s in our interest to make absolutely sure that there is no conflict of interest which might in any way damage or undermine our institution.”

A number of senior officials in Europe and the U.S. have also worked at one time or another at Goldman Sachs. Bank of England Governor Mark Carney, European Central Bank President Mario Draghi and Federal Reserve Bank of New York President William Dudley all once worked at the bank as did former U.S. Treasury secretaries Robert Rubin and Henry Paulson.

In July, French President Francois Hollande said Barroso’s appointment is “legally possible but it’s morally unacceptable.” He said that Goldman Sachs was implicated in the financial crisis that began with U.S. sub-prime mortgages and in helping Greece cover up its debt, claims that the lender has denied.

Deficient Rules

More than 110,000 people have signed a petition, which claims to have been created by EU officials, protesting Barroso’s appointment and demanding the EU consider suspending his pension.

The EU ombudsman, who is from Ireland, requested the commission set out its position on the conformity of the appointment with the EU’s ethics code that governs former officials entering the private sector. Previously the commission said Barroso hadn’t breached its rules because he waited 18 months before taking up the role. Juncker must respond by Oct. 14.

Barroso told the Financial Times on July 8 that he will do what he can to “mitigate the negative effects” of the Brexit decision. If the U.K. loses access to the EU single market, U.S. banks may need to move big parts of their large European businesses out of London. “Of course I know well the EU, I also know relatively well the U.K. environment,” Barroso told the Financial Times. “If my advice can be helpful in this circumstance I’m ready to contribute, of course.”

Goldman Sachs is among the biggest U.S. banks struggling with the repercussions of Brexit, which sent the pound plunging to its lowest in decades, roiled property markets and touched off political instability. Goldman employs about 6,000 people in London and along with most other international banks supported the “Remain” camp in the U.K.’s June 23 referendum.

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