Goldman’s Compliance Staff Is Reviewing Venezuela Trade

Updated on
  • Firm’s lawyers said to examine how to improve the process
  • Deal sparked wave of protests, calls for probe by lawmakers

Demonstrators hold signs and Venezuelan flags during a protest outside of the Goldman Sachs Group Inc. headquarters in New York, on May 30, 2017.

Photographer: Alexander F. Yuan/Bloomberg

Goldman Sachs Group Inc.’s compliance and legal staff are reviewing the purchase of $2.8 billion in discounted Venezuela bonds after the deal sparked protests and calls for a legislative probe, according to a person with knowledge of the matter.

The review is focusing on how the process can be improved, the person said, asking not to be identified because the decision hasn’t been announced publicly.

Some Venezuelan lawmakers said the purchase, made by Goldman Sachs’s asset-management unit, lends support to President Nicolas Maduro as he grapples with accusations of human-rights violations. The nation’s legislature vowed to investigate the deal and whether paying back the bonds is in the country’s best interest. The National Assembly approved a motion Tuesday asking the U.S. Congress to examine the transaction.

Goldman Sachs used a broker to buy the securities, issued in 2014 by the state-owned oil company Petroleos de Venezuela SA, and had no interaction with the government, the New York-based firm said in a statement Monday. Venezuela’s opposition leaders, which have been urging Wall Street banks not to throw a financial lifeline to Maduro, allege that the purchase represents an infusion of cash to the government.

“We agree that life there has to get better,” Goldman Sachs said in its statement. “We made the investment in part because we believe it will.”

Andrew Williams, a Goldman Sachs spokesman, declined to comment on the internal review beyond the Monday statement, which also said the firm recognizes “the situation is complex and evolving and that Venezuela is in crisis.”

Read more: Goldman ignites Venezuela’s ‘Hunger Bonds’ movement

Eric Lane and Tim O’Neill, who run Goldman Sachs’s investment-management division, weren’t briefed on the trade until after it was completed, the person said. The firm’s business-standards committee, set up by Chief Executive Officer Lloyd Blankfein in 2010 after the financial crisis, didn’t review the trades either, and neither did the investment-management unit’s own standards committee, the person said. The Wall Street Journal reported earlier Friday that the purchase wasn’t vetted by senior executives.

Goldman Sachs Asset Management’s portfolio managers aren’t typically required or expected to get pre-approval from senior managers for their investments. There is a system in place to trigger a review in cases where the purchase might carry heightened reputational risk for the firm. That process wasn’t used in the Venezuela transaction, the person said.

With a severely constrained supply of cash, Maduro has kept up bond payments while sharply curtailing imports of food, medicine and other basic goods. Anti-government protests have left dozens killed over the past two months.

U.S. Senator Marco Rubio, who serves on the Foreign Relations Committee, also has been in contact with financial institutions, a spokeswoman for the Florida Republican said. Rubio is encouraging them “to respect the will of the Venezuelan people and not to give a lifeline to the imploding Maduro regime,” she said.

— With assistance by Katia Porzecanski

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