The Securities and Exchange Commission (SEC) announced Thursday that it charged Goldman, Sachs & Co. and one of its former investment bankers with “pay-to-play” violations involving undisclosed campaign contributions to then-Massachusetts state treasurer Timothy P. Cahill while he was a candidate for governor.
In what the SEC says is the biggest fine it has levied for Municipal Securities Rulemaking Board (MSRB) pay-to-play violations, Goldman Sachs agreed to settle the charges by paying $12 million—$7,558,942 in disgorgement, $670,033 in prejudgment interest and a $3.75 million penalty.
The SEC coordinated this enforcement action with a related action filed by the Massachusetts Attorney General against Goldman Sachs.
Pay-to-play schemes involve campaign contributions or other payments made in an attempt to influence the awarding of lucrative public contracts for securities underwriting business. This marks the first SEC enforcement action for pay-to-play violations involving “in-kind” non-cash contributions to a political campaign.
The SEC’s Office of Compliance Inspections and Examinations (OCIE) issued a risk alert in late August noting that SEC examiners have observed practices that raise concerns about firms’ compliance with their obligations under MSRB Rule G-37, which clamped down on so-called “pay-to-play” practices.
The SEC says that the case against Neil M.M. Morrison, the vice president in the Goldman’s Boston office who solicited underwriting business from the Massachusetts treasurer’s office beginning in July 2008, continues. Morrison, according to the SEC, also was “substantially engaged” in working on Cahill’s political campaigns from November 2008 to October 2010, and at times conducted campaign activities from the Goldman Sachs office during work hours and using the firm’s phones and e-mail.