naked capitalism

The latest “Goldman [appears to be] behaving badly” incident reflects either uncommon boneheadedness (the only question is whether by an employee or the firm itself) or a very clever ruse to further discredit the reputation-challenged bank.

Well-known British film director/producer/screenwriter Richard Curtis (Four Weddings and a Funeral, for instance) and actor Bill Nightly started a campaign for a Tobin tax on banks, which they rebranded as a “Robin Hood tax”. In addition to securing the support from a variety of organizations, they launched a video and an internet poll to show that the public would favor the idea.

At 3:41 PM, “no” votes spiked suddenly, rising from 1400 to 6000 in less than twenty minutes, which. The site’s technical staff tightened security, investigated, and determined that nearly all the votes in the surge period came from two computers….and as the Times Online explains:

one privately-owned and hard to trace, the other, it is claimed, registered to a computer at Goldman Sachs…

Internet experts said that the act was sabotage, as the culprit would have to create a special computer program in order to register so many votes in such a short space of time. They also said it was possible, though unlikely, that the campaign had fallen victim to an elaborate hoax, as it is possible to mask the true IP address and make it seem as though a hacker came from elsewhere.

Yves here. Now of course, assuming this cute move originated from Goldman or its staff, it has backfired impressively. It has not only garnered more free press for a idea that the banking industry is not keen about, but (yet again) features Goldman in an unfavorable light.

And before you say, “Goldman isn’t THAT stupid, this had to have been an employee with lousy judgment,” it is still remotely possible that this ploy did have someone in the officialdom backing it.

Consider the case of Christian Curry. Curry was an analyst in Morgan Stanley’s real estate department. He was fired almost immediately after nude photos of him appeared in a gay magazine, although when Curry sued for wrongful termination, Morgan claimed he had engaged in expense account fraud (I dimly recall the particulars, and even at that stage, Morgan Stanley was already looking inept. Curry said the firm was contesting him having been reimbursed for visits to strip clubs. Curry said it was on client business and that sort of thing was routine at Morgan Stanley. Oh, and before readers wonder why a young staffer would be charging client-related entertainment to his company, it’s part of the culture at most firms that the most junior person picks up the tab for wining and dining, to relieve the senior person of the nuisance of submitting the paperwork. If I were Morgan Stanley, I would not give someone cause to do discovery on whether other staffers had been reimbursed for expenses at adult entertainment venues).

Then the dispute took a bizarre twist. Per the Time Magazine:

Several months after he left Morgan Stanley last year, the Columbia University graduate was arrested for paying undercover police $200 to plant racist e-mail messages in the Morgan Stanley computer system. The alleged motive was to bolster a planned discrimination lawsuit. Yet last week the New York district attorney’s office dropped the charges after discovering that just days after Curry’s arrest, Morgan Stanley officials had paid $10,000 to an informant working with the same undercover police who busted the young analyst.

One problem: nobody will explain what the $10,000 was for, but it was enough to make the D.A. rethink its case against Curry. Now Morgan Stanley is under investigation.

The denouement? Morgan Stanley hired an outside firm to conduct an investigation, which found no laws were broken. But the general counsel, who authorized the payment, resigned.

Now I’m no expert, but this sure looked like an attempt at entrapment to me (it was the informant, a school friend of Curry, who suggested the idea of planting the e-mail messages). And the Morgan Stanley general counsel went as far as seeking outside opinion from Davis Polk on the ploy:

Sonnenborn [the general counsel] understood from the lawyers that the payment as a reward for Luethke’s information would be legal if the informant was not to be a witness in the Curry case..

So get this: it’s OK if Morgan Stanley uses the “information” to get him Curry arrested and support their case, just as long as the “informant” does not appear in court. The Manhattan District Attorney’s office was not too happy when they learned about this angle, which led them to drop the case against Curry and start investigating Morgan Stanley.

Curry is hardly a sympathetic figure, but Morgan Stanley managed to come out the loser on the PR and monetary front. Morgan Stanley claimed it paid the junior staffer nothing, but the counter-evidence was awfully loud:

But try as Morgan Stanley might, its public claims have been belied by the recent transformation of Curry from social pariah to Richie Rich. The party started the week of the settlement, when Curry arrived at a victory dinner at Harry Cipriani in a limo strewn with rose petals; it built steam as he bought two Ferraris, a Porsche, a Range Rover, and a Mercedes; and it’s still on in mid-January, when he arrives at Le Cirque 2000 with his 23-year-old assistant, Stephanie, and publicist, David Granoff, whose other famous client is Anna Nicole Smith. “The last time I came here was for a Morgan closing party,” Curry says with a smirk.

After settling in a purple velvet banquette — “best table in the house,” Granoff observes — Curry gazes around the fairy-tale room, smiling happily. He sips a kir royale, peruses the menu (“What’s halibut?” he asks), and orders tub after tub of caviar. “I’ve never had caviar,” confesses Stephanie. “It’s one of those little-kid things — I always said I wouldn’t eat it.”…

But there is one topic about which Curry loses his cool: “People are saying, ‘This guy Curry, spoiled little bitch, never worked a day in his life, and now he’s a multimillionaire,’ ” he snarls. “Well, bullshit! I’d never go through that again, whether they paid me zero dollars” — and now he speaks very, very slowly — “or $52 million.”

So — hypothetically speaking, of course — what, exactly, does a 26-year-old guy do with, say, $52 million in cash and stock?

Yves here. I’m not saying Goldman did anything remotely this stupid (first firing someone over photos in a gay magazine, the protestations to the contrary, without preparing a credible case for another reason first, then compounding the error with overzealous moves). But while Goldman has long been careful about staying just this side of the letter of the law, it has revealed itself to be remarkably tone-deaf as far as the court of public opinion is concerned (and that is saying something, given the generally appalling performance of the industry.

That’s a long-winded way of saying that given that the ballot box stuffing was not illegal, it does make it conceivable that someone in the officialdom at Goldman signed off on this childish stunt.

Update: Swedish Lex, who was kind enough to point me to to l’affaire Robin Hood Tax (boy, does that not roll trippingly off the tongue), made a comment in passing (in Links yesterday) about my “Goldman Sachs issues,” so I thought I might clarify matters a tad.

First, this blog is news-driven, so if Goldman is getting a lot of headlines, Goldman will get a lot of coverage in the blogosphere, including here. One could equally well describe me as having Timothy Geitner issues from the moment he opened his mouth as Treasury Secretary.

Second, for the record, it isn’t so much Goldman issues as “investment banking/capital markets firm” issues, but Goldman has made itself the poster child by asking for it, particularly Blankfein’s statement re doing the Lord’s work. And its staffers have made even more stunning remarks that have gotten less play in the US. From a November post:

“The injunction of Jesus to love others as ourselves is an endorsement of self-interest,” Goldman’s [Brian] Griffiths said Oct. 20, his voice echoing around the gold-mosaic walls of St. Paul’s Cathedral, whose 365-feet-high dome towers over the City, London’s financial district. “We have to tolerate the inequality as a way to achieving greater prosperity and opportunity for all.”

Yves again. This is the most brazen example of Newspeak I have ever seen. The remark Griffith cited is against self-interest, it’s a clear and well known instruction to put other people’s interest on the same footing as your own, to be at least fair, if not to go out of your way to be fair. But all Griffiths pays attention to is the self love part, ignores the rest, and acts as if he can brazen his way into getting others to buy his obviously warped reading.

I think they must put something in the water at Goldman these days. The firm seems to be incapable of reasoning any more, and instead reverts increasingly to patent examples of self-serving, intelligence-insulting palaver, which to anyone with an operating brain cell looks narcissistic. Not only is the only thing that matters is what is good for Goldman, but the people at the firm are so deeply inculcated that they assume that the rest of the world recognizes their superiority and privileged claim on everything, so they no longer even bother indulging the idea that other people might have rights too.

Back to today. By contrast, John Mack took no bonus for the last three years running. JPM was no where near as solid during the crisis as they are generally perceived to have been, but Dimon also has the sense to not make as ridiculous pronouncements as the GS crowd has. Ken Lewis, John Thain, Dick Fuld, and Jimmy Cayne got their comeuppance, Pandit is being forced to partially dismantle Citi.

So my emphasis on Goldman isn’t simply its conduct (the whole industry has set out to feather its nest, please) but the fact that it is so convinced of its superiority and deservingness (not a word, but you get what I mean) that its intransigence manages to be worse than the rest of the industry. The place clearly was a cult when I worked there briefly, more than 25 years ago, and more recent accounts suggest it is even more so now. Cults are remarkably effective forms of organization, in that they motivate staff to make sacrifices and tolerate boundary violations that most people would not tolerate. But they are remarkably poor at admitting not just error, but any input that threatens their belief system, which rests on an assumption of specialness and privilege. As a result, Goldman not only so clearly and visibly doesnt’t get it that they demand to be whacked, but it will take an extraordinary amount of denigration and pushback for any negative information to penetrate.