|SUBPOENAS FOR DOCUMENTS
It is not clear what direction the federal investigation is taking, but Timothy Cahill’s campaign for governor is a factor.
SEC looks at Cahill, Goldman Sachs link
Subpoenas focus on ex-treasurer, aides, bank official
The US Securities and Exchange Commission has delivered subpoenas to the state treasurer’s office in a wide-ranging request for documents concerning dealings between investment banking giant
The agency’s subpoenas, which seek e-mails, phone records, schedules, files, and memorandums, come just over a month after Goldman Sachs removed itself from two state bond deals in Massachusetts following the disclosure that a vice president at the firm, Neil Morrison, was active in Cahill’s 2010 gubernatorial campaign, which could violate federal securities regulations. Morrison had previously served as a top deputy to Cahill in the treasurer’s office.
The SEC served the papers just before the close of business Friday, catching the new treasurer, Steven Grossman, and his staff off guard. A spokesman for Grossman said the treasurer would not comment on details of what federal regulators are seek ing but said his staff is quickly assembling the requested material.
“We are cooperating fully and promptly with the US Securities and Exchange Commission’s request for documents consistent with our commitment to running a transparent and accountable Treasury,’’ the spokesman, Al Gordon, wrote in an e-mail yesterday. “Due to the nature of this matter, we cannot comment further.’’
A spokesman for Goldman Sachs, Michael DuVally, said yesterday the firm would have no comment. Cahill also declined to comment, telling the Globe he had not yet been informed of the subpoenas. “This is the first I heard of it, so I can’t really comment,’’ he said.
The SEC also would not comment on the subpoenas.
It is not clear from the subpoenas alone what direction the federal investigation is taking. An official who has been briefed on the documents said that they refer specifically to Goldman Sachs and seek all communications between Cahill’s office and Morrison and the investment bank dating back to June 1, 2008. The SEC, the official said, also asked for documents from the state Lottery and School Building Assistance authority, both of which are under the treasurer’s control.
The breadth of the subpoenas suggests federal regulators could be looking at possible connections between Cahill’s work as treasurer and his gubernatorial campaign, which was the subject of a separate investigation launched last year by the state attorney general’s office.
Named in the subpoenas are Cahill; his former chief of staff, Scott Campbell, who left state government last year to help manage Cahill’s campaign; deputy treasurer Colin MacNaught, who oversaw bond issuances under Cahill; Amy Birmingham, a top aide on Cahill’s gubernatorial campaign; and political finance consultant Laurie Bosio, a major political fund-raiser for Cahill in his bid for governor.
Morrison’s role in the campaign, which he has downplayed, could trigger SEC regulations that sharply restrict public-finance bankers from contributing to political figures and elected officials who issue public bonds.
The Globe reported last June that Morrison negotiated a $455.9 million bond with a state water-pollution control board that Cahill chairs and operates within the treasurer’s office.
As part of a civil lawsuit Cahill filed against ex-advisers during the gubernatorial campaign, Morrison was identified as a “top political adviser’’ to Cahill. Documents filed in the suit included a copy of an e-mail that Morrison sent from his private account to two consultants for the campaign, in which he accepts, on Cahill’s behalf, the terms of a contract between the campaign and the consultants.
Such work could be considered an in-kind contribution to the Cahill committee. If it was done on company time and if its value exceeds the $250 limit set by the SEC, Morrison, under federal regulations, could face fines and lose his broker’s license. The e-mail was sent during working hours on Friday, Aug. 13.
Morrison, who is leaving his position at Goldman Sachs later this month, declined to comment yesterday when asked about the subpoenas or the campaign work. In an abbreviated response to Bloomberg News last month about the issue, he referred to his political role as minor. There was no “formal role with the Cahill committee,’’ he said.
The SEC could impose penalties on Goldman Sachs, including banning it from underwriting bond offerings by the state treasurer’s office for two years, according to federal regulations.
Complicating the issue is Morrison’s role in negotiating the bond deal with the Massachusetts Water Pollution Abatement Trust board last spring. The banking firm earned an estimated $2 million in fees on the deal. The subpoenas also seek documents from the trust and its dealings with Goldman Sachs.
Morrison, a former Taunton city councilor, joined the Treasury staff after Cahill was elected to his first term in 2002, rising to become first deputy treasurer. He left in 2006 and joined the Swiss banking firm
The decision by the water-pollution control board to give Goldman Sachs the bond work last spring came just months after the SEC had charged Goldman, one of the most influential and prestigious investment firms in the country, with fraud in a federal suit. The regulators argued that Goldman’s investment banking division had created a system that allowed the company to bet against the mortgage securities it had sold to some of its clients.
In July, the firm paid a $550 million fine to settle the suit. It also launched an advertising campaign to repair its image.
Although some state agencies were concerned about contracting with the company, Goldman Sachs had also landed work last year managing bond sales for the MBTA and Massachusetts Housing Finance Agency. But late last year, Goldman Sachs, concerned about the revelations that Morrison was involved in the political campaign, suddenly withdrew.
Frank Phillips can be reached at firstname.lastname@example.org.