Goldman Sachs featured prominently in the headlines this year, even before the leak this week of Theresa May’s pre-EU referendum speech to staff at the investment bank.
The New York-based bank has been dragged into the BHS scandal, the bitter run-up to the US presidential election and the furore over the appointment of the former European commission president José Manuel Barroso as chairman of Goldman Sachs International.
The high court in London also heard allegations in June that Goldman bankers paid for prostitutes, private jets and five-star hotels, and held meetings on yachts to win business from a Libyan investment fund set up under the Gaddafi regime.
These allegations were part of a $1.2bn claim against Goldman by the Libyan Investment Authority, which said the bank duped it into signing deals it did not understand. The high court ruled in Goldman’s favour this month.
The prime minister spoke in May at the investment bank’s “Talks at GS” series. The list of past speakers at these Goldman Sachs events has highlighted the company’s allure and influence in London and other financial centres around the world. According to Goldman’s website, the “Talks at GS” involve the bank inviting “leading thinkers from a broad range of backgrounds to share their views and expertise”.
As well as May, who spoke at Goldman on 26 May, other speakers have included Anna Wintour, the editor-in-chief of Vogue, Eddie Jones, the England rugby union coach, and Justin Welby, the archbishop of Canterbury.
The investment bank is not the biggest in the world (that title belongs to JP Morgan Chase based on their respective stock market values) but Goldman consistently tops the global league table for the number of mergers and acquisitions it has worked on, and its alumni have ended up in some of the most powerful jobs in the world. It was infamously described by Rolling Stone magazine in 2010 as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”.
Former Goldman employees who have moved on to high-profile positions in public life include Mark Carney, governor of the Bank of England, Mario Draghi, president of the European Central Bank, Hank Paulson, the former US treasury secretary, and Malcolm Turnbull, the Australian prime minister.
In the UK, Jim O’Neill, the former chief economist of Goldman Sachs, had been a Treasury minister in the Conservative government until his resignation last month, while Paul Deighton, the former chief operating officer in Europe, was commercial secretary to the Treasury under George Osborne and has just been named chairman of Heathrow airport.
Howard Wheeldon, a veteran analyst in the City, claimed Goldman was perceived as a “cut above the rest”. He added: “It is informed and always one step ahead of its peers, quiet and yet super efficient, influential because it creates knowledge required, always up with events and yet, by the same token, invisible to its peers. There simply is no one better – the Rolls-Royce of global investment banking.”
Another City source said there was a business adage that “no one ever got fired for hiring Goldman Sachs”.
Goldman is renowned for its discretion and secrecy, appreciated by wealthy clients looking for someone to manage their money or a company working on a big acquisition. So the bank will have been disappointed to find its name in the news in relation to the British prime minister, particularly because the story was leaked from within the bank and involved a secret event held behind closed doors.
A spokesman for Goldman declined to comment when asked if the company was investigating the source of the leak.
The bank was involved in a similar controversy with Hillary Clinton this year after it emerged the US Democratic presidential candidate was paid $675,000 for speeches to Goldman employees and clients. Clinton did not reveal the details of her speeches, but WikiLeaks released transcripts in October that showed she had avoided directly criticising Wall Street.
Two of Goldman’s most senior employees in Europe – Michael Sherwood and Anthony Gutman – were also summoned before MPs in June as part of a parliamentary investigation into the demise of the retailer BHS. Goldman had offered informal advice to Sir Philip Green before he sold BHS to Dominic Chappell. It warned that Chappell, a billionaire tycoon, had been declared bankrupt in the past and that the deal could be risky – a warning that came true when BHS folded this year.
Sherwood and Gutman found the public hearing and inquiries into Goldman’s business practices awkward. At one stage, Michelle Thomson, the SNP MP, even said: “Mr Sherwood, I have been keeping quiet to this point, but I have been sitting watching everyone’s faces and, if you don’t mind my saying, you look somewhat uncomfortable.”
But the parliamentary appearance of two senior Goldman figures also provided a unique insight into how the investment bank does business, including its determination to stay close to leading clients.
“Goldman Sachs is slightly different from other firms,” Sherwood told MPs. “Our starting account size is larger and we are really in the high net worth business and that is all. We are in the business where we cover large corporations, high net worth individuals, governments. They may not do things for a very long period of time, but, at particular times in their lifecycle, they might do significant transactions and we want to be in the goalmouth when those things happen.”
