Goldman chief reaches out to wealthy clients
Goldman Sachs Group Inc.’s chief executive, Lloyd Blankfein, struck a chastened tone in an unusual private call with wealthy clients Wednesday as the company embarks on a campaign to shore up its image in the wake of government and shareholder attacks.
“We have to recognize that we put ourselves in a place where these doubts could come up,” Blankfein said. “We have to analyze what we did and how we got ourselves into this place.”
He acknowledged the gravity of the company’s problems since the Securities and Exchange Commission sued the firm last month, accusing it of defrauding some institutional investors. He also acknowledged how the company’s inward-looking posture and unwillingness to admit mistakes have hurt the firm.
“If there is a silver lining in this for us, it is that I am reaching out to people — which, with the benefit of hindsight, I wish I had done earlier,” Blankfein said. “I wish I had done calls like this before this, but I am doing them now.”
The event was not an open forum, however — the well-heeled clients invited to be on the call were not permitted to ask questions.
The firm has made several other recent moves to prepare for legal and public relations battles.
It hired President Obama’s former White House counsel, Gregory Craig, to defend the firm. Goldman also secured the services of Mark Fabiani, an attorney and public relations guru who represented the Hollywood studios during the 2007 writers’ strike and the Clinton White House during the Whitewater and Monica Lewinsky investigations.
Early this week, the company disclosed seven legal actions that shareholders have taken against the company since the SEC’s suit. On Wednesday the problems continued when Fitch Ratings downgraded the company’s credit outlook to negative.
Even before the suit was filed, Goldman stepped up its lobbying operation, spending $1.15 million during the first quarter.
Goldman emerged from the financial crisis stronger than almost any other firm on Wall Street, but along with success it developed a reputation for an unwillingness to engage in public discussion or recognize flaws in its business model. Last week, during Blankfein’s appearance before a Senate investigative committee, he expressed few regrets about the company’s actions before and during the credit crisis.
On the Wednesday call, which also included comments from Tucker York, head of Goldman’s private wealth management division, Blankfein’s tone was decidedly more conciliatory.
York said he had been hearing from concerned clients. “There clearly are questions around our integrity,” York said. “Oftentimes it’s in the form of ‘How do I know that you are putting my, the client’s, interest ahead of your own?’ ”
Blankfein said he recognized that the firm is frequently in situations in which different divisions have conflicting interests. “We are going to examine frankly with an open mind and determine what we may be doing wrong,” he said. Otherwise, he mentioned no specific actions.
While some of the company’s biggest investors, including billionaire Warren Buffett, have expressed confidence in Blankfein, the chief executive is clearly facing questions about his own survival. On Friday, shareholders will vote on a nonbinding resolution proposing that Blankfein no longer hold both the chief executive and chairman positions.
Bank analyst Richard Bove has made multiple calls for the company to replace Blankfein and other executives, most recently on Monday.
“Goldman’s approach to the charges was inept to the point of being counterproductive,” Bove wrote in a note to clients. “Goldman is going to have to pay a high price for its ineptitude in handling this issue. Its shareholders already have.”
