Washington, Oct. 3 (Reuters): Wall Street powerhouse Goldman Sachs gave officers or directors of 21 favoured investment banking clients access to lucrative initial public offerings it managed, said a congressional committee on Wednesday in a scathing report Goldman slammed as “rubbish.”
The so-called “spinning” of IPOs by Goldman occurred from 1996 to 2000 and allowed numerous high-profile corporate executives to reap hefty profits from new, red-hot, mostly technology and telecommunication issues, said the report from the House of Representatives Financial Services Committee.
Among those who received the IPO share access from Goldman were former Enron Corp chairman Kenneth Lay and former Tyco International chief Dennis Kozlowski, said the committee chaired by Ohio Republican Rep. Michael Oxley.
The committee also said it found that Swiss-owned finance group Credit Suisse First Boston spun IPOs to former WorldCom Inc head Bernard Ebbers.
The IPOs spun by Goldman and CSFB to the privileged few included those of Yahoo Inc, eBay Inc, Global Crossing, Lucent Technologies and many others, according to the committee’s report.
“Some officers and directors were given access to and purchased hundreds of Goldman-led IPOs ... CSFB and Salomon Smith Barney also allocated IPO shares to banking clients,” the committee said.
The findings came amid seemingly daily revelations of deep conflicts of interest within Wall Street’s richest and most powerful financial houses, contributing to a persistent crisis of confidence in US stock markets.
“There is no equity in the equities markets. I call on every Wall Street firm to show respect for America’s individual investors by reforming these corrupt practices immediately,” said Oxley in a statement.
Responding to the committee’s report, Goldman Sachs spokesman Lucas van Praag said, “We think the committee’s statement is highly misleading and in our view an egregious distortion of the facts. The suggestion that Goldman Sachs was involved in ‘spinning’ or any other inappropriate actions relating to IPO allocation is simply wrong.”
“Our investment bankers did not play a role in determining how shares were allocated and our banking clients did not receive favoured treatment. The information (in the report) is accurate, but the inference that the committee has chosen to draw is completely inaccurate. It's rubbish.”
A CSFB spokeswoman said, “We continue to support the government and regulatory authority as we work together on initiatives to restore investor confidence.”
Top brass of Goldman Sachs, one of the financial world’s proudest organisations, met here last week with market regulators, along with officers of Citigroup Inc, to try to settle numerous probes of IPO and research practices.