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July 13, 2009 11:33 pm
Executives at Goldman Sachs sold almost $700m worth of stock following the collapse of Lehman Brothers last September, according to filings with the Securities and Exchange Commission.
Most of the sales occurred during the period in which the investment bank enjoyed the support of $10bn from the troubled asset relief programme.
The surge in selling among Goldman partners, at a time when the US government had thrown a lifeline to Wall Street, is likely to draw criticism from lawmakers on Capitol Hill. Having survived the crisis, the bank is expected to report strong second-quarter earnings on Tuesday on rebounding trading profits.
For the eight-month period for which figures are available, Goldman partners sold more than $691m in company stock, even as the firm expanded its public float from 395m to 503m shares in several capital raises.
For the comparable period between September 2007 and April 2008, when the average share price was substantially higher, Goldman partners sold about $438m in stock.
A spokesman declined to comment on the sales, other than to note that Goldman partners receive a big share of annual bonuses in stock, and that for many, stock sales are an effort to diversify their holdings.
Some of the sales could have been motivated by margin calls, which are said to have afflicted a number of Goldman executives who used company stock as collateral for loans.
Stock sales by partners have been a sensitive topic at Goldman Sachs, but never more so than since last September after the collapse of Lehman’s. According to a disclosure in Goldman’s most recent proxy statement in March, the bank took the unusual step of buying back investments in illiquid employee funds made by Jon Winkelried, former co-chief operating officer, and Gregory Palm, general counsel, for $19.7m and $38.3m respectively.
Goldman agreed to the unusual buy-backs last September to obviate the need for the two officers to sell stock on the open market, the company said in March. “Stock sales would easily have covered their requirements but, given the turbulent market conditions, we and they were concerned that such sales would be misconstrued by the market as indicating a lack of confidence in Goldman Sachs.”
Employee ownership has been an important component of Goldman’s “partnership” culture, a vestige of the investment bank’s history as a privately held firm. It went public in 1999.
But Goldman’s culture was severely tested last year. For the period during which executive sales were allowed, from September 17 to October 24, Goldman partners sold some $250m worth of stock.
A bigger wave of selling occurred during the window between December 2008, after Goldman reported its first quarterly loss as a public company, and mid-February. In that two-month period, when Goldman’s share price sunk to near-historic lows, partners sold more than $280m worth of company stock.
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