The watchdog said that under pay-to-play schemes, the companies offer campaign contributions or other financial aid with an aim to influence the awarding of public contracts for securities underwriting business.
Delivering its order against Goldman Sachs, the market regulator said that Neil M M Morrison was a vice president in the firm’s Boston office and pleaded for underwriting business from the Massachusetts treasurer’s office beginning in July 2008.
Morrison was also working for Cahill’s political campaigns from November 2008 to October 2010 and carried out campaign activities from the Goldman Sachs office during work hours and used the firm’s phones and e-mail.
Goldman Sachs contribution to Cahill disqualified the firm from engaging in municipal underwriting business with certain Massachusetts municipal issuers for two years after the contributions.
However, the firm was involved in 30 prohibited underwritings with Massachusetts issuers and earned more than $7.5m in underwriting fees, claims the US watchdog.
Goldman Sachs has agreed to settle the charges by paying $7,558,942 in disgorgement, $670,033 in prejudgment interest, and a $3.75m in penalty, which is the largest ever imposed by the SEC for Municipal Securities Rulemaking Board (MSRB) pay-to-play violations.
SEC’s Division of Enforcement director Robert Khuzami said, "The pay-to-play rules are clear: municipal finance professionals that use their firm’s resources to campaign on behalf of political candidates compromise themselves and the firms that employ them."
