Analysis: Why Goldman's Blankfein tapped big-time lawyer

NEW YORK Wed Aug 24, 2011 6:20pm EDT

NEW YORK (Reuters) - If you need to hire Reid Weingarten, your career has probably hit a rough patch.

The rule now applies to Goldman Sachs (GS.N) CEO Lloyd Blankfein, who Reuters reported on Monday has retained Weingarten, a partner at Steptoe & Johnson in Washington.

With that move, Blankfein becomes the latest in a long line of executives and high-profile people in trouble who have turned to Weingarten for help. They range from Tyco (TYC.N) corporate counsel Mark Belnick, for whom Weingarten won an acquittal, to ex-Enron accounting officer Richard Causey, who pleaded guilty to fraud and conspiracy, to film director Roman Polanski, who tapped Weingarten to fight extradition to the Unites States for sexually assaulting a 13-year-old girl in 1977.

In the courtroom, Weingarten can come across as laid-back and likable, not as an imposing, powerbroker-type, clients say. It is a demeanor that goes a long way with juries.

"When I got indicted, I sat down with Reid and I knew he was my type of guy," said Douglas Jemal, a prominent real estate developer in Washington.

In 2006, Weingarten, a native of Newark, New Jersey, won a jury acquittal for Jemal on six out of seven federal charges that Jemal bribed a city official to obtain sweetheart contracts. The developer received probation on the remaining charge of wire fraud. Jemal said he talked to three attorneys before choosing Weingarten, who was necktie-less and looked downright rumpled at their initial meeting. "He knows how to talk to a jury. He knows how to talk to everybody," he said.

Weingarten's cross-examination of the government's key witness, a city official who said he arranged the contracts, was critical to undermining the government's case. During questioning, Weingarten relentlessly prodded the official to admit that nearly everything on the resume he used to get his city job was false.

Jemal said he watched Weingarten shed 15 pounds before and during the trial. "He doesn't eat. He puts his heart and soul into it."

Weingarten did not respond to interview requests for this story.

While defending Bernard Ebbers, the former WorldCom chief executive in the $100 billion accounting fraud scandal, Weingarten was especially aggressive with WorldCom finance chief Scott Sullivan, asking him at one point during cross-examination if he out-and-out lied to board members.

"So you looked those 12 people in the eye and lied your head off?" Weingarten asked.


But he has a softer side, too, said attorney Colleen Conry, "You don't have to beat up every witness, and he knows that," she said. Conry worked with Weingarten when they successfully defended Lauren Stevens, a former GlaxoSmithKline Plc (GSK.L) in-house lawyer accused of making false statements and obstructing a federal investigation into off-label marketing of the antidepressant Wellbutrin. "Reid is particularly adept at figuring out which approach to take with whom." His nice-guy quality was especially evident with the way he dealt with the associates working on the case, she said.

Blankfein's choice of Weingarten as his lawyer has raised questions about what kind of trouble the Goldman Sachs CEO might be in. The DOJ, where Weingarten once worked, is reviewing a Senate report released in April regarding Goldman Sachs and other banks' role in the financial crisis.

While it is not unusual for company leaders to arm themselves with their own lawyers, Weingarten's reputation as a litigator -- as opposed to a lawyer who guides clients through investigations -- is making Goldman investors nervous. The day that Blankfein's hiring of Weingarten broke, the bank's stock dropped nearly 5 percent to its lowest level since March 2009. On Wednesday, Goldman shares closed at $110.31, up 3.6 percent from Monday's close at $106.51.

Blankfein has not been indicted or accused of wrongdoing.

Goldman Sachs and Blankfein declined to comment for this story, but on Monday, the bank told Reuters that the hiring of Weingarten was routine.

"As is common in such situations, Mr. Blankfein and other individuals who were expected to be interviewed in connection with the Justice Department's inquiry into certain matters raised in the PSI report hired counsel at the outset," the bank said, referring to the Senate's Permanent Subcommittee on Investigations.

A more conventional choice for Blankfein might have been Debevoise & Plimpton's Mary Jo White or Gary Naftalis, of Kramer Levin Naftalis & Frankel, lawyers known for working with executives whose companies face DOJ investigations.

Weingarten, a 1975 graduate of Penn State Dickinson School of Law, has a "regular guy" touch, said Jemal. And that might be part of Blankfein's strategy if a case goes to trial. "He's very down-to-earth. He's real," Jemal said.

Still, he does lose a few, including the case against Ebbers, the second-biggest accounting fraud scandal in history after the Bernard Madoff affair. Weingarten told television talk show host Charlie Rose after the Ebbers verdict, "The system didn't work right." He added, "I think it comes out right almost all the time."

(Reporting by Leigh Jones; editing by Eileen Daspin and Eddie Evans)

(This story has been corrected in paragraph 13 to say DoJ is reviewing the Senate report on Goldman and other banks, not just Goldman; and in paragraph 15 to make clear that Blankfein has not been accused of wrongdoing)

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