WASHINGTON/CHICAGO A former Goldman Sachs Group Inc. investment banker has agreed to a five-year securities industry ban and a record fine to settle Securities and Exchange Commission charges that he broke rules against influence peddling to win bond underwriting business in Massachusetts.
Without admitting or denying wrongdoing, Neil Morrison, 38, accepted what the SEC said was the first industry ban for violating "pay-to-play" rules governing the $3.7 trillion municipal bond market.
He also agreed to a $100,000 civil fine, which the SEC called the largest individual penalty in such a case.
Thursday's settlement was announced eight months after Goldman struck its own $12 million settlement with the SEC over the case, which involved contributions to the 2010 gubernatorial campaign of then-Massachusetts State Treasurer Timothy Cahill.
Pay-to-play refers to the providing of cash or other contributions to public officials in exchange for political favors or the awarding of contracts.
"These tough sanctions against Morrison show that we take abuses of the pay-to-play rules in the municipal securities industry very seriously and will hold individuals accountable for their violations," Elaine Greenberg, chief of the municipal securities and public pensions unit of the SEC's enforcement division, said in a statement.
Thomas Kiley, a lawyer for Morrison, in an email said his client is happy to have resolved the matter, and agreed with Greenberg's characterization of the sanctions' severity.
"That this is the first time there has been an industry bar for a violation of the pay-to-play rule is a pretty good indication the law wasn't clear at the time of the conduct," Kiley said.
Goldman spokesman Michael DuVally said: "Neil Morrison violated applicable regulatory rules as well as Goldman Sachs' internal policies. We detected his activities, promptly alerted regulators, terminated his employment, and fully cooperated with investigations."
WEARING MANY HATS
The SEC said Morrison, a resident of Taunton, Massachusetts, helped run Cahill's campaign from his Goldman office in Boston, where he was a vice president, during work hours while using the bank's phone and e-mail system.
By performing such roles as speechwriter, fundraiser, strategist and media coordinator, Morrison got more access to Cahill and his staff, giving Goldman a leg up on mandates to underwrite municipal bond offerings, the SEC said.
"From my standpoint as an advisor/consultant/friend I am saying, PLEASE don't give these (underwriter) slots away willy-nilly," Morrison once e-mailed a deputy treasurer in Cahill's office, according to the SEC. "You are in the fight of your lives and need to reward loyalty and encourage friendship."
The SEC said Goldman was able to participate in 30 Massachusetts bond offerings from which it should have been disqualified because of Morrison's activities.
Goldman did not admit wrongdoing in its agreement to settle with the SEC. At the time, it also settled a related case brought by Massachusetts Attorney General Martha Coakley.
The fine is small relative to the amount of business that Morrison may have generated for Goldman, said James Cox, a Duke University law professor. "What is significant is barring this guy from the securities industry for five years," he said.
FORMER TREASURER SETTLES
In April 2012, Cahill was indicted on charges that he misused $1.5 million in funds intended to promote the state lottery to boost his campaign prospects.
A mistrial was declared in December, and Massachusetts dropped the criminal case in March 2013 when Cahill admitted to violations of state ethics rules and accepted a $100,000 fine.
The case against Goldman and Morrison was part of a broader SEC crackdown on "pay-to-play" practices.
In 2010, the regulator adopted measures to target activities of investment advisers who seek out contracts to manage public pension plans and other investment accounts.
The SEC has recently also turned up the heat on the municipal bond market itself.
On Wednesday, it settled a fraud case in which it accused South Miami, Florida, of failing to disclose problems with the tax-exempt status of two bond deals to investors.
Earlier this month, the SEC settled a landmark fraud case against Harrisburg, Pennsylvania's capital city, in which it accused city officials of glossing over the city's financial problems in public speeches and presentations.
(Additional reporting by Sarah N. Lynch; Editing by Dan Grebler, Bernard Orr)