Last year the SEC charged Goldman Sachs & Co. and Neil Morrison, one of its former investment bankers, with “pay-to-play” violations involving undisclosed campaign contributions to then-Massachusetts state treasurer Timothy P. Cahill while he was a candidate for governor.
Pay-to-play schemes involve campaign contributions or other payments made in an attempt to influence the awarding of lucrative public contracts for securities underwriting business.
While Goldman Sachs had already agreed to settle its charges last year, only recently did Morrison agree to a settlement. Without admitting or denying wrongdoing, Morrison agreed to pay $100,000 and receive a ban from the securities industry for five years.
Elaine Greenberg, chief of the municipal securities and public pensions unit of the SEC’s enforcement division, said of the settlement, “This is the largest penalty ever imposed by the SEC against an individual for violations of the MSRB pay-to-play rules, and the first time an individual is barred from the securities industry for these violations. 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.”
According to the SEC’s order against Morrison, the campaign activities that Morrison engaged in for Timothy Cahill included fundraising, drafting speeches, communicating with reporters, approving personnel decisions, and interviewing at least one possible running mate. Morrison at times referenced his campaign work while soliciting underwriting business in an apparent attempt to gain favor during the selection process.
The SEC claims that by performing these roles for Cahill’s campaign, Morrison got more access to Cahill and his staff, giving Goldman a leg up on mandates to underwrite municipal bond offerings.
“We certainly agree with Ms. Greenberg of the SEC that these sanctions are tough,” said Tom Kiley, Morrison’s attorney. “The fact 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.”