Goldman Bans Partners From Donating To Trump Campaign To "Minimize Potential Reputational Damage"

In the last days of August, Goldman Sachs surprised its employees with a new rule: the firm's top employees will be barred from donating to certain political campaigns, including that of Trump-Pence.

In a memo sent out on August 29, the firm's global compliance office said that starting on September 1, "all partners across the firm are considered “Restricted Persons” as defined by the firm’s Policy on Personal Political Activities in the US." This means that as of this moment, Goldman's partners are "prohibited from engaging in political activities and/or making campaign contributions to candidates running for state and local offices, as well as sitting state and local officials running for federal office", and specifically donating to the Donald Trump campaign, in order to "minimize potential reputational damage."

The memo conveniently provides the following example of the type of political activity that is barred, among others:

  • Any federal candidate who is a sitting state or local official (e.g., governor running for president or vice president, such as the Trump/Pence ticket, or mayor running for Congress), including their Political Action Committees (PACs).

As Fortune, which first obtained the memo reported, said that Goldman's new rule was meant to remove any implication of so-called “pay to play.” Four years ago Goldman bank paid $12 million to settle charges that a former Boston-based banker had picked up bond underwriting business in the state while working for and contributing funds to the campaign of a then Massachusetts state treasurer and governor-hopeful, Tim Cahill.

Pay-to-play rules were first introduced by the Securities and Exchange Commission in 2010, after several investment advisors were accused of trying to win business, such as managing public pensions, with improper tactics including political contributions. If a financial advisor were to make a campaign contribution to a public official or candidate, they would be banned from providing advisory services for compensation to the government client for two years under the rules.

Goldman explains that "the policy change is also meant to minimize potential reputational damage caused by any false perception that the firm is attempting to circumvent pay-to-play rules, particularly given partners’ seniority and visibility," adding that “all failures to pre-clear political activities as outlined below are taken seriously and violations may result in disciplinary action."

Yet while the new policy would be perfectly reasonable if it was treated both political candidates equitably, it appears that there is a loophole: namely Clinton-Kaine.

Because as Forbes diligently reports, "the rules do not restrict donations to Clinton-Kaine. Kaine is a U.S. Senator for Virginia, and not considered a local official under Goldman’s rules. Although the memo does say that Goldman partners are no longer able to donate to the Virginia Democratic party, which could be a reference to Kaine. Lloyd Blankfein, Goldman’s CEO, has declined to say who he is supporting for president, but is known as a long-time Clinton supporter. Blankfein donated to Clinton when she ran against Obama is 2008."

Goldman declined to comment to Forbes.

Still, while partners are henceforth barred from donating to Trump - and with their boss' well-known bias to Hillary we doubt they would in any case - the ban doesn’t eliminate a large number of potential Trump donors. The bank has 467 partners globally, out of 30,000 plus employees. But since Goldman partners tend to be some of the wealthiest people in finance, the fact that they aren’t allowed to send money to the Trump campaign could make a difference, particularly among the race for Wall Street dollars, where Trump has been trailing Clinton but catching up lately. What makes the situation even more ironic is that Trump's fundraising chief, Steven Mnuchin, happens to be a former Goldman employee himself. 

Incidentally, Hillary's campaign finance chief, former CFTC head Gary Gensler, is also a former Goldman banker; he appears to have done a better job of keeping the "access" flowing between his former coworkers and his current boss.

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The full Goldman memo courtesy of Fortune:

From: Global Compliance
Sent: Monday, August 29, 2016 11:57 AM
To: ‘All Partners’
Subject: New Policy on US Political Activities by “Restricted Persons”

 

Global Compliance 

 

August 29, 2016

 

New Policy on US Political Activities by “Restricted Persons”

 

You are receiving this e-mail because effective Thursday, September 1, all partners across the firm are considered “Restricted Persons” as defined by the firm’s Policy on Personal Political Activities in the US. As outlined below, Restricted Persons are prohibited from engaging in political activities and/or making campaign contributions to candidates running for state and local offices, as well as sitting state and local officials running for federal office.

 

The policy change is meant to prevent inadvertently violating pay-to-play rules, particularly the look-back provision, when partners transition into roles covered by these rules. The penalties for failing to comply with these rules can be severe and include fines and a ban on the firm from doing business with government clients in a particular jurisdiction for a period of at least two years.

 

The policy change is also meant to minimize potential reputational damage caused by any false perception that the firm is attempting to circumvent pay-to-play rules, particularly given partners’ seniority and visibility. All failures to pre-clear political activities as outlined below are taken seriously and violations may result in disciplinary action.

 

Highlights of the policy as it applies to you as a Restricted Person are as follows:

 

All Political Activities Require Pre-Clearance

 

Like all firm personnel, you must pre-clear all politicalactivities through the US Political Contributions Pre-Clearance System. A pre-clearance requirement applies to all contributions and solicitations, as well as to attending or hosting events; lending your name to lists, letters or invitations; serving on committees; and volunteering with campaigns and elections. Each contribution or political activity must be separately approved, even if you have received prior approvals for the same political campaign.

 

Prohibition on State, Local and Certain Federal Political Activities

 

As a Restricted Person, you may not make any contributions or solicit in connection with:

  • Any federal candidate who is a sitting state or local official (e.g., governor running for president or vice president, such as the Trump/Pence ticket, or mayor running for Congress), including their Political Action Committees (PACs).
  • Any state or local candidate or official in any state or locality (e.g., candidate for governor, mayor, state treasurer, state comptroller, state legislator, local city council).
  • State and local party committees (e.g., the Democratic Party of Virginia, the Suffolk County Republican Party).
  • PACs and Super PACs supporting or opposing one or more state or local candidates.
  • Inaugural/Transition Committees or expenses for newly elected state and local officials.
  • Bond ballot initiative committees (e.g., a committee seeking authorization to issue municipal securities to fund a public infrastructure project).

Contact Government Interactions Compliance or Government Affairs Legal if you have any questions about these restrictions.