Goldman Sachs board mum on director's conflicts

June 30, 2010 | By Jim Kim

Stephen Friedman, a Goldman director, bought 37,300 shares at an average of $80.78 each on Dec. 17, 2008. Five weeks later, he picked up 15,300 more at an average $66.61. The stock has soared since then, giving Friedman a multi-million paper profit. These purchases have long been controversial, as Friedman was also chairman of the Federal Reserve Bank of New York at that time.

These insider purchases are difficult, and Friedman first got clearance from the CFO of Goldman Sachs (GS) at that time, reports Bloomberg Markets, which offers a fascinating glimpse of the transactions. Recall that the New York Fed sought a waiver from the Federal Reserve Board in September 2008 so that Friedman could keep his position. Friedman was told that the "rules were in abeyance while the waiver was pending." Given that abeyance, the stock purchases were legal, despite appearances of a conflict. The waiver was granted in January 2009.

Yet others say such an abeyance was not possible. This will likely been explored by the U.S. House Oversight and Government Reform Committee, which is taking a look. The stock buys raise another possible conflict stemming from the decision to bail out AIG, which certainly benefitted Goldman Sachs shareholders. Some would wonder what Friedman knew. Bloomberg Markets raises the issue of board accountability. The criticism is mounting as the board stays generally mum on many issues. You have to wonder if some changes are in order.

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