In last night’s Republican gubernatorial debate, the topic of front runner Meg Whitman’s ties to the Goldman Sachs investment bank – as corporate director, investor and beneficiary of campaign donations and insider stock deals – came up three times in 60 minutes.
Insurance Commissioner Steve Poizner
Insurance Commissioner Steve Poizner, who is trailing badly in the polls, hit Whitman on Goldman twice during the debate – a measure of the traction he thinks the issue can give. (On Friday, a Poizner attack ad accusing Whitman of investing in Goldman “vulture funds” began airing.)
In addition, the San Francisco Chronicle’s Carla Marinucci, who teamed with me last month on a joint California Watch-Chronicle investigation of Whitman and Goldman, asked Whitman about Goldman midway through the debate.
The SEC last month accused Goldman of defrauding investors in the sale of financial instruments based on toxic mortgage portfolios. The FBI is now investigating the bank as well, according to press reports. Whitman served on the Goldman board in 2001 and 2002, when she was CEO at eBay. Goldman executives have given her more than $110,000 in donations for her campaign.
Poizner first brought up the investment bank two minutes into the debate, in response to a question about how either of the two wealthy Republican candidates could possibly understand the problems of ordinary Californians (Whitman is worth $1.2 billion, while Poizner is merely a multimillionaire.)
“That’s why this Goldman Sachs issue is a big issue,” Poizner said at one point in a rambling response. “She has massive investments in Goldman Sachs … made huge amounts of money from the collapse of the real estate market … Did she inform people that she had a massive conflict of interest? … Lots of people got damaged by Goldman Sachs and Meg Whitman is right in the middle of it.”
Whitman didn’t return fire.
Then, at about the 20-minute mark, Marinucci asked Whitman about the so-called “spinning” scandal. In 2002 Whitman was accused by a GOP Congressman and in an eBay shareholders’ lawsuit of steering eBay’s investment banking business to Goldman in exchange for access to initial public offerings of hot stocks.
Whitman says she flipped the IPOs for $1.8 million in profits. Spinning now is banned. Marinucci asked if Whitman thinks she did something unethical.
No, Whitman said: “I am a Main Street executive, not a Wall Street executive … I did not do anything wrong – it was a legal and standard practice.”
She said she got the IPOs because she was a private client of Goldman, not because of her executive role at eBay. She also took a couple of shots at Goldman, which manages a portion of her $1.2 billion fortune and the money in her family foundation as well.
She said she left the Goldman board after 15 months (and two months after the spinning scandal erupted) “because, as Donald Trump says, I fired them. I didn’t like the culture, I didn’t like the management.” She also noted that in the end she had given her profits on the IPO deals “back to eBay and to charities.”
But Delaware court records show Whitman returned the money as part of an out-of-court settlement of the shareholders’ lawsuit; and the incomplete reply gave Poizner an opening.
“You really don’t get this, Meg,” Poizner said, and noted that the chair of a congressional committee that investigated the “spinning” scandal called the practice corrupt.
“It was a huge conflict of interest … the only reason you paid the money is because they sued you,” he also said, as well as, “Your judgment was terrible.”
Poizner hit the issue one last time in his closing remarks, referring to Whitman offhandedly as “a rookie (politician) with close ties to Goldman Sachs and Wall Street – I don’t think people are ready for that.”
The debate ended, so Whitman had no chance to reply.