Wall Street Firms Continue to Cover Up for Each Other


Morgan Stanley’s CEO James Gorman warned Morgan Stanley employees not to circulate a New York Times op-ed piece by former Goldman employee Greg Smith that blasted Goldman’s culture as “morally bankrupt” and said that success at Goldman was often achieved by selling products that the firm wanted to get rid of. Smith wrote the article to explain why he was resigning from Goldman after over a decade as a managing director. (“Gorman Says He Told Staff Not to Circulate Op-Ed on Goldman,” Bloomberg).

Smith described meetings at Goldman that he attended, saying there was never any discussion about how to help clients (often referred to as “muppets”) ? only about “how we can make the most possible money off of them.” He was careful not to accuse anyone at Goldman of “illegal behavior,” but asserted that Goldman employees would “push the envelope” by selling products to customers that were not aligned with the client’s goals but were lucrative for Goldman.

Smith said the culture of putting the firm’s interests ahead of its clients’ was fostered by talk about “‘muppets,’ ‘ripping eyeballs out’ and ‘getting paid,'” that was heard and absorbed by junior employees.

CEO Gorman complained that the New York Times was unfair in publishing the article of “a random employee” and said he did not think it was balanced. Since Mr. Gorman does not appear to have ever worked at Goldman Sachs, one must ask how he could make an informed determination that Mr. Smith’s charges were unbalanced.

Investor attorney J. Boyd Page, senior partner of Atlanta-based Page Perry, remarked: “I’ve heard some on Wall Street react by saying it’s disingenuous to criticize salesmen for being salesmen and selling products. What they fail to consider is the fact that securities firms and their brokers are professionals bound by a high set of standards. In many cases, they are fiduciaries and have been required, as a matter of industry policy since the 1940s, to put their client’s interests ahead of their own. Mr. Gorman’s observations are hardly random or isolated and are consistent with Wall Street CEOs’ own testimony before Congress, in which every one of them right down the line dodged the question “Does your firm put its clients’ interest first?”

Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.