Former Goldman, Sachs & Co. banker Neil M. M. Morrison has agreed to a $100,000 fine and a five-year bar from the securities industry to settle Securities and Exchange Commission charges over his involvement in a pay-to-play scheme involving a Massachusetts gubernatorial candidate.
“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,” Elaine Greenberg, chief of the SEC enforcement division’s municipal securities and public pensions unit said in a commission SEC’s announcement. “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.”
The case is also the first to involve so-called in-kind, or non-cash, contributions as part of a pay-to-play scheme.
Morrison, now 38, was discharged by Goldman on Dec. 19, 2010 and has not been registered with the Financial Industry Regulatory Association since then. He is not currently working in the securities industry, according to his attorney, Thomas R. Kiley, with Cosgrove, Eisenberg and Kiley, P.C. in Boston.
Kiley said on Thursday, “In resolving the matter Neil neither admitted nor denied the facts of the alleged violations of the law and it wouldn’t be right for us to do either now. We certainly agree with Ms. Greenberg of the SEC that these sanctions are tough. 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. Neil is happy to have this in his rear view mirror and to get back to the political and media work he has always been so good at.”
Morrison had been a vice president at Goldman and was hired in July 2008 to solicit underwriting business from, among others, the Massachusetts Treasurer’s office, according to the SEC.
From November 2008 to October 2010 he was substantially involved in then-Massachusett’s treasurer Timothy P. Cahill’s gubernatorial campaign. He conducted campaign activities from Goldman’s office during work hours using its phones and email. His work gave him close access to Cahill and his staff, who in turn gave him information about the treasurer’s internal deliberations involving the selection of muni underwriters.
Morrison’s work included fundraising, drafting speeches and fundraising solicitations, writing, reviewing or approving numerous campaign documents including position papers and talking points. He also helped prepare for press conferences, approved personnel decisions on hiring and salaries. He interviewed consultants and provided legal advice, the SEC said.
The SEC settlement order against Morrison contains an email he sent to the deputy treasurer in which he made clear his top priority was to get Goldman the lead underwriter spot on an upcoming Build America Bond deal and talking about a campaign function slated to be held on Oct. 26.
The SEC charged that Morrison violated numerous Municipal Securities Rulemaking Board Rules and caused Goldman’s violation of Rule G-37 through his campaign work and ash and in-kind contributions to Cahill.
Rule G-37 bars a firm from engaging in negotiated municipal securities business with an issuer for two years if it or any of its municipal finance professionals make significant political contributions to issuer officials who can influence the award of bond business. The rule permits MFPs to contribute up to $250 per election to anyone they can vote for.
Cahill was and would have been an issuer official, influencing the selection of muni underwriters as Treasurer and Governor, if he had been elected. Morrison did not disclose any of his activities on the firm’s G-37 forms as required.
Within two years of those contributions, Goldman, with Morrison’s knowledge, was senior or co-manager for 30 negotiated underwritings by the state or its authorities totaling about $9 billion, on which the firm received more than $7.5 million of fees.
Morrison was well aware of the G-37 restrictions, having been trained about them while at Goldman, according to the SEC.
Goldman Sachs agreed last September to pay $14.4 million to settle state and federal charges related to Morrison's activities.