State House News Service

Goldman Sachs Settles As SEC Launches Case Against Cahill Adviser

BOSTON — A one-time state Treasury official and Goldman Sachs banker who advised former Treasurer Tim Cahill’s campaign for governor was charged Thursday in a “pay-to-play” scandal by the Securities and Exchange Commission for trading undisclosed contributions to Cahill for public contracts.

As a result of Neil Morrison’s actions, Goldman, Sachs & Co. has agreed to pay almost $12 million in penalties to settle the SEC’s case against the investment firm. And Attorney General Martha Coakley has negotiated a separate $4 million settlement with the firm for the state, resolving any potential civil charges to be brought against the firm.

The SEC’s case against Morrison is ongoing, with the agency opening administrative and “cease-and-desist” proceedings against the former investment banker.

“The pay-to-play rules are clear: Municipal finance professionals that use their firm’s resources to campaign on behalf of political candidates compromise themselves and the firms that employ them,” said Robert Khuzami, director of the SEC’s enforcement division.

Morrison, a former Treasury aide who was vice president of Goldman Sachs’s Boston office, solicited underwriting business from Cahill’s office beginning in July 2008 while also working on Cahill’s failed 2010 campaign for governor, according to the SEC.

In addition to using the firm’s phones, email and offices for campaign work that should have disqualified Goldman Sachs from participating in municipal underwriting for two years after the “in-kind” donations were made, Morrison assisted in speechwriting, fundraising, communicating with reporters, approving personnel decisions and even interviewing at least one possible running mate.

According to case documents, Morrison was in frequent contact with Cahill campaign staffers, Treasury officials and Cahill regarding both campaign and bank business.

He also encouraged Lottery employees based in Braintree to contribute and fundraise for Cahill, according to court documents, and told former Cahill campaign manager Scott Campbell, “I want to encourage people down there to do the right thing and reward the ones who do.”

According to the SEC, Morrison at times referenced his campaign work when soliciting underwriting business. In an email to a deputy treasurer, Morrison wrote:

From my standpoint as an advisor/consultant/friend I am saying PLEASE don’t give these [underwriter] slots away willy-nilly. You are in the fight of your lives and need to reward loyalty and encourage friendship. If people aren’t willing to be creative with their support then they shouldn’t expect business. This has to be a political decision.

When Goldman Sachs was seeking a state contract for a Build America Bond transaction, Morrison told Campbell, “This is my No. 1 priority and most important ask.” Goldman Sachs was named the lead underwriter on the bond deal and earned revenues exceeding $2 million from this single transaction.

In addition to his campaign work for Cahill, the SEC said Morrison made an indirect cash contribution to Cahill’s campaign by giving $400 to a friend who then wrote the check for $500 to Cahill to disguise the source in violation of campaign finance law.

Morrison demonstrated that he knew what he was doing was wrong in an email to a campaign communications director Alison Mitchell when he wrote, “I am staying in banking and don’t want a story that says that I am helping Cahill, who is giving me banking business. If that came out, I’m sure I wouldn’t get any more business.”

According to the court documents, Morrison was under the impression that there was a close connection between the Treasury and Cahill’s campaign. That impression was backed up by Campbell, who noted to Morrison in a March 29, 2010 email, “we’re REALLY strattling [sic] the line between campaign vs treasury…and, it’s only going to get worse.”

Goldman Sachs, which fired Morrison in 2010 for his undisclosed political activities and suspended its own solicitation of business in Massachusetts, agreed to pay $7.6 million in disgorgement, $670,000 in prejudgment interest and a $3.75 million penalty to settle with the SEC.

The firm also agreed to pay $1.5 million to the state, $607,645 to the Massachusetts Water Pollution Abatement Trust and $2.4 million to the attorney general’s office for distributions to affected state agencies and the remainder to be deposited in the general fund.

“The allegations settled through our assurance of discontinuance filed today with Goldman Sachs include serious violations of state law that involved millions of taxpayer dollars and were similar to the federal violations the company settled with the Securities and Exchange Commission. We are pleased that this settlement brings back more than $4 million to the Commonwealth and serves to protect the integrity of the Commonwealth’s bidding process,” Coakley said in a statement.

Cahill is facing charges in Suffolk Superior Court that the former Quincy politician illegally used $1.5 million in public funds from the Lottery on an ad campaign designed to bolster his 2010 campaign for governor. Campbell is also charged in the case. Both have pleaded not guilty.

Morrison found himself at the center of a controversy in the late days of the 2010 campaign when Cahill’s running mate, former Rep. Paul Loscocco, defected from the treasurer’s campaign and endorsed Republican Charlie Baker.

Loscocco accused the Cahill campaign of coordinating with Gov. Deval Patrick to defeat Baker. He claimed that Cahill told him during a face-to-face meeting that Morrison had been coordinating with top Patrick adviser Doug Rubin on a “negative ad strategy against Charlie Baker, the timing of such ads, and coordination of the specific role that the Democratic Governors’ Association will play in the race.”

He also said Cahill “did not deny the rumors that jobs in the prevailing administration among members of their currently opposing camps (with longstanding prior relationships in the Democratic Party) were also being arranged. Rubin dismissed the accusation as lies concocted by a former campaign adversary. He went on to point out that his relationship with Cahill has frayed since their days working together in the Treasury.

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