Pension Fund Sues Goldman Board?
Brooke masters of the FT reports that Pension fund sues Goldman board:
A pension fund for fire and police officers has sued the board of Goldman Sachs, seeking to stop the investment bank from paying out billions of dollars in bonuses to the bank's staff, writes Brooke Masters in London.
Lawyers representing the Security Police and Fire Professionals of America Retirement Fund argue that the board has "abdicated" its responsibility to shareholders and "blindly "rewarded" executives for "corporate performance that has absolutely nothing to do with the skill of the company's employees".
The lawsuit, filed in New York late on Monday, claims that Goldman's 2009 profits are due to direct taxpayer help and $13bn used to bail out American International Group , a Goldman counter-party.
Lawyers from the firm Grant & Eisenhofer wrote in the complaint that paying 50 per cent of net revenues to staff constitutes "waste" and "elevates the interest of senior Goldman employees over those of shareholders".
Goldman said: "We think this lawsuit is entirely without merit."
This type of derivative lawsuit, in which shareholders sue a board for failing to perform its duty, has historically been very difficult to win. Cases in the New York state courts can take years to resolve.
Goldman can claim anything they want, including the "we have to pay top talent" card, but they demonstrate total political contempt and lack of judgment when they turn around and start rewarding obscene bonuses based on what quite frankly was a free call option. Take huge risks knowing that Uncle Sam will bail out the banks. No wonder everyone wants to own a bank.
It will be interesting to see if larger public pension funds join in on this lawsuit. I wouldn't count on it because the big public pension funds have a special relationship with Goldman and won't dare jeopardize it over a lawsuit that defends the rights of American taxpayers.
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