The Fraud Examiner

Lessons from a Former Goldman Sachs Executive

April 2012 

By Peter Goldmann, CFE 


Greg Smith, the former Goldman Sachs (GS) executive who hammered his former employer in The New York Times in mid-March, inadvertently did a great service to senior management everywhere. As a refresher, you’ll recall that Smith berated GS for its “toxic” environment of putting itself before its clients, some of whom GS managing directors referred to as “muppets” (British slang for “idiots,” according to numerous Internet writers).

Interestingly, in his Times article, Smith admitted to knowing of no actual illegal activity at GS. But his choice of words suggested that much of what he saw could be interpreted as being outside the law.

Illegal or not, the destructive business conduct and culture at GS is what counts the most. It is a perfect example of how not to establish “tone at the top.” Even if no crimes were committed by its traders and other sales executives in the fast and furious “sell or die” days of the pre-2008 years, the atmosphere to justify doing so certainly was ripe.

And for those who doubt that Greg Smith is a responsible, ethical professional, it should be noted that he is by no means the only Wall Streeter to have come out recently with what ethics professionals deem to be the truth about today’s financial profession.

For example, an anonymous Internet commenter about Smith’s Times letter wrote “In 2008, I worked for JPMorgan Chase, albeit at a lower level than Mr. Smith. I spent a year trying to tell managers that there were all kinds of abuses going on with respect to disclosures about mortgages and home equity loans. All paid me nothing more than lip service. They couldn't have cared less about the client; it was all about their bottom line. Then the housing market crashed. Surprise. I wrote a letter to [CEO] Jamie Dimon, expressing my concerns. I got a call from one of his flacks in personnel. And instead of saying we'll look into this and fix it, her question was "Well, what do you want?" -- corporate speak for ‘What do we have to do to shut you up?’”

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