Former employee blasts Goldman Sachs, firm loses billions overnight
Op-ed accuses Goldman Sachs of placing profits before client interests.
The Goldman Sachs investment firm continues to reel from a scathing attack that originated within its ranks. A recent employee with 12 years experience in the firm, sent an op-ed to the New York Times which has shaken investor confidence.
The op-ed hit hard. Goldman Sachs has already lost $2.15 billion of market value and its shares dropped 3.4 percent yesterday.
Meanwhile, Goldman-Sachs has replied via a memo sent to current and former employees, explaining that Smith's piece does not reflect "how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients."
Goldman Sachs has had its share of troubles. The firm recently paid $550 million to settle a fraud suit brought against them by the Securities and Exchange Commission. The firm has previously been accused by the US Senate's Permanent Subcommittee of Investigations of misleading clients. In January 2011, the firm published a list of 39 recommendations to improve its business relations and refocus on clients.
Despite the lessons of the past, Smith claims the company has a bad attitude towards clients. Smith mentions managing directors who refer to their clients as "muppets."
He added, "It astounds me how little senior management gets a basic truth: If clients don't trust you they will eventually stop doing business with you."
Smith discussed in his piece how the firm pushes its own interests over those of the clients and that employees are regularly told to push products that serve the client more than the company. Smith lamented the change in culture which he feels is disastrous for both clients and the company with a 143 year history.
Smith was clear in stating that he had not observed any illegal activity, just activity that he felt was self-serving and inconsistent with what he believes the company's core values should be.
Investors have already reacted, possibly wiping out overnight a substantial portion of Goldman Sachs' profits. At the current price tag of $2.15 billion dollars, one must ask if it is ever beneficial or profitable to hold the interest of the bottom line over the interest of the client after all.
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