Prominent Wall Street firm Goldman Sachs will pay almost $12 million to settle charges that one of its investment bankers made undisclosed campaign contributions to a state official responsible for awarding government contracts.

The case is the first SEC action for pay-to-play violations based on “in-kind” – meaning, non-cash – contributions to a political campaign. In the settlement order, the SEC charges that Goldman vice president, Neil M.M. Morrison, sought lucrative government contracts from the State of Massachusetts while at the same time doing political campaign work out of Goldman’s offices for state treasurer, Timothy P. Cahill. The SEC alleges that Morrison’s activities included fundraising, writing speeches, talking with reporters, and approving personnel decisions for the campaign. The Goldman executive also allegedly made cash payments to a third party, who then contributed to Cahill’s campaign.

The SEC order faults Goldman for failing to properly monitor the investment banker’s activities.  Goldman Sachs entered into the settlement without admitting or denying liability. Morrison did not settle.

This is the second major announcement from the SEC this month concerning pay-to-play practices. A couple of weeks ago, the SEC issued a “Risk Alert” urging municipal securities dealers to institute training, pre-clearance procedures for political contributions, and other compliance measures to prevent unlawful intervention in campaigns.

More broadly, the Goldman settlement serves as a potent reminder that political activity by employees – even personal political activity – can present substantial risks to employers doing business with state and local government. Using company staff and resources in connection with fundraising and directing contributions through third-parties may also violate federal and state campaign finance laws, even if the employer is not a contractor.

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Photo of Ronald M. Jacobs Ronald M. Jacobs

Ron Jacobs focuses his practice on political law, nonprofit organizations, and crisis management, including congressional investigations, class actions, and regulatory investigations. Ron founded and co-chairs the firm’s nationally recognized Political Law practice. He advises clients on all aspects of state and federal political…

Ron Jacobs focuses his practice on political law, nonprofit organizations, and crisis management, including congressional investigations, class actions, and regulatory investigations. Ron founded and co-chairs the firm’s nationally recognized Political Law practice. He advises clients on all aspects of state and federal political law, including campaign finance, lobbying disclosure, gift and ethics rules, pay-to-play laws, and tax implications of political activities.

Photo of Lawrence H. Norton Lawrence H. Norton

Larry Norton, a former general counsel of the Federal Election Commission (FEC), advises clients on federal and state campaign finance laws, lobbying disclosure, gift and ethics rules, pay-to-play laws, and the tax implications of political activities. His clients include corporations and their PACs…

Larry Norton, a former general counsel of the Federal Election Commission (FEC), advises clients on federal and state campaign finance laws, lobbying disclosure, gift and ethics rules, pay-to-play laws, and the tax implications of political activities. His clients include corporations and their PACs, advocacy groups and trade associations, candidates, super PACs, lobbying shops and law firms, and high-net-worth individuals. Larry recognizes the unique issues facing organizations seeking to influence public policy and elections. He provides pragmatic and creative solutions to complex problems, troubleshoots new projects and programs, and helps clients manage their legal and reputational risks.