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.