'Muppet hunt' set to put Goldman Sachs in clear

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Goldman Sachs is ready to give its London office a clean bill of health after investigating claims from its former employee Greg Smith that the bank had a "toxic" culture where traders routinely boasted of ripping off clients.

The investigation - dubbed "the muppet hunt" because Smith said bankers derisively referred to clients as muppets - has not thrown up any revelations that would prompt disciplinary action, it is understood.

Goldman has made contact with Smith and asked him to assist, but he has not taken the bank through his allegations. Instead, he is working on a tell-all book, after landing a reported US$1.5 million ($1.8 million) advance from the publishing house Hachette.

Smith, a trader of equity derivatives at Goldman's offices in London, stunned the bank last month by announcing his resignation in the New York Times. In an opinion piece, under the headline "Why I am leaving Goldman Sachs", he described how the bank's moral standards had collapsed over his 12 years at the firm, and he blamed the "toxic and destructive" culture on the chief executive, Lloyd Blankfein, and his deputy, Gary Cohn.

"It makes me ill how callously people talk about ripping their clients off," Smith wrote. "Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets', sometimes over internal email."

Smith's denunciation of the firm ignited another firestorm of criticism of Goldman, which is already the lightning rod for anger over Wall Street's role in the credit crisis. His allegations also threatened to tarnish the bank's reputation with clients.

Fearful of that, Blankfein launched the "muppet hunt" to scan internal email communications for disparaging comments about clients. While the scan revealed isolated references, these did not hint that Goldman traders believed they were taking advantage of their clients' idiocy to rip them off. The overwhelming majority of the references were to the recent Muppet Movie.

Goldman has also interviewed Smith's former colleagues and examined his and their annual appraisals in which Goldman employees discuss their own performance and those of their bosses, subordinates and colleagues.

With most of the work of the investigation done, Goldman believes it is close to being able to give the London office a clean bill of health, and has begun to have internal discussions about how to communicate its findings to a sceptical public.

The current favoured course of action is for Blankfein to refer to the findings of the investigation at the bank's annual shareholder meeting on May 24.

The meeting is expected to be a raucous affair, since rebel shareholders are trying to force the company to reveal details of its lobbying of politicians and regulators, and to change pay policies so that even former executives are financially tied to the fortunes of the bank.

- Independent