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Goldman Sachs' success lands it in House hot seat

Goldman Sachs Group Inc investors have fared better this year than owners of shares of Citi-group Inc, Merrill Lynch & Co and Credit Suisse Group.

That may change now that congressional investigators are turning their focus to Goldman in a probe of Wall Street conflicts of interest, some investors say. The House Financial Services Committee sent a letter to Goldman Chief Executive Henry Paulson seeking documents, e-mails and all records related to the firm's work with 14 communications and technology companies.

"Goldman stock's probably going to get hit," said Dan Goldfarb, who helps manage US$20 billion at David L. Babson & Co, which sold 293,000 Goldman shares last quarter.

The House panel's probe into allegations of research conflicts and favoritism in initial public offering allocations has focused on Citigroup, and shares of that company have fallen 36 percent this year. Shares of Merrill, which agreed to pay US$100 million to settle a conflict-of-interest investigation in New York, have fallen 32 percent. Goldman's stock is down 19 percent.

Goldman rose US$1.75 to US$75.50 yesterday in New York Stock Exchange composite trading. The House committee announced after the market closed that it had demanded documents from Goldman, and the stock dropped as low as US$73.99 in after-hours trading.

Credit Suisse First Boston Inc Chief Executive Officer John Mack also was asked to supply documents by the committee, which is chaired by Representative Michael Oxley, an Ohio Republican.

Goldman was the top handler of US stock sales in 2000 and 2001 and No. 2 in 1999. Credit Suisse placed third all three years.

Shares of Credit Suisse First Boston's Zurich-based parent, Credit Suisse Group, have lost more than half their value this year amid losses at its Winterthur insurance unit and a decline in investment banking.

The expansion of the probe follows a committee statement last week that former WorldCom Inc CEO Bernard Ebbers made a profit of US$10.6 million after Citigroup's Salomon Smith Barney unit gave him shares of IPOs.
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