Morning Coffee: Is there a dubious back door into a front office job at Goldmans Sachs? And the acquitted LIBOR broker back on the lookout for suspicious trades

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It’s the most controversial of investment banks' hiring practices, and in some cases can even be considered to be a felony – the giving of special treatment to potential applicants because they are the children of executives or officials who are major clients.  Things get even worse if the advantaged applicant is suspected of being dishonest in the interview process, something which would be an immediate red flag for any normal job seeker.  Even if the client’s kid ends up not being taken on, it leaves a lot of bad feeling with anyone who cares about integrity and following the rules.

According to the New York Times, there was one such situation in Goldman Sachs around 2014. At that time, James C Katzman, the senior partner in charge of the West Coast M&A team, was just the “boy scout” character to want to make a fuss about it.  The NYT's story has a lot of quotes from “sources close” to the protagonists (presumably because of the watertight non-disparagement agreements that senior GS staff sign if they leave while keeping restricted stock units) but the gist appears to be that, unhappy with the hiring incident and with a few other cases where he felt that he was under pressure to share confidential client information with other parts of the bank, Mr Katzman called the internal whistleblower line.

Despite the seriousness of the comments and the senior position of the person making them, the law firm responsible for managing the whistleblower line chose to hand the tip over to the internal counsel rather than taking it to the board.  A group of other senior executives, allegedly including the soon to be CEO David Solomon, was deputed to take Mr Katzman to one side and tell him not to be such a stickler, talk him out of leaving the firm and persuade him to withdraw his allegations.  None of this worked, Katzman left the company and now, hopefully without anyone breaking their nondisclosure agreements, the story is in the New York Times.

It’s a tale that doesn’t reflect well on the industry, or on Goldman Sachs.  Whatever the full facts of the case are, clearly some things happened which a senior insider (albeit one with a reputation for a very strict black-and-white approach to ethics rules) didn’t want to go on living with.  The practice of hiring fortunate offspring is clearly still something that has not been rooted out of the industry.  And in many ways, Goldman’s famous discretion has worked against them.

If there were written records (like emails and chat transcripts) of the conversations which took place and the precise nature of the hiring process and its flaws, something could be done and a full explanation could be arrived at.  As it is, with a culture of personal chats and appeals to team-player ethos, we’re in the uncomfortable situation of anonymous he said/she said versions of history being played out through press rumours.  Although “taking it offline” helps to avoid creating too much of a paper trail of incriminating evidence, it also doesn’t create a trail of exculpatory evidence, in cases where people really are being unreasonable and making baseless accusations.  The Solomon era has been preceded by an abnormal number of hires at Goldman Sachs. Partiality in the selection of new recruits is the last thing the firm needs.

Danny Wilkinson, meanwhile, does not appear to have anyone currently wanting to be anonymously quoted describing him as a “boy scout”.  He was one of the six brokers who were acquitted of conspiring with Tom Hayes, saying in his testimony that “That’s just how it was. Banks lie to brokers, brokers lie to banks, banks lie to each other, brokers lie to each other.”  After leaving ICAP in 2013 to concentrate on the LIBOR defence, he spent some time concentrating on his music career as a DJ with house music group “Hellsinki-V”.  He also apparently worked on a children’s book “based on the brokers and characters of my City career”.

Now he’s back in the market, however, as the Market Surveillance Director of Raidne Limited, a regtech firm which aims to use quant techniques and voice analysis to help firms spot potential market abuse.  According to Wilkinson, “I know where to look” and his boss at Raidne praises his “market colour”.  Presumably this means helping to explain how phrases like “I’ve got my wizards hat on today” (actual quote from one of Hayes’ other brokers, read out at the trial) might mean that something is going on.


When he closed down Nevsky Capital, 46 year-old Martin Taylor suggested that in a world of algo trading, political populism and quantitative easing, it was no longer possible for a traditional stock-picking hedge fund to make money.  After two years out of the market, he has revised this view and thinks the problem might have been that he personally was just too tired.  Now he’s coming back with Crake Asset Management, a new global long-short equity fund launch for next year (Reuters)

Big banks were appearing at the House of Commons Treasury Select Committee to talk Brexit, and different people heard different messages.  JP Morgan are in “full Brexit execution mode” and see as many as 4,000 of the banks 16,000 London staff potentially relocating in the long term … (Daily Telegraph)

… but the day one impact, according to Citi, JPM and Barclays, would be in the hundreds rather than thousands, with each bank only planning around 150 job losses (Business Insider)

And as part of its full Brexit execution mode, JP Morgan is setting up a wealth management business in Luxembourg, merging some functions from its London unit (Reuters)

For people who regard these things as significant, Goldman Sachs shares have now fallen for ten consecutive trading sessions, equalling a record set in 2008, although the actual loss from the peak is only 5.1% (Financial Times)

Psychological research reveals that bosses who prefer “brainteaser” interview questions to ones about the candidate’s personality and achievements tend to score higher on tests of narcissism and sadism.  They also find that people significantly overestimate how likely they would be to have solved the brainteaser themselves (Daily Mail)

Someone describing himself as a bank whistleblower gave the FCA a hard time at its annual public meeting, claiming that his own career had been destroyed.  Andrew Bailey offered the complainant a private meeting with FCA staff, but the regulator was still fiercely criticised for its handling of the Jes Staley case. (Financial News)

Five portfolio managers and one quant from Patrick Barbe’s team at BNP Paribas AM have left to enhance the European fixed income product at Neuberger Berman (Funds Europe)

An in-depth and very pessimistic longread from Bloomberg on the outlook for hedge fund flows and startups (Bloomberg)

German news reports suggest that Commerzbank “would rather do a deal today than tomorrow” with Deutsche Bank, while Christian Sewing would prefer not to do anything for the next 18 months (Reuters)

Are these “The Incredibles” of stockbroking?  Raymond James has poached a father/son/daughter team from JP Morgan (Financial Planning News)

After Wirecard replaced Commerzbank in the DAX, a Dutch fintech payments company called Adyen has now surpassed Deutsche Bank in market cap terms.  Adyen is 12 years old and a substantial company which has Netflix and Facebook as clients, but for anyone who knows the scale of Deutsche Bank’s payments business, this might seem a bit odd. (Quartz)

MIT has knocked Stanford off the top slot for universities with the best graduate outcomes (Guardian)

Financial journalists at IFRE report on their own parent company’s LBO debt issue, even noting that the key to the deal is a massive cost cutting program (IFRE)

And the UK Treasury has posted an advert on LinkedIn for a “Senior Policy Adviser” in its Financial Services Group to solve Brexit problems and think about the “future relationship” with Europe. (Financial News)

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