Double standard? Sen. Jon Corzine portrays himself as a progressive corporate reformer but, under his direction, the Goldman Sachs investment bank may have been a leader in deceiving investors

0 Comments | Insight on the News, August 26, 2002 | by John Berlau

It's hard to turn on the television or read the newspaper without finding some rehashed "revelation" from more than a decade ago about President George W. Bush at Harken Energy or the so-called accounting scandal at Halliburton Corp. The liberal media and congressional Democrats say they're just trying to see how Bush's words on corporate accountability square with what they imagine to have been his past actions and those of former corporate executives in his administration. "If Bush and [Vice President Dick] Cheney aren't perceived as being clean, how much confidence can investors have in their reforms?" intones a recent article in Time magazine, the weekly publication of AOL Time Warner, whose accounting methods now are under investigation by the Justice Department.

Meanwhile, most of the press has not been interested in the least in even the most notorious business dealings of prominent Democrats. Former Clinton Treasury secretary Robert Rubin's acknowledgement that he telephoned Treasury Department officials on behalf of Citigroup Inc. to try to get them to keep credit-rating agencies from downgrading Enron hasn't undermined the media's confidence in him when he bashes Republicans or calls for repealing last year's tax cuts.

As the Media Research Center points out, a Newsweek article by Jonathan Alter even complained that Bush "lacks an oracular Robert Rubin figure to calm the markets," and then goes on to quote the oracle's call to "adjust" the tax cuts downward. Not a bad idea to make money more precious, say critics, when you are in the business of lending it.

Hovering above all this is the case of Sen. Jon Corzine (D-N.J.). Mounting evidence has come to light that during Corzine's reign as cochairman of Goldman Sachs--a rich and prestigious investment-banking house also formerly cochaired by Rubin--the firm may have manipulated the market and inflated stock prices through a controversial practice now being investigated by the Securities and Exchange Commission (SEC). Corzine, a sponsor of several bills to "protect" investors by adding more layers of regulation, has been portrayed by the Democratic leadership and by the liberal press as a benevolent millionaire championing the cause of the little guy.

After playing defense in the seven months since Enron went bankrupt, some Republicans finally are calling for Democrats of the go-go Clinton era to be held accountable for their roles in corporate scandals. "When we talk about Enron, we ought to talk about all the players," declared Rep. Mark Foley (R-Fla.) on the House floor. Foley also wrote to the nightly news anchors of the Big Three TV networks urging them to cover the corporate and political relationships of Corzine and Rubin.

Foley is one of many putting the heat on Democratic Sens. Joe Lieberman of Connecticut, chairman of the Senate Governmental Affairs Committee, and Carl Levin of Michigan, chairman of that committee's permanent subcommittee on Investigations. The pair seems to be subpoenaing every Bush aide with a possible tie to the Houston-based energy company while saying they will not call Rubin. In late July, Lieberman backed off somewhat and said he would call Rubin if he believed the former Treasury secretary had pertinent information.

Rubin preceded Corzine as a cochairman of Goldman Sachs in the early 1990s, before he came to Washington to work for Clinton, for whom he had scoured corporate boardrooms to raise very large sums of money. Like Rubin, many of the firm's current and former executives are big-time Democratic donors. Corzine used $65 million of his own money, two-thirds of his fortune made at Goldman, to mount, or some say buy, a successful Senate campaign in 2000.

These days, as Newsmax .com has put it, Corzine is "one of the loudest Democrats trying to blame others for corporate corruption." Portraying himself as a progressive corporate reformer, the business moralist declared in a press release in January: "Our markets work when they're predicated on information that is truthful and accurate."

The problem is, Goldman Sachs under Corzine and Rubin may have been one of the leading firms deceiving investors about the real value of the stocks of new companies, critics say. "If we're going to have hearings, Mr. Lieberman, let's have Goldman Sachs ... brought to the dais," Foley says. "There seems to be some real mischief. Goldman Sachs was hyping Enron past $90. They encouraged people to buy it" when they had reason to know better.

Allegations have surfaced that while Corzine was cochairman of Goldman Sachs from 1994 to 1999, the firm engaged in a deceptive and possibly illegal practice called "laddering" in which it would give brokerage firms shares of an initial public offering (IPO) at very low prices in exchange for a commitment to buy some shares at a higher price once it opened on the market. Nicholas Maier, syndicate manager for the brokerage firm Cramer and Co. from 1996 to 1998, wrote about laddering in his powerful book Trading With the Enemy. "Goldman Sachs was one of the chief perpetrators of an illegal act that was the original sin of the Internet bubble," Maier tells INSIGHT.