Goldman Sachs Created Dozens of Private Equity Shell Companies Using Cayman Islands-Based Corporate Directors
WASHINGTON, D.C. – Goldman Sachs Renewable Power Marketing LLC misled energy regulators last month when it claimed not to be affiliated with Wall Street banking titan The Goldman Sachs Group (Goldman Sachs) in an application to sell electric power, Public Citizen said today.
In fact, Goldman Sachs set up the affiliate using Cayman Islands-based “directors for hire,” Public Citizen told the Federal Energy Regulatory Commission (FERC). Three Cayman-based men show up on the boards of at least 60 shell corporations created by Goldman Sachs, Public Citizen found.
This raises the prospect that Goldman Sachs could be buying and selling power to itself via its affiliates, amassing profits at the expense of entities for which it is supposed to be trading, such as pension funds. It also raises significant questions about what Goldman has reported to other financial regulators.
Public Citizen, which filed a protest on Dec. 30 over Goldman Sachs Renewable Power Marketing LLC’s application, today supplemented the protest to include its findings about the Cayman-based directors and to call on FERC to get more information and hold an evidentiary hearing.
“Goldman Sachs is using firms in a notorious tax haven to supply corporate directors in a scheme that conceals Goldman’s control over dozens of private equity shell entities,” said Tyson Slocum, director of Public Citizen’s Energy Program. “Our findings raise a host of questions about what Goldman Sachs is doing and what else it isn’t reporting.”
On Dec. 9, Goldman Sachs Renewable Power Marketing applied to FERC for market-based rate authority, which is necessary to sell electric power. In the application, Goldman Sachs Renewable Power Marketing claimed that it is unaffiliated with Goldman Sachs. Goldman Sachs Renewable Power Marketing claimed that three unnamed individuals managed and controlled the company, and that these three individuals had no affiliation with Goldman Sachs.
In its Dec. 30 filing, Public Citizen noted that it appeared that Goldman Sachs Renewable Power Marketing and Goldman Sachs operate as affiliates, given that they share a name, the same address and the same phone number. Also, Goldman Sachs provides financial services to Goldman Sachs Renewable Power Marketing.
Since then, Public Citizen learned the names of the three directors of Goldman Sachs Renewable Power Marketing and found them on the boards of 60 other Goldman Sachs-affiliated companies.
The three men – Andrew Galloway of ICG Management Ltd. in the Cayman Islands, Andrew Johnson of Circumference FS in the Cayman Islands and John Lewis of Highwater Ltd. in the Cayman Islands – are listed as corporate directors for 61 shell companies, all affiliated with Goldman Sachs, Public Citizen told FERC in its amended filing today.
“The fact that Goldman Sachs employs these same three directors for at least 61 affiliated shell companies renders these individuals unable to claim independence from Goldman Sachs,” Slocum said. “Goldman Sachs Renewable Power Marketing made serious factual misrepresentations in its Dec. 9 application. What we found may help explain why Goldman Sachs Renewable Power Marketing did not tell FERC the three names of its corporate directors.”
All three companies affiliated with the directors offer their executives as a type of corporate director-on-demand, selling the service of their executives serving as “independent” corporate directors.
In all 61 companies, an affiliate of Goldman Sachs is the lone recipient of the sales of securities for the company. In addition, 55 of these companies share a principal address and phone number with Goldman Sachs’ main office in New York.
Goldman Sachs’ links to the additional shell companies raise questions about whether it is in compliance with Federal Reserve reporting obligations, asset and activities restrictions and restrictions on certain affiliate transactions, as well as U.S. Securities and Exchange Commission reporting requirements.
Further, pension funds that invested with Goldman Sachs Renewable Power Marketing were assured that they were getting the best of both worlds: access to Goldman’s deep market experience and the promise of an “independent” corporate board to ensure that Goldman’s investment advice had the pension’s best interests – not Goldman’s – in mind. If in fact Goldman controls the board, Goldman may be giving pension funds investment advice that is in the best financial interest of Goldman Sachs, rather than for the pensions, Slocum said.