If it Looks Like an Affiliate and Walks Like an Affiliate, Then FERC Must Designate Goldman Sachs’ Group as an Affiliate
Public Citizen Files Protest After Goldman Sachs Hides Its Deception in Plain Sight
Public Citizen late on Friday filed a protest with the Federal Energy Regulatory Commission (FERC) requesting the agency deem a private equity fund set up and run by Goldman Sachs to be an affiliate of Goldman Sachs.
In its Dec. 9, 2019, application to FERC for permission to trade electricity at market-based rates, the private equity fund Goldman Sachs Renewable Power LLC claimed it was unaffiliated with Goldman Sachs. In multiple filings with FERC, Public Citizen has submitted evidence underscoring the fact that Goldman Sachs Renewable Power must be considered an affiliate of Goldman Sachs to protect consumers and the public universities and pension funds that have provided nearly all of the billions of capital for the private equity fund.
Our investigation found that not only does Goldman Sachs control the day-to-day activities of the private equity fund, but that the fund’s weak corporate governance is highly susceptible to control by Goldman Sachs. Public Citizen documented that not only did Goldman Sachs select the three board members of the private equity firm, but the bank installed all three on at least 63 other boards of private equity firms with ties to Goldman Sachs. The fees these directors earn from all 64 Goldman-affiliated boards provide them more than $1 million a year in compensation. All three hail from “rent-a-director” firms based in the Cayman Islands.
Public Citizen’s latest protest notes that the LLC agreement of the private equity fund acknowledges that having Goldman Sachs act as its investment manager presents inherent financial conflicts of interest and that the LLC’s rules permit only Goldman Sachs – not the pension funds or public universities – to resolve such conflicts. Our protest further questions the effectiveness of Goldman’s internal “information barriers” that it claims will address such financial conflicts of interest.
Public Citizen’s protest notes that FERC’s affiliate rules – and not Goldman’s internal firewalls – are the only way to protect consumers and investors from affiliate abuses, since Goldman Sachs has a long and unfortunate record of abusing such internal firewalls.
“Goldman Sachs designed this private equity shell company with weak corporate governance to maximize the bank’s control,” said Tyson Slocum, director of Public Citizen’s Energy Program. “To ensure the protection of consumers and the pension and public university investors, FERC must deem Goldman Sachs to be an affiliate of Goldman Sachs Renewable Power.”
Read the filing here.